How VCs Make Money

Re:How VCs Make Money by fnord123 on Wednesday November 13, 2019 @07:04AM (#21523148)

If management fees are 2/3 of the fund's income then the management is twice the performance fee. Given value of fund at start (f_0) and value of fund after a time period (f_1) then the value is:

    0.02f_1 = 2( 0.2 ( f_1 - f_0))
    f_1 = 20 (f_1 - f_0)
    20 f_0 = 19 f_1
    f_0 = 0.95 f_1
    f_1 = 1.053 f_0

So management fee is 2/3 of the income if the performance is 5.3%. SPY performance is all over the place[0] but you can see years with 10% or 20% growth.

But check my math because I'm a moron.

[0] https://finance.yahoo.com/quote/SPY/performance/

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Re:How VCs Make Money by xorfish on Wednesday November 13, 2019 @08:42AM (#21523817)

So depending on how carry is calculated that would be 4.24% or 2.24% performance per year. That is far below the average return of the market.

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