"the standard VC fund charges an annual fee of 2% on committed capital over the life of the fund—usually 10 years—plus a percentage of the profits when firms successfully exit, usually by being acquired or going public. So a firm that raised a $1 billion fund and charged a 2% fee would receive a fixed fee stream of $20 million a year to cover expenses and compensation. VC firms raise new funds about every three or four years, so let’s say that three years into the first fund, the firm raised a second $1 billion fund. That would generate an additional $20 million in fees, for a total of $40 million annually. These cumulative and guaranteed management fees insulate VC partners from poor returns because much of their compensation comes from fees. Many partners take home compensation in the seven figures regardless of the fund’s investment performance. Most entrepreneurs have no such safety net. "
Yup, those high-flying VCs? making money the same way money managers too - taking a cut of assets under management (AUM). Nothing to do with their investment prowess -- just gather lots of money, take a cut of that gathering, and whether or not the investors make money won't impact your paycheck. yes there's a nice bonus if you make it, but that's not necessary.
That's how the 80% of VCs that don't generate substantial returns are making a living.