Re:Big Banks Agree to Historic $30B Deposit Injection in Fir...
by gumby on Friday March 17, 2023 @11:50AM
(#35198693)
> venture capitalists, who by definition have lots of capital
Actually VC funds don't have much capital. If I agree to put $10MM into a $50MM fund as an LP, I don't send them $10MM. What I agree to do is that when they make an investment in Startup X, they can call me and ask for a fifth of that investment.
LPs invest in venture firms on the theory that the firms can pick good startups. I want the use of my money until they ask for it.
(This explanation ignores the annual management fee and the fact that some VCs have made a lot of money in the past).
Actually VC funds don't have much capital. If I agree to put $10MM into a $50MM fund as an LP, I don't send them $10MM. What I agree to do is that when they make an investment in Startup X, they can call me and ask for a fifth of that investment.
LPs invest in venture firms on the theory that the firms can pick good startups. I want the use of my money until they ask for it.
(This explanation ignores the annual management fee and the fact that some VCs have made a lot of money in the past).