Re:Ask HN: How much money does an average VC make?
by charlesdm on Saturday May 09, 2015 @03:07PM
(#9517346)
Not sure, but I don't think this is correct. I believe this to apply on the entire fund.
If you put together a $50m fund, and haven't invested anything (you're working on sourcing deals) then you still need cash to turn on the lights. That's essentially what the management fee is for. You shouldn't be making money on your management fee.
This gets 'abused' quite a bit when it comes to larger multi billion $/€ funds, but for smaller funds, this should definitely be the case. Also the reason why for larger funds management fees sometimes get pushed down to 1.5-1%
Another thing that sometimes happens as well is that the fund partners get paid their carry when they liquidate an investment in year 3-5, before the entire fund is liquidated.
Re:Ask HN: How much money does an average VC make?
by foobarqux on Saturday May 09, 2015 @03:06PM
(#9517340)
It's usually committed capital.
http://www.quora.com/Are-management-fees-based-on-committed-...
My understanding is that the 2% management fee only applies to funds invested. If they raise $1B, but it takes 5 years to make all the investments, they only get the full 2% in years 5+.