Maybe I'm missing something, but VCs take a management fee, correct? So, if you raised a $200M fund, and your management fee was %5 a year, then you'd be bringing in $10M a year before you even get started. If you have 5 partners, that's $2M a year each.
Then, if you make some good investments, your firm gets a cut of the returns, plus being on boards often results in stock options in the company, etc. etc.
It seems to me that being a VC is the catbird seat of leverage. You invest other people's money and get a cut of the results.
Comments
Maybe I'm missing something, but VCs take a management fee, correct? So, if you raised a $200M fund, and your management fee was %5 a year, then you'd be bringing in $10M a year before you even get started. If you have 5 partners, that's $2M a year each.
Then, if you make some good investments, your firm gets a cut of the returns, plus being on boards often results in stock options in the company, etc. etc.
It seems to me that being a VC is the catbird seat of leverage. You invest other people's money and get a cut of the results.
Generally, the management fee is 2%, and you get 20% of all profit (known as 'two and twenty').