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VC Fund Series 5- The economics of a VC Fund


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This episode is also available as a blog post: https://10leaves.ae/publications/difc/economics-of-a-vc-fund

Of course, it is about the money!

The economics of venture capital funds differ, based on a variety of factors. The most important one being the expertise and track record of the fund manager, based on the number and quality of the deals that have been closed and exited.

It also depends on the overall fee structure of the fund, with factors such as carried interest and catch up, the preferred return of the investors, management fees and other fund-level fees involved, including offsets, and the portfolio company fees paid to the fund manager on a deal-by-deal basis.

The investment investment purpose and structure of the fund, and general market dynamics also play a part to a large extent.

Although the specific vary, there are some basic elements of the economics of a fund common to all VC funds, including:

  • Investor capital commitments;
  • Allocations of profits and losses of the fund;
  • Applicable distributions;
  • Fees paid to the fund’s investment advisors; and
  • Expenses of the fund.
  • ...more
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