(Yikes.) They say this is modeled on traditional VC fund practice. Samir Kaji explaining ( here and here) that 22-25% of capital goes towards management fees and expenses (so at least 2% per year for at least 10 years)ĪngelList’s rolling funds generally charge “2% per annum over each fund’s 10-year life, payable quarterly over the first four years” (so 20% “total load” with the cash going out faster). Gyan Kapur telling us on Twitter that the traditional approach is to move down after the 10-12-year mark Here are some recent examples of the alternative view: We were surprised – and a little disturbed – to find out we were…possibly…wrong…Īn alternative view: Venture capital funds traditionally and/or generally charge 2% of committed capital for the whole of the fund’s (typically 10 year) life. Prompted by some recent discussions on “VC Twitter” we went back to see if the VentureSouth view was correct. We’ll call this the “step-down approach” in this article. The VentureSouth view: Venture capital funds and other similar funds that invest in early-stage companies ( like our VentureSouth sidecar funds) charge a management fee that is calculated as follows:Ģ% of committed capital for the “commitment period” (the period when new investments are being made, say five years), plusĢ% of (net) invested capital for the “harvesting period” (the period when old investments are being sold, say the second five years). What do VC funds actually charge in management fees, and who cares?
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