After yesterday’s post on Venture Firm Managing Partner Economics, I received a number of good comments and thoughts. Parker Conrad, founder/CEO of Zenefits, offered up that the economics for a VC change dramatically when managing multiple funds simultaneously. So true.
Here’s how the economics might look with multiple funds under management:
- Fund 1, with $100 million of capital, performs well (3x cash on cash), and Managing Partners make an average $2 million per year over seven years (most is back-loaded)
- Fund 2, with $150 million of capital, closes four years into Fund 1 (able to raise it quickly because of progress to date), performs well, and Managing Partners make roughly $3 million per year over seven years, but the first three years overlap with Fund 1, so during those years, the Managing Partners make $5 million per year
- Fund 3, with $200 million of capital, closes four years into Fund…
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