Source - https://vcpreneur.com/vc-funds-101-understanding-venture-fund-structures-team-compensation-fund-metrics-and-reporting-152b02e8504a
TL;DR - VC fund structures vary based on strategy, age, and legal considerations.
Helpfulness - 4
Tags - law, fund structures, vc compensation, fund metrics, useful diagrams
Questions addressed:
- How are VC funds structured?
- How are VCs compensated?
- How do funds measure their performance?
- What factors drive differences in the way funds are structured?
Summary:
- One “VC firm” is actually composed of several interconnected legal entities.
- Each fund includes a different set of entities that vary based on investor/fund manager preferences or legal considerations.
- Fund compensation is distributed by seniority, allocating both cash (management fees) and carry (profits) across the team.
- Performance metrics are dominated by multiples and rates of return.
- Funds tend to compare metrics across stage, industry, and vintage year.
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