Venture Capital 101: Structure, Returns, Exit and Beyond by Pocket Sun

TL;DR - Venture Capitals use funds from LP to create a pool that they invest in different companies with an end goal of liquefaction.

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Tags - fund structures, VC compensation, VC exit strategy

Questions addressed:

Summary:

Three types of Venture Capitalists: Domain expert, Network, Operator
A domain expert is someone who’s deep into a certain field and knows everything going on in this industry. An operator, or a growth expert, is someone who has a track record of growing and scaling a company. A networker is someone who can make important intros to domain experts, operators, or your next investor.
The management company receives the management fee from the fund (about 2%) and uses it to pay the overhead related to operating the venture firm
Three investment Fund types: focus on stage, focus on geography, focus on sector
How to generate returns: Share purchase, Acquisition, IPO
9 out of 10 VC backed companies do not exit
Each fund is typically active for 3–4 years, but has a lifetime of ~10 years for harvesting returns.
A large portion (sometimes ~50%) of a fund is reserved for follow-on investments to support existing portfolio companies.

Follow up links:

Why VCs push companies to liquify/exit