How do VC funds make money?
Sure, you're probably familiar with the phrase "2 and 2", meaning VCs take a 2% management fee and 20% carried interest in the funds they create.
But how does it work really?
Who do fund GPs raise capital from? How much of their own capital do they contribute? How quickly do fund managers call down capital—and how quickly do LPs respond? Are all funds really 2 and 20? How do fees change over time? What are the largest fund-related expenses that GPs and LPs must consider?
So many questions - and now we give you answers, for both VC and PE funds:
PE fund managers have more skin in the game: In venture capital, the median fund manager makes a GP entity commitment totaling 1.7% of the fund size. In private equity, the median GP entity commitment is 50% higher, at 2.55%.
Most capital calls are fulfilled on time: Across all recent fund VC vintages, at least 75% of capital calls to LPs are fulfilled at or prior to the given deadline.
Venture funds from 2022 are spending more slowly: After nearly four years, the median 2022 vintage VC fund had deployed 67% of its capital.
Management fees and carry rates have remained steady: Across all recent VC vintages, the 2-and-20 fee structure remains the norm - but there are outliers.
Read the full Fund Economics 2025 report, it's worth your time.
Onwards!
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