The Next Web

“What is the cause of the low returns, and perhaps disconnect between partners, and the venture funds? The Kauffman Foundation has an opinion: The most significant misalignment occurs because LPs don’t pay VCs to do what they say they will—generate returns that exceed the public market. Instead, VCs typically are paid a 2 percent management fee on committed capital and a 20 percent profit-sharing structure (known as “2 and 20”). This pays VCs more for raising bigger funds, and in many cases allows them to lock in high levels of fee-based personal income even when the general partner fails to return investor capital.”

May 7, 2012 · 4:21 pm · 9 notes « Prev  Next »