Marc Andreesen, the cofounder of Netscape, Opsware, and Ning has today’s great post up titled The truth about venture capitalists, Part 1. Marc started blogging recently and while his posts are essay style ones, they are fun, interesting, and full of good juicy meat. There are a few factual inaccuracies (e.g. that VC funds are legally limited to 10 years – that’s the normal term, but most have automatic 2 year extensions and often get extended longer than that), but his general perspective should be interesting and enlightening to any entrepreneur thinking about taking money from a VC.
Posted in: Venture Capital | Posted by: Brad FeldCOMMENTS (2)
I think most VCs view the default as 12 years (where the extensions are basically automatic ones.) Usually, the first two extensions have the normal management fees associated with them. Years 13 on vary depending on the performance of the fund (sometimes they have fees; sometimes they don't.) I've heard of funds that have run > 20 years. All that said, I think the 10 year planning horizon does drive VC behavior - so your point is right on the money - although an early stage investor that does a new deal in year 5 of a fund is probably not going to be done with it in year 10.
Hi Brad -- thanks very much for the kind words!
I take your point that the 10 year term can be extended, but I'm thinking of leaving my post as is, because I don't think most VC's want to have those extensions have to kick in, do they? And to the extent that the 10 year term drives their behavior, that's the point I'm trying to make.
If you think I'm misrepresenting how it works, though, I'll definitely fix. I've never been a VC so would definitely defer to you.
Best,
Marc