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What Are Standard General Partner Terms in Fund Agreements?

Question:  I’ve always been curious, what are standard GP terms for venture funds?  What carry percentages are there?  How much do GPs actually put into funds?

Our Take:  There is a range, but in terms of general economic terms:

-  Management Fees: 1-3% of capital commitment.  Smaller funds usually have a higher percentage.  The norm is usually 2-2.5%.  Note that after the first five years (when the period for making new investments normally ends), the percentage usually decreases. 

-  Carry: 15-35%.  Mid-case is 20%.  Some newer funds have lower percentages and some of the large top-tier funds have 30% and higher.  Some funds have a scale whereby if they meet certain profit hurdles, their percentage increases. 

-  GP commitment: 1-5%.  The trend over time is for the percentage to increase.  This is both because investors want the GPs to have more skin in the game, but also because it’s a tax efficient way for GPs to receive compensation assuming they are successful.

January 7th, 2007 by     Categories: Fund Terms    
  • PRoales

    It would be great if the NVCA published a standard GP agreement along with their other Model Documents, just to give some base line for people to see.
    http://www.nvca.org/model_documents/model_docs.html

  • Jason Mendelson

    As one of the people on the NVCA committee that drafted the other model documents, I welcome your comment. I’m not sure it is something that we could come to consensus on, however. The reason the model documents project works so well with the financing transactions is 1. VC deals are fairly boilerpate; and 2. VCs have at least (if not more) bargaining power with companies and therefore when we all got in the in room to discuss, we knew what was reasonable and possible. With fund agreements, they may start with standard forms, but in the end, they each become quite tailored to specific deals. We have 3 fund agreements and each is different. I’ll think about it, however, and bring up at our next meeting.