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.