Venture capitalists typically charge what’s called “20 and 2” to their LPs: 20 percent carry and a 2 percent management fee. The management fee is money advanced by the LPs to the partners in the venture fund in order to pay for their overhead (salaries, office space, tickets to expensive conferences like TED and Davos). Those management fees get paid back out of the returns, but they are a point of contention with LPs in the venture capital industry. On a $300 million fund, a 2 percent management fee is $6 million per year. For a seven-year fund, that’s $42 million in management fees! Many
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