Venture capitalists make money in 2 ways: carried interest on their fund’s return and a fee for managing a fund’s capital.
Investors invest in your company believing (hoping) that the liquidity event will be large enough to return a significant portion: all of or in excess of their original investment fund.
How much money do venture capitalists make?
Annual salary and bonuses differ broadly in this field depending on the size of the VC firm and specialization. In general, pre-MBA VC associates can expect an annual salary of $80,000 to $150,000, according to Wall Street Oasis. With a bonus, which is typically a percentage of salary, this can be much higher.
Where do venture capitalists get their money?
The general partners of a venture capital fund make money…
…by raising the bulk of the capital that the fund’s investable capital from “Limited Partners”, usually institutions such as university endowments, insurance companies, and pension funds. This is the money that is invested in the startups.
What kind of return do venture capitalists expect?
A new venture can earn returns as high as 700 percent or have a negative return. According to the National Bureau of Economic Research, the average return is 25 percent. A venture capital firm will expect to at least make the average return but may have higher expectations, depending on the potential for your business.
What do venture capitalists do?
A venture capitalist (VC) is an investor that provides capital to firms exhibiting high growth potential in exchange for an equity stake. This could be funding startup ventures or supporting small companies that wish to expand but do not have access to equities markets.