Tom Zeus

As a founder, I never really understood how VC funds work and their incentives , so here’s a simple breakdown: Who does what: •General Partners (GPs): They manage the fund and make investment decisions. •Principals: They sometimes make investment decisions but mostly focus on sourcing and due diligence. •Analysts/Associates: Their job is mostly researching/sourcing and messaging anyone going viral on Twitter or LinkedIn. •Limited Partners (LPs): They are the fund’s investors, typically large pension funds, universities, or very wealthy individuals. When you talk to a vc always know who makes decisions. Mechanics: A fund’s lifetime is usually 10 years. After that, it can be extended, but there’s pressure to return money to LPs. That often leads to pressure on startups to exit or go public. How GPs make money: 1. Management fees: Usually around 2% per year (20% total over 10 years). For large funds, this means great salaries; for small funds, it’s often just enough to survive. 2.Carry (profit share): GPs typically get 20% of all profits generated by the fund — this is how successful fund managers get rich, especially those running smaller funds. Every 2–3 years, GPs need to raise a new fund. This process can take 6+ months and is genuinely exhausting, so if you ever want to feel a bit of empathy for VCs, it’s for this part: convincing LPs across the country to give them money. Happy to answer any other questions.