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The Inner Workings of a VC Fund
- Published December 14, 2022 8:11AM UTC
- Publisher Osama Hassan
- Categories Capital Raising Tips
Let’s go over the inner workings of a VC fund:
A venture fund is a fixed-pool of capital raised for investing per an agreed-upon investment strategy.
A venture firm manages this fund, and over time, can manage multiple funds.
General Partners (GPs) are the primary investment decision makers and are generally supported by a team of admin and investment professionals.
Limited Partners (LPs) provide the capital and agree to pay the GP a management fee each year and a share in a percentage of the profits.
The goal for the LP is to make a superior risk-adjusted financial return and the primary measures of their success is: Internal Rate of Return (IRR) and cash-on-cash return (C-on-C), and the multiple of invested capital (MOIC).
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