VC management fees are typically 2%/y. if a VC fund has $100 million in committed capital, the annual management fees would generally be between $2 million and $2.5 million. it's a lot of money.
On the other hand, a $100mm fund could be a 'contender' fund that wants to raise a large fund, and is in a competitive industry -- it's trying to get on the cap tables that, say, Mayfair gets on to, and so it needs to staff recruiting support, tech help, marketing people. Perhaps it's multi-jurisdiction. In that world, $2mm is way, way too little, and the GPs may well be financing the fund personally through fund 1 and into fund 2, depending on the follow-on raise. They are aiming at running, eventually, $1bn+ per fund in three to four stacked funds, and taking home $1bn after 20 years (or less?) of good effort for each of the original GPs.
These are caricatures, and there's much more than this to the lifecycle of venture funds, but since we're at HN and VC is a big part of the conversation, I think it's good for hackers and founders to understand the counterparties they do business with, and particularly to be able to read the signals of the VCs they talk to, while the VCs are reading the signals of a desperate, out of date deck.
You are sure you can speak for all of them? There are tons of VCs...
To me the 2% running fee sounds pretty nice, combined with somewhat low pressure job compared to many others. Of course it is not nice if your fund doesn't make it but you are guaranteed somewhat cushy position for 5-10 years.
And most LP's will expect the GP's to have significant skin in the game. E.g. at my previous employer, every staff member was expected to have at a minimum the equivalent of 1x gross yearly salary committed within a few years.
VC salaries are not that great outside the top tier funds or unless you're one of the GP's.
It could be "retirement money" for a handful of the GP's at the top tier funds, but they're only in that position in the first place because they have a lengthy track record, and so their past earnings from carry etc. will still dwarf any operating fee from their current fund.
Most who run a fund like this do not think of it as low pressure or cushy, regardless of goals. Something I tell my portco CEOs a lot is that as much as they want to raise money, or need money for their company, in general, VCs they are talking to need to write checks even more. Just not bad checks.
Spending a billion dollars take a lot of effort (or so I assume; I've "only" spent millions). People will ask annoying questions like "where is the billion dollars coming from, I had no idea you were a billionaire", and ask about AML etc.
Conversely, driving down the value of a company that's already worth billions is "easy": Just publicly demonstrate your willingness to drive the company totally into the ground.
Or if you want speed, and have access to the funds, the super-fast way would be transferring a billion worth of crypto to a random address.
For my part, my biggest "losses" were paper values in startups that failed or didn't get the exits we'd hoped for. There it's also "easy".
E.g. I know of a decent number of funds that size or smaller with a staff in the range of 10, a few with well above that. Even at 2% it's suddenly not so much money then, even less so when you start to factor in costs.
EDIT: You may also sometimes "on paper" have fees like that, but quietly offer discounts etc. to convince investors. On top of that comes often quite substantial requirements to buy into the fund for at least senior staff that seriously reduce the de facto salary unless the fund also does well enough that it's the carry that matters.
This is a clearly beneficial requirement, but your point is fair about it leading to 'on-paper' comp looking high. But I'd even go so far as to say that the majority of comp for senior people should be contingent (not sure if that's typical).
Note that given salary levels this means that over the 10 year runtime of the fund, most of us would be giving up nearly ~20% of our 10 year aggregate gross salary, most of us within 4-5 years. My gross salary during that period was not much different from in my job before - it was a pretty steep sacrifice for a shot at that carry.
Fair. These sorts of things are usually pretty nuanced.
> it was a pretty steep sacrifice for a shot at that carry.
I totally get that, but it also seems like the ideal balance of interests. To many obvious failure modes if you don't have enough skin in the game. Of course that works the other way too, the upside in good-to-great cases have to make it make sense.
A lot of startups think it's still ok to pay under the odds once hiring staff that are getting tiny fractions of a percent, though, and at that point, the risk-adjusted value of those options is not worth taking a cut for relative to a bigger corporate with somewhat predictable share performance and liquidity.