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Comment by ryandrake | Hacker News Reader

So, overall a 2950% return over ten years. I know its a contrived example, but not too shabby if you're lucky enough to be in the club. Wish this scaled down. I'd gladly invest $1,000 today for $30,500 in ten years.

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It does scale down - remember, it's not just the initial capital, but also 10 years of work. There are many similar situations where you can get similar returns. My parents spent ~$1000 on programming/CS textbooks for me when I was a teenager, and it made me a whole lot more than $30,500 in additional wages. Pick the right technology platform today and you can spend a couple hundred bucks and end up with a few billion.

The fees (management and performance) shouldn't be considered as "return on investment", but rather as "paycheck for work performed". The founded might as well invest $0 (e.g. if s/he has rich friends or a reputation that makes it easy for him/her to find seed capital), but still reap a lot of profits.

Agreed. On the other hand, is it really 100 times more work to manage an investment of 10 M than one of 100k? 1000 times more work to manage 1 bn than 1 m?

No, but pay isn't based on how hard the work is. It's based on the value provided, and/or on the influence the individual has; and somebody able to attract 1bn is much more influential than someone with just 1m under management.

why are VC's taking 200-300k+ as salaries when founders are expected to subsist on just above avg wage or around 100k?

Because they can?

I understand that but I can see fellow founders condemn other founders for taking an above avg salary or as was the case with the founders who took $6m [0] off the table during funding...

Surely the Lp's should look at such high salaries as exorbitant..

[0] - Secret App that has since closed shop

Part of raising money from (most) LPs requires a bit of showmanship akin to that of Lawyers and Investment Bankers. This goes beyond the taking a "client" out to dinner. It's the expectation of living a specific lifestyle and the perceptions the wealthy have of those asking for money. Also, consider the amount raised (typically XX million+). That usually allows you to pay $200-300k salaries (though whether that's right / justified is a different conversation).

As wealth changes hands over time, this expectation may change.

Well they can charge all the expense to the fund and still take nominal salaries.

The startup world isn't encouraging of founders who take high salaries or who take money off the table..

Some of this exorbitant salaries could have been paid to extend the runaway of key startups and generate better returns.

This doesn't hold for all of them. As a group VCs, underperform many other asset classes.

I think the well known firms tend to earn LPs good money, but aggregated it's bleaker. So although money-losing VCs still earn management fees (until they close down), earnings are lower than the example.

https://hbr.org/2014/08/venture-capitalists-get-paid-well-to...

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