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General VC Questions

Clarification on 2% Management Fee

Asked by:

Matan Hazanov

Oct 15, 2024

When we discuss a 2% management fee, I know that usually there is a drop off after the "investment period", meaning that we shouldn't charge 2% every year for a 10 year fund. So when we discuss 2%, is this a blended rate over 10 years with a higher % for the investment period? If so, what is the recommendation for fee % during the 3-5 year investment period? OR is the 2% for the investment period and the blended rate over 10 years is lower? Ex. 2.5% from years 1-4 dropping to 1.25% in years 5-10 yields a blended fee of 1.75% over the 10 year period.

Can a sample spreadsheet be produced for fund expenses paid yearly or over the term of the fund?

Asked by:

Community Member

Nov 10, 2023

Following the table here: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/ What are typical caps and best practices (which are limited and unlimited?) and for different size funds. Also a bit confusing that something like Travel & entertainment is a fund expense but paid for by the manager (I get it, and wouldn't if it was a fund expense it would be paid for by the fund?) - can you explain? Thanks!