1/ How VC economics work explained very simply

2/ Management company is the key entity. It is owned by the General Partners.

Revenues are fees paid on funds (usually 2%, may go down after investment period).

Expenses are team comp, office, all ops, compliance and placement agent fees if those are used.

3/ Each fund is a separate Limited Partnership. Investors are hence Limited Partners.

Each fund pay fees and carry ... as well as some expenses (legal feels, deal expenses, fund admin, audit fees)

4/ Carried interest is held in a separate partnership vehicle - usually one for each fund, or a "compartment" - and carried interest is distributed to the people who helped invest that fund (General Partners, Partners, other team members).

Subject to 10 year vesting.

5/ Simple :-)

6/ Most funds are 2% management fee and 20% carried interest. First time funds usually start at 2.5% to alleviate startup costs and decline over time. Total fee intensity is usually 15-20% over 10 years. Public investors tend to cap total fees at 15-18%

Top funds charge 3/30

7/ I forgot GP commitment! - Partners invest collectively 1 to 30% alongside the LPs into the fund.

Usually 2% at a minimum.

Often GP's will use the management fee to fund this.

New structures such as @AngelList rolling funds reduce that hurdle for emerging investors