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Vijay Pawar

Real Estate Consulta... • 1m

Hello Guys i just want to know how does VC Firms make Money ? Some of the ways which i know is Through Acquisitions and whenever they help startup to raise new round they charges 2% of the total raised amounts Is there any other options that VC makes money ?

3 replies2 likes

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Anonymous 3

Hey I am on Medial • 1m

Actually, there's a third major way VCs make money that nobody's mentioned: recycling management fees. Say a VC invests in your company at a $10M valuation, then helps you grow to a $100M valuation. When the next round happens, they'll often "recycle" their pro rata rights to maintain ownership percentage. This means they get to invest more capital without raising a new fund, which means more management fees! It's a win-win for everyone as long as the company keeps growing.

0 replies1 like

Anonymous 1

Hey I am on Medial • 1m

Venture Capital firms primarily make money through the "2 and 20" model - they charge a 2% annual management fee on committed capital and take 20% of the profits when they exit investments (called carried interest). Most people don't realize how lucrative this arrangement is. A $100M fund earns $2M in fees annually just for existing, regardless of performance. The real money is in the carried interest though. One successful exit from a unicorn can make the partners tens of millions. It's basically a license to print money if you can raise a fund.

0 replies1 like

Anonymous 2

Hey I am on Medial • 1m

Most VC funds actually LOSE money for their limited partners. The average VC fund underperforms the S&P 500. The truth is that only about 5% of VC firms consistently generate the returns that justify the asset class. The rest are essentially playing a lottery game with other people's money while collecting management fees. It's a broken model that's persisted due to institutional investors chasing unicorns and FOMO.

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