Question

1.What are four types of investors who normally invest as limited partners in a venture capital partnership?

2.Is the payment of venture capital management fees dependent upon the returns the limited partners receive?

3.Please list three sources of income the General Partner and management company receives from the sponsorship of a venture capital partnership.

4.Unless extended by a vote of the limited partners the investment period plus the commitment period is normally how many years?

Answer 1

Answer 1: Limited Partners (LPs) is someone who commits capital to the venture fund. LPs are mostly institutional investors, such as pension funds, insurance companies, endowments, foundations, family offices, and high net worth individuals

Answer 2: No,  the payment of venture capital management fees does not dependent upon the returns the limited partners receive. management fees act as an salary for an VC and hence had no relation to any profits received by the GP.

Answer 3: the management fee of 2% or 2.5% that venture capital firms charge their investors. it acts as a salary fora VC firm.

Distribution earned by the GP after LP receives his contribution.

The carry amount recieved by GP as a % of assets.

Answer 4: private equity and venture capital funds usually do not have any redemption rights and are organized to have a limited life cycle, often in the range of 7 to 15 years. During this life cycle, the fund manager will raise the capital for the fund, deploy that capital into investments, hold those investments, and then sell those investments and return the capital to the fund’s investors. This activity occurs over several distinct phases – the marketing period, the commitment period, and the post-commitment period.