5 ms·

How does a $40mm fund w/ a 2% management fee support ~20 employees ($80,000/head)?

• alex-wallish 6y ago
  Where are you seeing that they have a 20 person team? I don't doubt it, I'm just curious as well. On their website, it only lists four people: https://www.boost.vc/team https://www.boost.vc/team
• sethbannon 6y ago
  I don't know anything about Boost's structure in particular but there are a few ways to make this work: 1) Management fees stack from one fund to the next and can add up. The article says their last fund was $38M and that this is their 4th fund. So assuming their first two funds were $20M each (no idea if this is the case), you'd get stacked fees of $20M * 2% + $20M * 2% + $38M * 2% + $40M * 2% = $2.36M / year 2) Often VCs will taper their management fee over time. For instance, they might charge 3% the first two years, and then reduce over time, so the average is 2%. A 3% management fee on just the $40M fund would be $1.2M / year. 3) Sometimes VCs will sell a stake in the management company to fund operations. So if you expect a $40M fund to 3x, and the carry was 20%, then the management company would expect a windfall of ($40M * 3 - $40M) * 20% = $16M. The VC might sell a 10% stake in the management company that's due to received this carry for $1M now, in order to hire staff and fund operations. Hope this helps! [edited for formatting clarity]
  • brayton 6y ago
    Or the easiest way. We are only a team of 5 :) That picture is our team with Tribe 13!
• jartelt 6y ago
  Of the 20 employees listed on LinkedIn, several are just Mentors that almost certainly do not take home a full salary with benefits.