      SaaStr · 2015-10-10
      · 3889d
    

VC Profitability Beyond Top-Tier Firms: Returns, Fees, and Partner Economics

Venture capital can be profitable for non-top-tier firms through two mechanisms: fund returns to LPs and management fees to partners. While most funds fail to achieve 3x returns (90-95% underperform this benchmark), partners can still earn substantial compensation through high management fees and carried interest even on mediocre 1-2x funds.

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Metrics in this report

Acceptable Fund Return Multiple

2x multiple

minimum

General venture funds net of fees

Carried Interest Standard

20%

standard

Partner share of gains

Exceptional Fund Return Target

10x multiple

occasional

Best venture funds

Funds Underperforming 3x Return

90-95%

range

All venture funds

Good Fund Return Multiple

3x multiple

threshold

General venture funds net of fees

IRR from 2x Return Fund

15%

approximate

2x fund net of fees

Top-Tier Fund Return Target

5x multiple

target

Best venture funds