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Nov 21 โ€ข 7 tweets โ€ข 3 min read
General Partners (GP) are the showrunners of a #VC firm. If they perform well, they can make big money. But if they lose, their career is over.

A ๐Ÿงตon how do VCs make moneyโ€ฆ
#VCs make money in 2 ways:

1๏ธโƒฃ Management Fee - typically 2% per annum of the total corpus across the fund lifecycle (10 years)

2๏ธโƒฃ Carry - usually 20% of the profits generated after returning the initial capital of the investors

Letโ€™s take the recent example of #IndiaQuotient๐Ÿ‘‡
The Bangalore based VC firm returned its first fund of โ‚น32 Cr with a net multiple of 5.9x to its investors. Took them 9 years.

So ๐—ณ๐—ผ๐—ฟ ๐—ฒ๐˜ƒ๐—ฒ๐—ฟ๐˜† ๐—œ๐—ก๐—ฅ ๐Ÿญ ๐—–๐—ฟ ๐—ถ๐—ป๐˜ƒ๐—ฒ๐˜€๐˜๐—ฒ๐—ฑ ๐—ถ๐—ป ๐˜๐—ต๐—ฒ ๐—ณ๐˜‚๐—ป๐—ฑ, ๐˜๐—ต๐—ฒ๐˜† ๐—ฟ๐—ฒ๐˜๐˜‚๐—ฟ๐—ป๐—ฒ๐—ฑ ๐—œ๐—ก๐—ฅ ๐Ÿฑ.๐Ÿต ๐—–๐—ฟ ๐˜๐—ผ ๐˜๐—ต๐—ฒ๐—ถ๐—ฟ ๐—Ÿ๐—ฃ๐˜€ ๐Ÿ”ฅ

What did GPs potentially make?
(assuming standard management fee & carry)

Earnings from:

Management Fee = (2% of 32 Cr) * 9 years = INR 5.76 Cr
Carry = 20% of ((5.9 * 32 Cr) - 32 Cr) = INR 31.36 Cr

Total Earnings = INR 5.76 Cr + INR 31.36 Cr = INR 37.12 Cr

So, the GPs of India Quotient potentially generated over INR 37 Cr as profits which they will now divide among themselves.

Note - This calculation gives you an upper limit of profits because it doesnโ€™t include other expenses like team salaries, legal fees, etc.
Being a VC isnโ€™t easy. It takes patience, perseverance and consistent evolution to succeed.

Congrats @IndiaQuotient for the success!

Learn the science of venture capital from Indiaโ€™s top 1% investors and build the skills, network and experience to launch your own VC fund.

Explore #CapitalX ๐Ÿ‘‡

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