Managing Partner @ Accelerate Africa | Investor and Consigliere to African founders
What no one actually tells you before you get into venture is that even that 2% per year ‘fee’ isn’t really your money. It is at best a credit to be repaid with a deduction from your return at source before you can get any share of your carry profit. Venture capital is nothing but a pure labor of love. Anybody telling you anything else is either not being sincere or doesn’t actually intend to return capital to their investors. Ofcourse this is why most venture capital firms at scale default to becoming misaligned fee earning asset managers but that’s a story for another day. We have done enough table shaking today.
Partner @ Fast Forward Venture Studio. DotCV evangelist. Prev founded Jobberman (no 1 jobsite in Nigeria), Whogohost (no 1 .ng domain registrar) and led Product teams at Indeed. Wharton EMBA '25. MIT Legatum Fellow.
Contrary to public perception, venture capital doesn't pay great wages. Especially for micro-funds. A $10m fund with a 2% annual management fee and 20% carry leaves the fund with $200,000 annual budget (salaries, branding, website, tools, travel , legal et al). This is a whole firm, not 1 person. Which is why we have solo funds. Before you can get $10m entrusted to you, you are most likely pedigreed enough to earn far more than $200k pay elsewhere with Amazon, Google, Indeed et al. Get into venture capital because you are really passionate about it. Your reward is in the future - in the carry (or inadvertently when you get to amass tens and hundreds of millions of AUM). Which also means you have to make the best decisions to secure your future.
Not an hubris anymore. Startup often seek validation too quick. Zuck once had an offer to sell Facebook for a billion dollars to Yahoo. Everyone bet against him. Instead be bet on vision to expand. Startup have to start trusting the vision rather too quick pay out with Labor wages at first.
Emmanuel Oladosu
6mo
True, venture capital's fee structure often surprises newcomers. It's crucial to understand the nuances to navigate expectations and align incentives effectively.
Ely Fall
6mo
Why not forgo the 2% all together? Most partners are seemingly wealthy. Or taking a fixed low salary similar to what they expect entrepreneurs to do would be fair. This way everyone is aligned: LPs risking their money, VCs and Entrepreneurs risking their time.
Great Insight 👍 Most people only consider funds forgetting the process.
Theophilus Duger
6mo
Strong opinion!
Interesting perspective on the VC fee structure! It's definitely a complex world with unique dynamics. While I understand the point about the "fee as a credit," there's also the potential for significant carry profits down the line, especially with successful exits. Perhaps the key is managing expectations? Knowing that VC is a long-term game with inherent risks and delayed gratification.