Distilling Venture Capital

If you really want to understand a business figure out how it makes money. That's true for every kind of business.  It's especially true in venture capital.  Most people think about venture capital in terms of single deals.  A VC's job is to essentially buy low and sell high.  That takes a ton of work. In future episodes we'll take a look at how an individual VC deal makes money. Ultimately, however, venture capitalists make their money by managing a fund of venture investments for other people.  So that begs the question: How do venture capital funds make money?  VCs get paid with a management fee (1-3%) that should cover the costs of keeping the lights on.  It's a nice living, but not the reason someone becomes a venture capitalist.  Venture capital funds get "carry" which is a share of the upside, usually 20% of profits.  Carry is the brass ring. The lion's share of the money. The economic motive for VCs is to make a huge amount of money for other people and share in that success. In this episode we look a