Is there a standard percentage of money a venture capital firm holds in reserve? If, for example, a VC firm has $100 million dollars to invest, is there a standard amount of capital they don’t invest?

A typical medium sized or larger ($100m+ fund) model will work like this:

  • ~10% goes to fees (really more, but they’ll try to ‘recycle’ some and reinvest some proceeds so it ends up 10% to fees)
  • 30% goes to initial checks for new investments; and
  • 60% goes to reserves for second, third, etc. checks into existing investments.

So in a typical $100m fund, only $30m will go into brand new investments. If their typical check size is $3m, then that’s just 10 new investments.

Small funds will often be more like 10%:45%:45%. And sometimes, the fees aren’t really recycled at all, in which case they eat up 20% (or more in a small fund, often 25%) of the fund.

But 10/30/60 is a good standard model to understand where the money goes over the decade+ long life of a fund.

View original question on quora

Published on May 3, 2018

Pin It on Pinterest

Share This