It varies a lot, but in general, you can assume about 2% of each fund goes to “management fees”, for its operational budget.
Usually, the partners will pay themselves salaries very roughly equal to about 2-3% of the size of the fund. The rest will go to office, admin, travel and associates and non-partners. And whatever’s left? The partners that own the management company keep the surplus.
So let’s take a hypothetical:
- $200m fund
- 2.5% management fee, or $5m a year paid by LPs (the investors in the fund) for operational expenses.
- 3 general partners, take $1.5m in salary collectively.
- fancy South Park office is $50k a month, or $600k a year
- 3 EAs at $200k a year, burdened
- 2 associates at $400k a year, burdened
- $500k a year in travel and expenses, marketing (if any), “IT”, etc.
- $500k in CFO and audit fees, accounting, legal, admin.
What’s left? $1.3m. The partners that own the management company split this and dividend it out to themselves.
The bigger the fund, the more of the “excess” they can keep, especially if they are partners in multiple, overlapping, active funds.
As you can see, in VC, there’s a pretty large “fee drag”. I.e., you have to actually earn a lot more on the investments than you might think, because you don’t earn “carry”, or profits, until the investors reach 1x which, generally, but not always, includes repayment of fees.