...Let’s do the math on an example to see how this plays out. Let's say an entrepreneur owns 10% of their VC-backed start-up and someone comes and offers them $100 million. Thus, they stand to make $10 million if they proceed with the sale. Let's say a VC fund owns 20% and thus will take away $20 million, but assume they’ve invested $5 million already in the company, yielding a net capital gain of $15 million. Further, let’s say the VC’s “carried interest” is 20%. Therefore, the general partners of the fund take home $3 million. Let’s say there are 6 partners that split the carry evenly – that’s $500k for each general partner...
Thursday, July 13, 2006
Excellent Blog for Entrepreneurs on Fund Raising
An excellent blog I've been frequenting lately is www.bostonvcblog.com by Jeff Bussgang. Besides the fact that he was part of some pretty large startups (Upromise) - he gives some excellent insight into the whole fund raising process. The best part of the blog is that Jeff doesnt shy away from giving numbers, percentages and the like...you know, the questions that really matter. He also discusses the mindset of VCs and entrepreneurs, and the possible clashes that could occur. Anyhow, I'll leave you with an excerpt to give you a taste and illustrate his insight into the numbers, but you should go take a look for yourselves: