Venture Capitalist

What Is a Venture Capitalist?

A venture capitalist (VC) is a professional startup investor. 🚀 They manage pools of money (called funds) from other investors and invest that money into promising startups that could become the next big thing.

What makes VCs special:

• Manage large investment funds
• Focus on high-growth startups
• Take active roles in companies
• Aim for massive returns (10x+)
• Usually get board seats

How Do Venture Capitalists Make Money?

VCs have a pretty sweet deal with two main ways to make money.

1. Management Fees (The “2”)

• Get 2% of total fund size annually
• $100M fund = $2M per year in fees
• Used for salaries and operations
• Guaranteed income regardless of performance

2. Carried Interest (The “20”)

• Get 20% of fund’s profits
• Only after returning investors’ money
• The real money-maker for VCs
• Example: $500M profit = $100M for VCs

This is why it’s called the “2 and 20” model.

Venture Capitalist vs. Angel Investor

Think of it as playing with different-sized chips at different tables! 🎲

Venture Capitalists:

• Use other people’s money (OPM)
• Write bigger checks ($1M-$100M)
• Need approval committees
• Focus on later stages
• More formal process
• Usually lead entire rounds

Angel Investors:

• Use their own money
• Write smaller checks ($10K-$500K)
• Make quick decisions
• Focus on early stages
• More informal process
• Often invest alongside others