There's a lot of nuance here. A $100mm fund could be a single guy/gal working from her office, running money in an industry she knows with a little bit of admin support. In that world, $2mm a year in fees is plenty to keep the lights on. Some fund managers I know in this situation don't call all the fee; there may be social considerations / signaling the manager prefers to make. Some spend it all and then some of their own. Absolutely none of them think that the fee is 'retirement money'; they all have eyes on the prize of a 3-5x and carried interest getting them to $100m or so, when they can do whatever thing it is they want to do that got them into running the fund.
On the other hand, a $100mm fund could be a 'contender' fund that wants to raise a large fund, and is in a competitive industry -- it's trying to get on the cap tables that, say, Mayfair gets on to, and so it needs to staff recruiting support, tech help, marketing people. Perhaps it's multi-jurisdiction. In that world, $2mm is way, way too little, and the GPs may well be financing the fund personally through fund 1 and into fund 2, depending on the follow-on raise. They are aiming at running, eventually, $1bn+ per fund in three to four stacked funds, and taking home $1bn after 20 years (or less?) of good effort for each of the original GPs.
These are caricatures, and there's much more than this to the lifecycle of venture funds, but since we're at HN and VC is a big part of the conversation, I think it's good for hackers and founders to understand the counterparties they do business with, and particularly to be able to read the signals of the VCs they talk to, while the VCs are reading the signals of a desperate, out of date deck.
> Absolutely none of them think that the fee is 'retirement money'
You are sure you can speak for all of them? There are tons of VCs...
To me the 2% running fee sounds pretty nice, combined with somewhat low pressure job compared to many others. Of course it is not nice if your fund doesn't make it but you are guaranteed somewhat cushy position for 5-10 years.
You've already spent a lot of time to raise the fund, unpaid or paid out of proceeds from a previous fund first. Then you have to put in a massive effort to find, sort through and vet investments. Either there are quite a few of you, or you have a nightmare work pressure for several years unless you already have a massive rep (and it's still work).
And most LP's will expect the GP's to have significant skin in the game. E.g. at my previous employer, every staff member was expected to have at a minimum the equivalent of 1x gross yearly salary committed within a few years.
VC salaries are not that great outside the top tier funds or unless you're one of the GP's.
It could be "retirement money" for a handful of the GP's at the top tier funds, but they're only in that position in the first place because they have a lengthy track record, and so their past earnings from carry etc. will still dwarf any operating fee from their current fund.
Yep I'm sure I can speak for all of the $100M-fund work out of your home office types. Or at least > 99%. The Venn overlap between "content with promising people you'll make money for them believably", "too cheap to spend on office / marketing because your fake pitch was so good nobody will need it to feel comfortable", "enough executive function to make believable calls on believable companies while doing no sourcing work" and "$2mm for three years until people catch on, but def don't send me to prison" is absolutely zero or very close to it.
Most who run a fund like this do not think of it as low pressure or cushy, regardless of goals. Something I tell my portco CEOs a lot is that as much as they want to raise money, or need money for their company, in general, VCs they are talking to need to write checks even more. Just not bad checks.
I've not lost billions twice, but have definitely lost tens of millions, and worked alongside at lost one person who lost a billion once... It's an "interesting" business to be in...
Spending a billion dollars take a lot of effort (or so I assume; I've "only" spent millions). People will ask annoying questions like "where is the billion dollars coming from, I had no idea you were a billionaire", and ask about AML etc.
Conversely, driving down the value of a company that's already worth billions is "easy": Just publicly demonstrate your willingness to drive the company totally into the ground.
Or if you want speed, and have access to the funds, the super-fast way would be transferring a billion worth of crypto to a random address.
For my part, my biggest "losses" were paper values in startups that failed or didn't get the exits we'd hoped for. There it's also "easy".
On the other hand, a $100mm fund could be a 'contender' fund that wants to raise a large fund, and is in a competitive industry -- it's trying to get on the cap tables that, say, Mayfair gets on to, and so it needs to staff recruiting support, tech help, marketing people. Perhaps it's multi-jurisdiction. In that world, $2mm is way, way too little, and the GPs may well be financing the fund personally through fund 1 and into fund 2, depending on the follow-on raise. They are aiming at running, eventually, $1bn+ per fund in three to four stacked funds, and taking home $1bn after 20 years (or less?) of good effort for each of the original GPs.
These are caricatures, and there's much more than this to the lifecycle of venture funds, but since we're at HN and VC is a big part of the conversation, I think it's good for hackers and founders to understand the counterparties they do business with, and particularly to be able to read the signals of the VCs they talk to, while the VCs are reading the signals of a desperate, out of date deck.