VC Fund Economics: The 2-and-20 Stack
How management fees and carry shape LP / GP incentives.
- Management fee
- ~2% / year
- Carried interest
- ~20%
- Investment period
- 3–5 years
- Fund life
- 10+2 years
- DPI
- Distributions ÷ Paid-in
- TVPI
- (Dist. + NAV) ÷ Paid-in
Typically charged on committed or invested capital; often steps down after the investment period.
GP share of profits after LPs receive returned capital (and hurdle, if any).
Window when the fund actively deploys new checks into companies.
Standard term with optional extensions to harvest remaining holdings.
Cash returned to LPs — the realization metric that matters most.
Total value including unrealized marks; useful early, less so near end of life.
On a $100M fund: ~2% management fee funds operations; ~20% carried interest is the GP share of profits above the return of capital (and any preferred return, if present).