Calculating the Payout for VCs (GP) and their Investors (LP)

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Last updated 1:24 PM on 4/3/26
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9 Terms

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Initial Size of Fund (I)

The amount of money raised by GPs from LPs

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Terminal Fund Value (T)

Liquidation Value of all venture investments at the end of the Fund’s life minus payment of annual management fees

3
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VC Management Fee (F)

Paid annually from fund to VC as a percentage Fund’s
initial size

4
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VC Carried Interest (C)

A payment to GPs after LPs get their initial investment plus
some hurdle rate

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Investor Hurdle Rate (H)

Minimum annual return (based on Fund size) LPs must
receive before GPs get their carried interest

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Life of Fund (L)

this is always 10 years

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Fund Total Profit (P)

T - I

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dividend

extra money you get for owning a share of a company

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cumulative dividend

Cumulative means the dividends stack up over time if they aren’t paid right away