Definition
The annual fee (typically 2% of committed capital) that VC fund managers charge to keep the lights on, whether or not they make good investments. The guaranteed money that pays for offices, salaries, and kombucha before carried interest kicks in.
Example Usage
Even though the fund had no exits yet, the $5M annual management fee on their $250M fund kept the partnership running comfortably.
Origin
Investment management standard dating to mutual funds in the 1920s, adopted by venture capital in the 1970s
Fun Fact
Critics call the '2 and 20' model (2% management fees plus 20% carried interest) excessive—some firms have moved to lower fees, but many maintain it's industry standard.
Source: Investment management and venture fund documentation
Related Terms
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See “management fee” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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