I worked in hedge funds, even there the management fee (2%) covers the fixed costs (legal, trading operations, treasury, IT operations, etc.) whereas the performance fee (20%) incentivises the alpha.
In VC it's even worse, because at least hedge funds are liquid. VC investments don't realize their value for 5-10 years! Are they supposed to work for free for 10 years? Even the support staff?
I worked in hedge funds, even there the management fee (2%) covers the fixed costs (legal, trading operations, treasury, IT operations, etc.) whereas the performance fee (20%) incentivises the alpha.
In VC it's even worse, because at least hedge funds are liquid. VC investments don't realize their value for 5-10 years! Are they supposed to work for free for 10 years? Even the support staff?