FREE online courses on Venture Capital Funding - The Venture Capital Industry - Management of funds

 

·         The venture capital firm will organize its partnership as a pooled fund; that is, a fund made up of the general partner and the investors or limited partners.

 

·         These funds are typically organized as fixed life partnerships, usually having a life of ten years.

 

·         Each fund is capitalized by commitments of capital from the limited partners.

 

·         Once the partnership has reached its target size, the partnership is closed to further investment from new investors or even existing investors so the fund has a fixed capital pool from which to make its investments.

 

Multiple funds

 

Like a mutual fund company, a venture capital firm may have more than one fund

in existence. A venture firm may raise another fund a few years after closing the first fund in order to continue to invest in companies and to provide more opportunities for existing and new investors. It is not uncommon to see a successful firm raise six or seven funds consecutively over the span of ten to fifteen years.

 

Each fund is managed separately and has its own investors or limited partners and its own general partner. These funds' investment strategy may be similar to other funds in the firm. However, the firm may have one fund with a specific focus and another with a different focus and yet another with a broadly diversified portfolio. This depends on the strategy and focus of the venture firm itself.