What would VentureSouth do?
A fair follow-up question on these posts on venture capital fund management fees is: so what does VentureSouth do?
You hopefully will not be surprised to learn that we use the step-down approach on our sidecar funds: a percentage of committed capital during the investment period, then a percentage on (net) invested capital during the harvesting period.
In VentureSouth Angel Fund I, which was the first fund and very small (<$2M), the percentage was 2.5%.
As the funds have grown and we have leveraged operational efficiencies – both within the funds and across VentureSouth – later funds have been 2% using the step-down approach.
As we said, we think this is the most reasonable approach, and we try to practice what we preach.