Founders raise from venture funds without always understanding how those funds make money, which is worth knowing, because the way a fund is paid shapes how it behaves toward its companies. There are two components: the management fee and carried interest.
A fund charges its limited partners, the people whose money it invests, an annual management fee, historically around two percent of the fund, to cover salaries and operations. The fee keeps the lights on but is not where the wealth is made. A fund living only on fees is not really a venture fund; it is a salary.
Carry is the fund's share of the profits, historically around twenty percent, paid only after the limited partners get their money back. This is the real prize, and it is why funds are so focused on outsized outcomes: their upside comes almost entirely from the winners, not the fees. The classic shorthand for the whole structure is two-and-twenty.
Because carry rewards big exits, funds are structurally driven toward companies that can return the entire fund, which shapes the advice and pressure a founder receives. Understanding that incentive helps a founder read their investors accurately: not cynically, but clearly. An operating investor like Greenridge, which also builds, tends to weigh durability alongside the swing. This is general information, not investment advice.
Fees keep the lights on. Carry is the point.