Jay Z Launching A Venture Capital Fund
- Thread starter JordanWearinThe45
- Start date
Ms. Elaine
Spoiled Brat
Grano-Grano
The Bando
@Ms. Elaine anything for your daddy Drake huh? Sheesh you take stanning to the ball sacks
KillerB88
Superstar
Jay isn't the sole investor. And he can't do anything with that "valuation". It's meaningless at this point.
Ms. Elaine
Spoiled Brat
Exactly. I sat here thinking, "with what money?"
People only hear about the successes. Never the (99% chance) failures.
Venture capitalism/angel investing isn't for those who don't have money to play around and don't mind losing.
If reports are to believed, Jay (and Beyonce) aren't nearly as rich as they'd like you to believe. Mind you, these are "billionaires" with a real estate portfolio that is valued at less than 8M$ and are currently renting.
Did I log onto the "Bitter" section of LSA?
MrWestGrand
The Negotiator
So we attack him for even attempting to put his name in the hat? Is that how we treat successful blacks trying to diversify and open up more doors.
We just label them sell outs off top?
That's what we doing?
Ms. Elaine
Spoiled Brat
And it's clear, you're the one with no experience.
I've audited and analyzed many financial documents/statements (especially for businesses) in my life to know bullshyt when I see it.
KillerB88
Superstar
Not at all. Just understand that this won't benefit black tech entrepreneurs most likely. Jay isn't trying to be about that.
KillerB88
Superstar
He wasn't PAID anything. They bought a stake in the company. Which JayZ has SHARED ownership of.
Ms. Elaine
Spoiled Brat
How so? Those bitties worship them.
KillerB88
Superstar
Why did he capitalize the word business like that made it more official lol
And it's clear, you're the one with no experience.
I've audited and analyzed any financial documents/statements (especially for business) in my life to know bullshyt when I see it.
Exactly. I sat here thinking, "with what money?"
People only hear about the successes. Never the (99% chance) failures.
Venture capitalism/angel investing isn't for those who don't have money to play around and don't mind losing.
If reports are to believed, Jay (and Beyonce) aren't nearly as rich as they'd like you to believe. Mind you, these are "billionaires" with a real estate portfolio that is valued at less than 8M$ and are currently renting.
Anybody who gets into the VC game knows that most of the start ups fail. That's why they spread their money out to so many different companies. They're all hoping that one or two of them take off and make up for the loses on the rest. VCs get paid on the 2 and 20 rule. 2 percent on the management fees and 20 percent on the carry. The bigger the fund the larger the management fee stream. Mad people are trying to do away with that structure because they feel VCs are getting away with murder on it.
but would add one more major problem with the venture industry to the list. The fact that most VCs get rich via “management fees” just by showing up every day.
The 2 refers to the 2% of the fund they use to cover operating expenses and pay their salaries. The 20 refers to the (normally) 20% “carry” fee – the percent of the profits they make for their investors that they get to keep.
The problem is the management fees. 2% made sense back when VC funds were much smaller, but not now that they have gotten so large. As peHUB said in their email newsletter today, Benchmark had an $85M fund in 1995 but today has a $500M fund. That seems to be the typical trend for most big VCs.
The other problem with venture capital: management fees | cdixon blog
Let’s do a little math. 2% of $85M is $1.7M. Assuming 8 partners, that means salaries are in the $100-$200K range. Much higher than national averages but, by the standards of finance, they aren’t getting “rich.” 2% of $500 is $10M, so each partner is probably getting $1M+ in salaries. Over the 10 year life of the fund that’s $10M. Even on Wall Street that is considered pretty rich. And they get that money even if they make only bad investments and don’t return a dime to their investors.
This is why you see VCs raising bigger and bigger funds, why you frequently hear them say things like “I need to do 2 deals this year” and, worst of all, why you often see VC’s arguing for larger round sizes even if the startup has no productive use for the additional money – and even for the same percentage ownership. In other words, in many cases VCs argue for a higher valuation just so they can “put more money to work.” Why? If you raise a $500M fund and tell your LPs you are going to invest it over, say, 4 years, then its pretty hard to go back to them after a year and say “thanks for the $10M in management fees, I decided not to make any investments this year.”
VCs are paid very well when they underperform. VCs have a great gig. They raise a fund, and lock in a minimum of 10 years of fixed, fee-based compensation. Three or four years later they raise a second fund, based largely on unrealized returns of the existing fund. Usually the subsequent fund is larger, so the VC locks in another 10 years of larger, fixed, fee-based compensation in addition to the remaining fees from the current fund. And so on. Assume it takes three or four funds for poor returns to start catching up with a VC firm. By then, investors have already paid for nearly two decades of high levels of fixed, fee-based compensation, regardless of investment returns. And the fee-based compensation isn’t trivial – in all but the smallest funds, the partners make high six, and more often seven, figures in fixed cash compensation.
Venture Capitalists Get Paid Well to Lose Money
Ms. Elaine
Spoiled Brat
They don't hear you tho...
Listen, it's always the ones who know the least who act like they know the most.