David Rosenthal: belief

Transcript context

…And TVI was Dave Marquardt who made that investment in Microsoft and was the leader of TVI. Yes, but not one of the founders, I don't think. I think he was part of the second generation. But there starts to be a whole bunch of conversations within these two firms about, hey, what does the structure look like going forward? The firms are getting a little longer in the tooth. These older GPs maybe aren't working as hard anymore. They've made their money. We've got some junior investors here that are out doing all the deals. Maybe we need to rethink some of the ownership structures of these firms. It's worth a quick digression here about how does a venture firm actually work economically? Even today, I think most people and a lot of entrepreneurs don't really know this. There are multiple parts to the economics of a venture firm. You think about a fund and the carry within a fund. It's pretty straightforward which partner gets what percentage of the carry, but there's also the management company. Yes. Typically, the way that this works is the founding partners of a firm own the management company. That management company is an LLC that has basically an employment relationship with all of the founders, and then it is the umbrella parent over each of the funds. Each fund has its own carry that gets cut up in different ways among all the different partners for that particular fund, but over the umbrella of the whole thing is a management company, which you would think of typically an LLC, but you can think about it like Kleiner Perkins Incorporated. Of course, that's the governance of do we raise more funds and how big are those funds, but there’s also economics. There’s the economics on a fund by fund level, which is how is the carry from this fund getting distributed on a percentage basis across everyone with carry?…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.