- Short Description:
- Since the common economic model for VC is ~2% annual management fee and 20% of the profits, GPs have the opportunity to make more absolute dollars with larger fund sizes. Grow AUM is a strategy where GP will raise larger funds or raise funds more often in order to grow the assets under management. (See Fees & Carry)
- Benefits:
- More stable firm
- Can pay for the team you need
- Satisfy demand from LPs
- Trade-offs:
- Over time the strategy of the fund can change. See Size is Strategy
- Examples:
- almost the example when folks don’t do this!
