Bigger cakes than a scramble for cakes

"When the cake, the last round to VC?!" A friend in the venture to understand the operation of VC after the way to conclude. In fact, in our business, when to take our own piece of cake, this is a very interesting topic, because it reflects how a person through angel investment in this way to create value.

First, let's briefly introduce how VC works:

First, you raise a sum of money to invest;

From this money, you get two benefits: one is the management fee you deserve as a trustee, and the other is a part of the income that is ultimately earned by investing.

Generally speaking, this ratio is 2% and 20%--2% is an annual fee, the proportion of income is 20%. This ratio is not fixed, can be based on your investment record, the size of the fund and so on and other factors to negotiate with the investor.

If you raise a lot of money every few years, you'll probably get a millions of-dollar annual fee before you start investing. That's why all the limited partners hate mediocre investors--without creating the value that matches their high annual salary.

If you were in Homebrew, the first time you raised 35 million dollars, well, that's all we've learned. But in fact, the Homebrew way is a little bit special. For my own example, the company pays me less than I did at Google in 2001. But in fact, if we are diligent enough, we will get paid after the investment is successful. This is Homebrew's attitude to VC operations-let VC, investors and entrepreneurs get paid at the same time.

In fact, if the object of our investment is successful (first and foremost, it is economic.) At the same time, entrepreneurs should be proud of what they create. This is our two bottom line, investors will get the income they expect, and we'll get our share. Satya (another partner of Homebrew) and I are very much interested in the agreement with the investors and will not see any increase in profits. While we want to drum up our wallets, investment is just the beginning. At this point, almost all VC will do this, although there are a few exceptions: I remember when I was working at Google, there are always some not good colleagues will do similar things-claiming to have a Facebook offer, and then everywhere to ask for a raise. Some people pay very little, but can always get high returns.

Every VC should have a ruler in mind to measure whether the remuneration they receive is fair. For myself, I hope that the rewards I receive are decent, and that's enough. At the same time, I will be very angry with those who do not have much to pay but get huge returns. (In fact, this is a matter of personal value judgment.) )

So, to sum up, the following I have some ideas and suggestions for VC:

It is fair to make sure that you are rewarded for your own return, and that the process lags behind.

Make the cake bigger than the entrepreneur, instead of competing for the one that doesn't belong to you. If you are a good VC, only this will allow you to succeed.