Top-secret VC economics and power unveiled

I wrote a little bit ago about how VCs get paid (more here).

In particular, I wrote about the “management company” that exists at venture firms and which controls the money and power at those firms. A management company is essentially a “firm within a firm” and it’s details are often kept secret from partners at that very same venture firm.

Entrepreneurs need to know about management companies, as it can affect a venture firm’s behavior and stability, as well as how you may want to think about your fundraising efforts with that firm (more in the above hyperlink).

Well, many VC firms now have to register with the SEC, and the details of who is in the management company are available at this part of the SEC site. Just click on the Investment Adviser search button on the left. You can then search by firm name or individual. You have to scroll a few pages before you get to the good stuff. Keep hitting “next” at the bottom of the pages until you arrive at “Schedule A: Direct Owners and Executive Officers.”

The site also shows who has “control” of their management companies. These are the Chief Partners.

I am shocked as I look at how tightly-controlled these entities are, and how many great VCs are excluded from the inner circles of their firms.

Many thanks to Bijan Salehizadeh for tweeting about this SEC site. This site is a huge step forward in transparency.

9 thoughts on “Top-secret VC economics and power unveiled

  1. Interesting that all the major firms (that I’ve stabled in) are exempt from this registry….

    1. The major firms I’ve checked are there. At the bottom of the first entry page, there’s a “next” button. You have to progress a few pages until you hit the page that lists the individuals in the management company.

  2. You mentioned that many VC firms have to report to the SEC.
    What are the distinctions between firms that do/don’t have to register?

  3. Dramatic title but does not quite work though.

    Let’s take us (Atlas Venture) as an example — we show up with concentrated control of the management entity. However, our management company is not designed to accrete value (so who owns it is not financially relevant) and the voting percentages in that entity are a product of years past (Atlas was created in 1984 not 2004 πŸ™‚ ). We’re a flat partnership with equal decision making but you would not know that from the filing.

    So on the evidence of one, I actually don’t know that you can derive that much knowledge from looking at these filings, sorry πŸ™‚

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