The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies, 2nd Edition

CHAPTER 11 The Venture Capital Firm, Operations, and Culture

“I think of venture capital business as a series of individual personalities, as opposed to a series of firms.”¹

—James Breyer, Accel Partners, Former Chairman, National Venture Capital Association

A venture firm is a catchall phrase that encapsulates at least two separate entities—the general partnership (typically structured as a limited liability company in the United States) and a limited partnership. The general partnership is an entity that employs fund managers and earns annual management fees and carried interests. The limited partnership structure allows several investors to have a “limited” liability to the extent of their ownership in the fund, which is managed by the general partner, as seen in Figure 11.1

FIGURE 11.1 Venture firm and its entities.

More on fund governance and operations is dealt with in later parts of this chapter. Let us first look at the DNA of any firm.

THE DNA OF A FIRM

Like any start-up, the firm needs to define its operations and build its brand identity. However, many firms believe that a Web site and some fancy logos are sufficient to create their brand identity. In an era when entrepreneurs have choices, the venture firms need to weigh the importance of branding their venture firm appropriately. The venture firm can develop into three archetypes:

• A group of cowboys
• An ...