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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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In this video, Jake Denham explains how compensation works in a typical venture capital fund by looking at three key players: the Manager, the Limited Partners (LPs), and the General Partner (GP). He discusses how the Manager, usually the management company, earns an annual management fee to operate the fund and pay the team. He also covers how LPs, the investors who provide the capital, are paid back first and then share in any profits. Finally, we explain how GPs, who make the investment decisions, are typically compensated through carried interest, meaning they only earn a share of the profits after the LPs receive their capital back. Understanding this structure helps explain how incentives are aligned within a venture fund and why getting the structure right is critical when launching a fund.

Compensation in Private Fund Formation

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