Venture Capital Structure
How capital moves through a venture firm, with the German legal forms that carry each role
The same Managing Partners own and run both
MANAGEMENT COMPANY
Brand, IP, vendors. Employs the team
and pays the salaries
DE · Management-GmbH
GENERAL PARTNER
Decides and holds the liability. Splits
the carry among partners and principals
DE · Komplementär-GmbH + Carry-KG
LIMITED PARTNERS
Provide the capital, carry no control
Liability limited to the commitment
Pension funds, endowments,
family offices, HNWIs
DE · Kommanditisten
THE FUND
Holds the securities on behalf of the LPs
Calls capital in tranches, as it is needed
Carries the fund expenses
Governed by the Limited
Partnership Agreement
In Germany: GmbH & Co. KG
Tax-transparent, as long as it stays
asset-managing rather than commercial
PORTFOLIO COMPANIES
High-growth startups
Deliberately not tax-transparent
Each under its own
Investment Agreement
DE · meist GmbH
commitments
called in tranches
capital back first,
then ~80% of profit
investment
for equity
exit proceeds
M&A, IPO or secondary
management fee · ~2% of committed capital
~20% carried interest
ORDER OF THE MONEY AT AN EXIT
proceeds reach the fund → LP capital returned in full → preferred return, where one exists → GP catch-up → remaining profit splits roughly 80 / 20
European whole-fund waterfall. The American deal-by-deal version pays the GP earlier and is secured by a clawback.
PASS-THROUGH TAXATION
The fund and the GP pay no tax themselves. Income passes to their owners, so profit is taxed once, at the investor, instead of twice.
Portfolio companies deliberately are not, which keeps their gains and losses off each LP's own tax return. In Germany the KG achieves the same effect.