Why Do Venture Funds Keep Raising More Money?

Bilal Zuberi says the extra fees from raising another $2 billion, $40 million a year, go mostly straight into the managing partner's pocket. Venture expenses do not rise by $40 million when the fund gets that much larger.

A firm might hire a couple more people and spend 2 million or 5 million more. Assets under management are increasing while funds shrink, because teams use AI and power is consolidating in a few people. A partner who must decide on $100 million needs a couple of junior associates to judge which voice recognition company is better, then writes the check personally. Few people are needed in between. Stopping at $2 billion makes little sense when a firm should raise a $5 billion fund. If firms could raise $5, they would raise $5, and if they could raise $10, they would raise $10. Only a few managers sit in the $5 and $10 category, but the same pattern works for a $500 million fund, a billion dollar fund, or a $2 billion fund.

The new $40 million of annual revenue is mostly partner income, which is why managers raise the largest fund they can.