Estimate steady-state annual revenue

To understand the potential financial impact of doubling assets under management, estimate TanMDs "steady-state" annual revenue and its costs before GP compensation using the following simplifying assumptions:

TanMD raises a new $1.5 billion fund every 3.33 years (a typical frequency for a VC firm); fund life averages 10 years. So, in steady state, TanMD would have $4.5 billion in total committed capital1.7x its current scaleand would invest $450 million per year.

Across its entire portfolio, exit proceeds average 2.5-3.0x capital invested, consistent with successful VC funds' performance.

Management fees equal 2.5% of committed capital and carry equals 25% of capital gains. Ignore thresholds that boost the carry to 30% and the fact that management fees on parallel funds are paid on invested, rather than committed capital.

To calculate costs, estimate average annual cash compensation per non-GP employee. Then increase that figure to reflect additional expenses for benefits, rent, travel, professional services, etc. Finally, estimate the number of non-GP employees TanMD would require to support a 1.7x increase in scale to $4.5 billion in committed capital. Note that TanMD currently has 74 non-GP employees, 43 of whom are operating team professionals.