Normally, in a VC fund, the fund often have a 2% management fee per year on the amount of capital, which is the case here, although it is capped to 5 years. However, you then have a carry that is split between the LP (investor that are passive) and the GP (people who run the fund). Typically, most of the returns goes to the LP, and a 20% in most cases goes to GP to compensate them for doing a good job... in this case there is no carry, and based on reply below, every LP is also a GP... however if the team has a % of token allocation, then that's similar to a carry except it's not based on financial performance... not ideal. I'll skip the other details, but the point is, in this particular case the team allocated 14% of the token supply to themselves which has nothing to do with financial performance of having picked the right investment targets...
Why are there advisors (even though a reply is below as to why, I'd prefer if these advisors would buy tokens instead of getting them... it's like giving money to Bill Gates for being an advisor, I'm not saying his advice would be worthless, but why would he not just invest, it's not like giving him pennies would matter to him!
GPs typically have to contribute their own money 1% or 2% of the total fund capital (is this the case here?). LP in any investment funds own essentially 98% of the capital and obtain 80% on the growth of the capital (simple math to make things easier to understand). In this case, the LP's (or GPs) own only a small 21.85%, so the question is when investors invest in a project, does the ROI of that investment goes back in the token economy, or it goes directly to the investors based on their investment? (if it's the later, then everything is ok, if it's the first then it's a lot worse than a carry fee).
Crypto funds sometimes generate massive returns compared to non-crypto investments, and becomes liquid much faster (average returns for tech is 25% per year). The question comes back, are the returns distributed through token buyback or something similar, or the returns goes straight to token holders that have made an investment (in which case the token is not directly related).
If I give my money to be managed by an investment fund to manage it on my behalf, I will not be giving it to them so they spend it on marketing and giving out free rewards and incentives to all kinds of people. I want the money to go into generating returns, not chasing after more investors. It's like giving money to red cross and finding out they spend 50% of it on marketing and paying out huge salaries to their executives. (reply below mention that 100% of the invested capital goes into the project, but once I get clarification over where the return of the investment fund is given back to investors I'll have more peace of mind).
If I invest $10,000 how much of that $10,000 actually goes to be invested in a project?? How much of the return of that investment goes back to me? 100%, or it goes back into the token economy through buyback? I suspect this information might be there in the whitepaper and I didn't notice it.
** updated - added 1 star ** Based on the reply below, many of my concerns above have been clarified and resolved. However, to get to 5 stars, I'd like to see the team token to be based on financial performance... similar to a carry structure. Show Less
