Iamveetoria
@iamveektoria
What is AUM, and Why Do VCs Talk About It❔ When you hear Venture Capital (VC) firms talk about AUM (Assets Under Management), they’re referring to the total amount of capital they manage, not the total value of the startups they invest in. Let’s break it down simply. ↓ How VCs Work Think of a VC firm like a chef who wants to open a restaurant. The chef doesn’t have enough money to buy ingredients or hire staff, so they go to big investors (LPs – Limited Partners) and say: “Give me money, and I’ll use it to cook amazing meals (invest in startups). When the restaurant makes a profit (when startups grow and succeed), you’ll also get a share of the earnings.” These big investors (LPs) could be pension funds, wealthy individuals, or institutions. The total money they give to the VC firm to manage is what’s called #AUM.
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Iamveetoria
@iamveektoria
What AUM Really Means for a VC Firm A VC’s AUM (Assets Under Management) includes: → Uninvested capital Money they haven’t deployed yet. →Invested capital Money already used to buy equity in startups. AUM is NOT the total value of the startups they’ve invested in. That’s called the portfolio value or fair market value (FMV) of investments, which can go up or down over time. For example, if a VC raises $500M from LPs, invests $300M into startups, and keeps $200M for future investments, their AUM is still $500M, even if some startups grow into billion-dollar companies.
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