Dr. Emanuel is a distinguished physician with many interests. The one that I’m going to explore today is his work as a Venture Partner with the healthcare venture capital fund, Oak HC/FT.
This post is a simple introduction to venture capital firms.
There are two key elements within a VC fund: general and limited partners. The general partners are the people in charge of making investment decisions (finding and agreeing to terms with startups and companies) and working with startups to grow and meet their goals. On the other hand there are limited partners, the people and organizations who provide the capital necessary to complete those investments.
In other words, general partners make the investments and limited partners provide the funds.
This is one of the key differences between VC funds and other investment vehicles: Venture Capital funds don’t invest the money of their own partners, but that of limited partners such as pension funds, public venture funds, endowments, hedge funds, etc. General partners might invest some of their own money through the fund, but this tends to account for only 1% of the size of the fund.
The way Venture Capital funds make money are two fold: via management fees and carries (carried interest).
[Management Fees] VC funds typically pay an annual management fee to the fund’s management company, as a form of salary and a way to cover organizational and fund expenses. Management fees are usually calculated on a percentage of the capital commitments of the fund, or about 2 to 2.5 per cent.
[Carried Interest] Carried interesting in Venture Capital is usually 20 to 25 per cent, meaning that while 20% of the profits go to the general partners, 80% belongs to the limited partners. [means that the general partners may only contribute 1% of the funds but will receive 20 to 25 percent of profits]
It’s also worth noting that Venture Capital funds have a fixed life of about 10 years, thus establishing investing cycles that last for about three to five years. After that the firms will work alongside the startups and founders to scale and seek an exit, providing the returns that they sought in the first place.
Dr. Emanuel is a Venture Partner* of Oak HC/FT. “Ezekiel J. Emanuel joined Oak HC/FT as Venture Partner in 2016. He is a Board Member on VillageMD.” VillageMD is one of the businesses Oak HC/FT has a relationsip with. VillageMD is “A management services company that partners with leading healthcare providers to improve care delivery and optimize population health outcomes.”
*The AVC blog in the post What Is A “Venture Partner” And Why Does It Matter To You?states that “A Venture Partner is a person who a VC [Venture Capital] firm brings on board to help them do investments and manage them, but is not a full and permanent member of the partnership. The ‘full and permanent’ members of the partnership are often called General Partners, Managing Members, or Partners.”
Click here for a list of the companies that Oak HC/FT invests in.
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