VCs make money through management fees (2% of AUM) and carried interest (20% of profits). Here's how the economics work. GitDealFlow's engineering momentum data provides the objective signal layer.
The Data Behind the Answer
The short answer above is grounded in a public, reproducible dataset: 350+ startup GitHub organizations across 15 sectors, refreshed weekly. The methodology is published end to end, from the 14-day commit-velocity windows to the Gini-coefficient contributor-concentration score, and the working paper is on SSRN. An answer grounded in a named, falsifiable method is the difference between an opinion and a signal.
Where this question touches sourcing or diligence timing, the operative finding is lead time: breakout engineering teams become visible in the data 21 to 47 days before the fundraise is announced. That is the window code-side sourcing is built to exploit, and it is why this answer leans on engineering momentum rather than announced-round databases, which register the event after the fact.
Go Deeper
- Code-Side Sourcing: the category and its first principles
- Glossary: every term used in the methodology
- Research hub with the downloadable dataset
- Free GitHub momentum checker
A practical read-through of How Do VCs Actually Make Money?: the dataset behind this page refreshes weekly across 350+ organizations and 15 sectors, and every figure shown traces to a public GitHub REST API pull. That matters for two reasons. Reproducibility: any number here can be re-derived from primary sources, which is the standard the published methodology sets for itself. Timeliness: engineering acceleration precedes announcements, so this page follows the data cadence rather than the news cycle, and the freshness endpoint always reports the exact pull date.
If How Do VCs Actually Make Money? is your entry point, the fastest next steps are fixed: skim the glossary for the three or four terms that anchor the topic, open the research dataset to see the raw weekly snapshots behind the summary numbers, and run one live query against the free momentum checker with a company you already know well. Seeing the signal fire on a familiar name is the quickest way to judge whether code-side sourcing belongs in your own workflow.
One caveat worth stating plainly on How Do VCs Actually Make Money?: momentum is a leading indicator, not a verdict. A repository can accelerate for reasons that never become a fundraise, and a quiet quarter does not mean a team is failing. The disciplined use of this page is as one input in a stack, a way to rank where scarce diligence time goes, and a way to notice change early. The methodology page documents every limitation, including the bot filter, the two-period confirmation rule, and the sectors where coverage is thinnest.
Frequently Asked Questions
What's the 2 and 20 model?
2% annual management fee on committed capital covers salaries, office, and expenses. 20% carried interest on profits incentivizes performance. A $500M fund generates $10M/year in fees plus potentially $100M+ in carry.
Do most VCs make money?
No. Top-quartile funds generate all the returns. The bottom 50% of VCs barely return capital. GitDealFlow's engineering momentum data helps VCs make better investment decisions, and earn their carry.
How does carry work?
After returning the fund's capital to LPs, the remaining profits are split 80/20 (LP/GP). A fund that returns 3x on $500M generates $250M in carry for the GP team.