hmm

This is how Mitt Romney was able to own Bain without making management decisions:

What many don’t know (including many VCs) is that these fees are transferred to a separate legal entity, called a management company. This is the entity that pays out expenses (salaries, rent, travel, legal, etc.), hires and fires employees, and owns “the franchise.” It is where the power is.

What is left over after expenses is the management company’s profit. The “franchise owners” of the firm divide this up among themselves. Usually, a small group of partners are the franchise owners, and often, it is just one or two individuals (usually, the founders). Very important to know is that usually one person has voting control of the management company; that person is truly the “Chief Partner”. This person usually owns the firm’s trademark.

For entrepreneurs, here's the most important lesson:

Entrepreneurs can overcome this reality in two main ways. They can out-perform, so that even if their champion is no longer on their Board, they can point to clear metrics. Another way is to build good relationships with other partners at that VC firm, particularly the Chief Partner.

Now, a VC firm’s culture varies from one to another. The Chief Partner may delegate authority so that all partners have a voice in an investment decision–or, he may allow input from others, but in reality, is the one making the decisions. Entrepreneurs need to know that when they pitch a firm. Who is the Chief Partner and do the other partners have power? The best way to find about both is to speak with other entrepreneurs who have pitched that firm. In my opinion, 80% of venture firms have a collegial decision-making process.

The Chief Partner is like the head vampire. Very powerful and often determines life or death.