[schmidtc]

Checkout Venture Deals by B. Feld and J. Mendelson. It gives a great overview of how the VC world works and how VC's make their money.

VC's get paid through management fees. They get paid regardless of outcome, but their careers last longer if they are successful.

http://www.amazon.com/exec/obidos/ASIN/0470929820/domofa-20