1/ How much carry should you give your partners?
@HarryStebbings and I started 50/50. I'm a big believer in taking economics off the table (who knows who will find the next Spotify?) and partnerships can destroy each other in endless economics discussions.
@HarryStebbings and I started 50/50. I'm a big believer in taking economics off the table (who knows who will find the next Spotify?) and partnerships can destroy each other in endless economics discussions.
2/ It's not uncommon or absurd that the GP group keeps roughly 80% of the economics - that would be say 3 or 4 General Partners taking the majority of economics and "floating down" as they accept more general partners into the group
3/ How is carry quoted ? Carried interest is typically 20% of profits generated by the fund; this 20% is 100% of the carry pool. You can quote carry as an absolute percentage (5% carry), a percentage of the carry pool (5% carry is 25% of the carry pool) or in dollar terms.
4/ When you quote carry in $ terms you will quote the $ amount for every turn of the fund i.e. $100M with 20% carry has a $20M carry pool. If you get 25% of the carry pool that's $5M per turn (I'm simplifying, no management fees or hurdle rates here included here).
5/ Some founding GPs consider that a firm would not exist without them and take the lion's share of economics. That's probably a fair view of the world. If you have track, LP contacts, brand etc you can make that argument. They might capture 50%+ of the overall carry pool solo
6/ The best firms have a strict set of rules.
GPs get equal carry for every fund they are a part of, and float together when they add a new GP or share more.
They also have rules for coming up the ranks (a Partner might be 50% of a GP share) and sunsetting / phasing out.
GPs get equal carry for every fund they are a part of, and float together when they add a new GP or share more.
They also have rules for coming up the ranks (a Partner might be 50% of a GP share) and sunsetting / phasing out.
7/ Fair and transparent rules on carry allocations based on equality produce the best cultures and outcomes.
Some General Partnerships have been known to fight for years over this stuff.
Some General Partnerships have been known to fight for years over this stuff.
8/ At the moment I operate as a single GP, with one Partner (@cleo_sham).
I'm assuming we end up with three partners with each significant carry (at least 20% of the total pool).
We share fairly generously with the team (5%+ each) as who knows who will contributes value.
I'm assuming we end up with three partners with each significant carry (at least 20% of the total pool).
We share fairly generously with the team (5%+ each) as who knows who will contributes value.
9/ My objective is to get to a system with equal GPs and broadly distributed carry as fast as we can.
There's plenty of money to go around in VC; whether you build great funds is more important than maximising your situational rent at the expense of your team, IMHO.
There's plenty of money to go around in VC; whether you build great funds is more important than maximising your situational rent at the expense of your team, IMHO.
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