Fund Structure
Carry
Carried interest — the share of investment profits (typically 20%) that a VC fund's general partners keep as performance compensation, paid after LPs have received their invested capital back.
Carried interest (carry) is the general partners' share of a fund's profits, taken as compensation for generating returns above the hurdle rate. The standard carry is 20% of profits, though top-tier firms charge 25-30%.
Carry is calculated after LPs have received their capital back (and, in funds with a preferred return, after a minimum return threshold). The remaining profits are then split: typically 80% to LPs and 20% to the GP.
For example, a $100M fund that returns $300M distributes: $100M back to LPs (return of capital), then splits the $200M profit 80/20 — $160M to LPs and $40M to the GP as carry.
Carry is the primary wealth-creation mechanism for VC partners. Senior partners at top-tier funds can receive tens or hundreds of millions in carry across their careers.
In Practice
A $200M fund returns $600M. After returning the $200M invested capital to LPs, $400M in profits remain. With 20% carry and no preferred return: GPs receive $80M carry ($400M × 20%), LPs receive $320M ($400M × 80%) plus their $200M capital return = $520M total. Net MOIC for LPs: $520M / $200M = 2.6x.
Why It Matters
Carry aligns GP incentives with LP returns — GPs only profit when LPs profit. Understanding carry matters for: founders (your VC needs to generate returns, which affects how they manage your company and exit timing), LPs (evaluating whether carry terms are fair), and anyone considering a career in VC (your carried interest in your fund is your primary long-term compensation).
VC Beast Take
Carry is increasingly concentrated among senior partners at top firms. Junior VCs and associates often receive minimal or no carry — meaning their financial upside from the portfolio they help build is limited. The best junior VCs negotiate for carry or carry equivalents early. For founders, your lead investor's carry stake in your company is why they care deeply about exit outcomes — their carry is your alignment.