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Explaining carried interest

The Equity Kicker

Carried interest’ is the name given to the profit share schemes that investors in venture capital funds, typically called ‘LPs’, use to incentivise the partners at at the funds in which they invest. Much like options in a startup carried interest schemes vest over time, typically five or seven years.

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Why LP’s Passed on Seed Funds 10 Years Ago (And What’s Happened Since)

View from Seed

Our response was that we were motivated to focus on seed because 1) this is what we enjoy, care about, and are good at and 2) we’re going to make money on carried interest and this was the best way to get there. From an industry standpoint, I think this have turned out to be only partially true.

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Why Average VC Returns Don’t Really Matter

Agile VC

FoFs have a range of strategies of course, but broadly speaking LPs that invest in FoFs pay them a management fee and carried interest (on top of the fee & carry of underlying VC funds they invest in) for access, diversification, active management or a combination of all three.

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Top 29 Startup Posts May 2010

SoCal CTO

Why Taxing Carried Interest As Ordinary Income Is Good Policy - A VC : Venture Capital and Technology , May 29, 2010 The House has passed a bill this past week that would change the taxation of carried interest from capital gains treatment to ordinary income treatment.

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The Economics of VCs Recycling Management Fees

Feld Thoughts

The post specifically discussed three items: Management Fees, Recycling, and Carried Interest. Many fund agreements, including ours, require us to pay back all fees and expenses before taking carried interest. We think this is another element of GP-LP alignment and have supported this from our first fund.

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Subprime Credit Levels & How They Affect Loan Interest Rates

YoungUpstarts

It is possible to get a debt consolidation loan with a bad credit score, but interest rates will almost certainly reach the double digits — and, since the purpose of such a loan is to help borrowers pay less in interest all things considered, these higher interest rates make it more difficult to pursue this debt elimination strategy.

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What Makes an Entrepreneur? Cojones (7/11)

Both Sides of the Table

I didn’t negotiate hard on carried interest. I figured that the alternative was that I start my third company with no salary and all risk. I had nothing to lose! And that’s exactly how I got into the VC world. On half salary and my own moving expenses. I figured I was new to VC and had much to prove.