Carried Interest
Definition
Carried interest (carry) is the share of a fund’s profits, typically 20 percent, that its managers receive after returning investors’ capital, usually above a hurdle rate.
How it comes up in fundraising
Carry is why VCs need large outcomes: a fund earns most of its money from a few investments big enough to generate profits worth 20 percent.
Frequently asked questions
What is the standard VC fee structure?
Commonly “2 and 20”: a 2 percent annual management fee on committed capital plus 20 percent carried interest on profits.
How does carry shape investor behavior?
It pushes funds toward companies with billion-dollar potential, since modest exits barely move fund-level profits.
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