Carried interest / carry interest for a $100 - $200mn fund with a 2-3 person team?
Hi there, am hoping to get your view on the appropriate carry structure (as well as base + bonus range)
- $100 - $200mn VC fund
- I will join before securing anchor LP (i.e., have not started fundraising)
- Joining as senior associate (4 years of BB IBD experience)
- 1 to 2 partners (depending on fund size); no other professionals, maybe one contract consultant
Obviously a very risky move joining a fund pre-fundraising but have confidence in the partner's ability to raise the fund given strong angel-investing / entrepreneurial track-record
What should my carried interest be as a % of total pool? Note the compensation structure is base + carried only (i.e., no bonus).
Many thanks!
A recent thread that has some relevant information in as it relates to a PE VP (~ same experience level as you): http://www.wallstreetoasis.com/forums/vice-president-fund-carryequity Adjust the base + bonus down significantly due to smaller fund size and adjust the carry up to make up for additional risk. Add a few points of carry on top of that as a starting point for discussions.
Thanks for the link - very helpful!
It really depends on the partners, but generally speaking, in a new fund, the founding partners will keep the lion share of the carry. In your situation, I would think something in the range of 1-3% would make sense, depending on your base + bonus and the generosity of the partners (and how much they want to keep for future hires). Given you have not secured any funds so far, how are you going to get paid until the first closing? That's going to have an impact on carry / comp, especially If the partners are paying you out of their pocket.
I don't have tons of data point for funds this size so others may want to chime in, but given you have no buy-side experience, I would think you should expect a total comp around $150-200K.
The partner will pay me out of his own pocket for my salary before the fund closes - however, that will be a very insignificant amount. (think 30% - 50% of salary for a small fund).
Personally I think 3% is a bit low, given I will only have base + carried interest (i.e., no bonus, given the small fund size and limited mgmt fee). I was thinking 5% is more reasonable.
I know a few folks in similar sized funds. 1-3% is the typical range for a new senior associate (post MBA) at a first time $100-200m fund. 5% is pushing it and I doubt you'll get it, but doesn't hurt to ask. At the very least, you should negotiate for a substantial increase in base once the fund closes.
Thank you - this is helpful to know. And I don't even have an MBA :P.
Just curious, for the similar-sized funds, how many partners, VPs/Principals, and associates do they have, for the associate to receive 1-3%? Keep in mind that the fund I'm pursuing will likely have founding partner, a junior partner and myself.
They are structured the same way as your firm. 1-2 founding partners, maybe 1 principal, and you're the 1st associate. The carry structure also depends a lot on projected headcount. If they're planning on hiring an army of associates and adding more partners, the carry structure will look very different than if they want to keep the team lean for the whole fund.
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