Angel 101: Terms & Tech
Or “Carry” as the cool kids say
Carry refers to the profits on an investment that go to the organizer of the investment, the SPV lead, or the fund manager.
Here’s How Carry Works
So, let’s say there is a liquidity event on one of your investments - the company gets acquired for a juicy sum of money. The SPV gets a distribution for its share of equity ownership from that liquidity event. Shazam. Happy Day.
From that distribution, each investor in the SPV will get the amount invested in the company returned to them. Woot!
If the distribution is large enough, the remaining money is the profit. Those profits are split between the investors (you) and whoever organized the SPV. The percent of the profits that go to the SPV organizer is called Carry.
20% Carry is typical in startup and private equity investing. This means investors get 80% of the profits, and “folks involved in the SPV” get 20%.
Sometimes, Carry will be lower than 20%. It usually happens because you’ve paid an upfront membership fee to the group running the SPV or you are making an investment greater than a specified dollar amount. In that case, Carry might be reduced to 15%, meaning you retain more potential profits from that investment.