Carry, explained before you sign

Somebody is about to offer you a job at a fund and mention carry. Here is what you need to understand before you decide what that sentence is worth.

The short version: carry is a share of a fund's profits, it is the reason venture pays well at the top, and for most people joining a fund below partner level it is worth considerably less than it sounds. That is not cynicism. It is arithmetic, and the arithmetic is knowable in advance.

How carry works

A venture fund charges its investors, the limited partners, two things. A management fee, which pays salaries and rent. And carried interest, which is a share of the profits.

The profits do not start counting immediately. LPs get their money back first, plus a preferred return, before anyone at the firm sees a share. As Sifted's explainer↗ sets out with a worked example, a fund with a 1.5x hurdle on 100 million has to return 150 million before carry exists at all. Return 200 million and the 50 million above the hurdle is what gets split.

Carry rates typically run 20 to 30 percent of that surplus. On the arithmetic above, at 20 percent, the whole firm shares 10 million.

Then it is divided. This is the part that matters to you.

The part that matters to you

Carry is not spread evenly, and it is not spread widely.

Jeannette zu Fürstenberg of La Famiglia, quoted in the same piece, gives the shape: general partners are allocated a collective 60 to 80 percent of the carried interest, leaving 20 to 40 percent to be distributed among the broader team.

And a meaningful share of the broader team gets none. David Beisel↗ of NextView Ventures cites survey data showing that only 11 percent of analysts and 39 percent of associates receive any carry at all.

Read those two facts together. If you are being offered a junior investing seat, the base case is that you get no carry, and the good case is a small slice of the minority share of a pool that only exists if the fund clears its hurdle.

None of which makes the job a bad idea. It makes carry a bad reason to take it.

Then there is the timing problem

Carry vests. A common schedule runs three to four years with a twelve month cliff, so nothing at all until month twelve, then straight line from there.

Except Beisel notes that in practice vesting on carry often runs six to eight years, and he is direct about why that is a problem: many junior investors do not stay that long. He goes further and warns that firms sometimes use extended vesting to quietly reduce the real value of a package.

Now put that next to how long these jobs last. Mark Suster↗ of Upfront Ventures describes the associate role as usually a two to three years and out type of job. Fred Wilson↗ says the same of Union Square Ventures: no career path, so people leave after a couple of years.

A seat that lasts two to three years, and carry that vests over six to eight, do not overlap. Whatever you leave behind, you leave behind. Xavier Lazarus of Elaia describes the mechanism without apology: unvested carry shares are used to incentivise whoever replaces the person who left.

That collision is the single most useful thing to understand about junior venture compensation, and almost nobody says it out loud during an offer conversation.

Two more mechanics worth knowing

It is usually one fund, not the firm. Carry is granted in a specific vehicle, normally the fund currently investing. If that fund is four years into its life when you join, most of its portfolio is already picked. You are being given a share of decisions you did not make, which cuts both ways.

Clawback exists. If a fund pays out carry early on its first wins and later investments disappoint, provisions can require that money to be returned to the LPs. It is rare at junior level because junior distributions are rare, but it is why nobody at a fund treats an early distribution as spent money.

What to ask before you sign

Ask these plainly. A firm that runs a fair process will answer them, and a firm that gets uncomfortable has told you something useful.

1. Is carry included at all? Given that most analysts get none, start here rather than assuming.
2. In which fund, and how far into its life is it?
3. How many basis points? Then convert it into money. Beisel's framing is the right one: think in carry dollars at work, not percentages. Fifty basis points of a 500 million fund at 20 percent carry, assuming a 2x return over a decade, is roughly 500 thousand. Ask for the fund size and do the multiplication yourself.
4. What is the vesting schedule and the cliff? If the answer is six years or more, weigh it against the realistic length of the job.
5. What happens to unvested carry if I leave, or if the firm asks me to?
6. What is the hurdle, and where is this fund against it today?
7. Has anyone at my level in this firm actually been paid carry? The most revealing question on the list.

Then, Beisel's advice, which is worth taking seriously: for non-partner roles, push on cash rather than carry. Carry takes ten years or more to materialise, is not guaranteed, and firms rarely have flexibility on it below partner level. Salary they can move.

Where the numbers on this page come from

Everything above is sourced to named practitioners and linked, because there is no public dataset on venture compensation to point at instead.

We would rather show you ours: across 298 roles open on the capital side, 0 listings publish a salary. Any specific figure you read about what a venture job pays, including on this page, is a survey or a memory rather than a published fact, and is worth holding loosely.

Related

What the levels inside a fund actually mean, including how few roles state one. Or see who is hiring right now, which is a more reliable guide to the market than any salary table.

If carry is starting to look like a thin reason to take a junior investing seat, that is a fair reading, and the operating roles funds are actually advertising are worth a look before you decide.