Last Money in is Powered by Sydecar

Sydecar empowers syndicate leads to manage their investments more effectively. Organize, manage, and engage your investor network effortlessly with Sydecar’s management and communication tools. Their platform also automates banking, compliance, contracts, tax, and reporting, freeing up syndicate leads to focus on securing deals and strengthening investor relations. Elevate your syndicate operations with Sydecar.

Deal Sheet Free Trial. Start your 7 day trial here!

Deal Sheet provides accredited investors: 

1. Access to some of the best startup opportunities across the VC syndicate ecosystem (est. 150-200 deals on Deal Sheet per year) and 

2. All Deal Sheet deals come at discounted carry – all opportunities on Deal Sheet are listed at 10% carry (versus 20% standard) with select opportunities (at our discretion) at 0% carry. 

Try the free trial today here!

💰Carried Interest → Perspectives from a Syndicate Lead

Carried interest in venture capital syndicates refers to the percentage of profits that syndicate leads (organizers) earn from successful investments. It works as a performance-based compensation structure that aligns the interests of the lead with their investors.

Here's how it typically works:

• Basic structure: Syndicate leads typically take 20% of the profits generated from investments after the original capital has been returned to investors.

• Alignment mechanism: Since carried interest only pays out when investments are profitable, it incentivizes syndicate leads to select high-quality deals and work to make them successful.

• Payment timing: Carried interest is usually paid upon liquidity events such as acquisitions, IPOs, or secondary sales when actual cash returns are generated.

• SPV context: In Special Purpose Vehicles (SPVs), which are single-deal investment entities, the carried interest applies specifically to that one investment rather than across a portfolio.

• Differentiation from management fees: Unlike management fees (which are charged regardless of performance), carried interest is only earned when investments generate returns above the initial capital.

Realizing substantial carried interest requires patience. Even when backing a promising $10M seed-stage startup today, complete liquidity typically takes 8-15 years—a timeline that demands strategic planning and consistent execution.

This extended horizon makes nurturing durable LP relationships essential. With smaller LPs, I value consistent participation across multiple deals that compounds trust over time. For larger capital partners, maintaining engagement through selective opportunities they find compelling is critical—whether by offering reduced carry via Deal Sheet or providing carry breaks for substantial check sizes.

A fundamental truth remains: failed investments yield zero carry. Pursuing deals primarily to satisfy LP interest undermines long-term economics if you lack genuine conviction in the company's potential. Your authentic excitement about a startup's prospects must drive investment decisions.

Notable VC carry successes include:

• Sequoia's $3.6B return from WhatsApp

• Accel's $9B return from a $12.7M Facebook investment

• Benchmark's estimated $2B return from Uber

• Peter Thiel's $500K Facebook investment returning over $1B

• Kleiner Perkins' $100M Google investment returning ~$4B

• Andreessen Horowitz's Airbnb investment growing from $40M to over $2B

Carry on Early-Stage Deals

This is where the biggest carry opportunity exists. Non-consensus investments at pre-seed and seed can deliver 100x-1000x returns. Even smaller SPVs at this stage can produce career-defining carry checks.

My largest markups have come from these early investments at $5M-20M valuations (and one outlier at $350m pre):

• $6M to $500M

• $6M to $300M

• $350M to $39B

• $20M to $300M

• $20M to $200M

• $14M to $200M+

• $5M to $160M

• $12M to $300M

• $15M to $60M

While only 1-2% of seed-funded startups reach unicorn status, the beauty of SPVs is that, unlike venture funds, losers in your portfolio don't impact winners when deals are structured as individual SPVs.

Carry on Growth Stage/Pre-IPO Deals

Recently, I’ve become more active in later-stage/Pre-IPO SPVs. This shift reflects market conditions and LP interests. While these opportunities typically offer 2x-10x returns rather than 100x, they have compelling advantages:

1. Potential for lower risk - these companies typically have product-market fit and tier 1 VC backing

2. Higher likelihood of returning capital to LPs

3. Shorter hold periods before IPO/M&A

4. Greater LP interest, enabling larger SPVs

A larger investment with a smaller multiple can sometimes generate more carry than a smaller early-stage deal:

Example 1: Early-Stage 10x (smaller SPV)

• $100K investment at $10M valuation

• 0.792% ownership after dilution at $100M exit

• $100M exit → $792K value

• $692K profit → $138.4K carry (at 20%)

Example 2: Later-Stage 4x (larger SPV)

• $500K investment at $1B valuation

• 0.04% ownership after dilution at $4B exit 

• $4B exit → $1.6M value

• $1.1M profit → $220K carry (at 20%)

Summary on the 2 deal carry comparison: even though the seed investment exited at 10x whereas the later stage investment exited at 4x, the check size from the 4x deal was larger and while the return was less than half of the early-stage one, the carry take home was still almost 2x, $220k compared to $138k.

While personally, I’m  most excited about seed-stage opportunities, I've become enthusiastic about navigating later stage markets to access quality later-stage deals with strong LP interest and solid upside potential.

Co-Syndications & Preferred LP Carry

Co-syndication Scenarios

1. Deals I've Sourced - When I have allocation I can't fill myself, I'll bring in another syndicate partner. I typically split carry 50/50 regardless of who contributes more, prioritizing relationship-building over maximizing carry on individual deals. Sometimes I need a partner to get a deal done, making the value they bring tremendous.

2. Deals Offered by Other Syndicates - I evaluate these like any deal and typically prefer 50/50 partnerships. I view these as team efforts and don't focus on who contributed what percentage of capital. The goal is to collaboratively fill allocations in exciting deals and position ourselves for continued partnership.

Preferred LP Carry

We offer reduced carry in two scenarios:

1. For Deal Sheet subscribers - Paid subscribers access weekly curated SPV opportunities across 60+ syndicate leads at 10% carry instead of 20%.

2. For larger LPs - Depending on the deal, we'll reduce carry to 15% for investments of over $1M LP check depending on the deal. This helps secure their participation and encourages ongoing relationships.

We otherwise do not offer carry breaks, though some are willing to for other circumstances, such as an LP joined their fund or other. 

In Summary

After leading approximately 400 SPVs over more than six years, I've learned that optimizing carried interest requires a balanced approach. Early-stage investments offer the potential for massive 100x-1000x returns, while later-stage deals provide more predictable 2x-10x outcomes with shorter timelines and larger check sizes. The key is maintaining strong LP relationships through consistent engagement, offering appropriate carry breaks for larger investments, and approaching co-syndications with a partnership mindset rather than maximizing short-term gains. 

Remember that carried interest is a long game—even promising investments may take 8-15 years to reach liquidity, and your carry strategy should reflect this reality. By diversifying across stages, nurturing LP relationships, and remaining selective about deals you genuinely believe in, you can build a sustainable carried interest model that rewards patience and thoughtful portfolio construction.

IMPORTANT DISCLOSURE:

The investment results presented represent select investments from our portfolio and are not representative of all investments made. These examples were chosen to illustrate potential returns in early-stage investing and do not represent a complete investment track record. Most early-stage investments result in partial or complete loss of capital. The valuations shown include both realized and unrealized returns, with many representing paper valuations that may change significantly before any liquidity event.

Past performance is not indicative of future results. The investments listed were made between [time period] and returns are calculated as of [current date]. Returns are presented gross of fees and carried interest. Investors would have experienced lower returns after accounting for fees and expenses.

This information is provided for illustrative purposes only and does not constitute an offer to sell or solicitation of an offer to buy any securities. Any offering of securities would be made only through private placement memorandum, subscription agreements, and other related documents.

If you enjoyed this article, feel free to view our prior articles on adjacent topics 

• Confessions of a Syndicate Lead: The 2% of LPs That Keep Me Up at Night

• ❓Do Syndicate leads do the job Full Time?

• 🚨Venture Scouts Explained

Last Money in is Powered by Sydecar

Sydecar empowers syndicate leads to manage their investments more effectively. Organize, manage, and engage your investor network effortlessly with Sydecar’s management and communication tools. Their platform also automates banking, compliance, contracts, tax, and reporting, freeing up syndicate leads to focus on securing deals and strengthening investor relations. Elevate your syndicate operations with Sydecar.

If you enjoyed this post, please share on LinkedIn, X (fka Twitter), Meta and elsewhere. It goes a long way to support us!

We’ll be back in your inbox next Wednesday on our next topic. Thanks for tuning in!

Questions? Comments? Feedback? We welcome all, and would love to hear from you!

Follow the Last Money In authors on LinkedIn

✍️ Written by Zachary and Alex