Carry, explained
Carried interest is how an SPV lead gets paid: a cut of the profit if the deal works, and nothing if it does not. Here is exactly how that split plays out in dollars.
The basics
A cut of profit, not of capital
Carry applies only to the gain above what backers put in — the lead never takes a cut of the original principal, only of the profit generated on top of it.
Typically 10–20%
Most angel-syndicate SPVs charge carry in the 10–20% range, broadly similar to (though usually somewhat below) traditional venture fund carry, which is more commonly 20%.
Zero if the deal fails
If the SPV’s investment is worth less than what backers put in, there is no profit to take a cut of — the lead earns nothing from carry on a losing deal, which is the whole point of the structure.
A worked example
10 backers each invest $10,000 into an SPV ($100,000 total) with 20% carry. The startup exits, and the SPV’s stake is worth $500,000 before carry.
| Amount | |
|---|---|
| Total invested (principal) | $100,000 |
| SPV stake value at exit | $500,000 |
| Profit (exit value minus principal) | $400,000 |
| Carry to lead (20% of profit) | $80,000 |
| Remaining to backers (principal + 80% of profit) | $420,000 |
| Each backer receives (of 10, pro-rata) | $42,000 |
Each backer’s $10,000 became $42,000 — a 4.2x net return, versus the 5x the SPV’s underlying stake actually returned before carry. The 0.8x gap is what the lead’s 20% carry cost each backer.
What to check before investing
Confirm the exact carry percentage and how it is calculated in writing before wiring money — ask specifically whether carry applies to gross profit or profit net of the SPV’s management fee and other costs, since the difference can meaningfully change your net return.
Also ask whether there is a "hurdle rate" (a minimum return the SPV must clear before any carry applies at all) — some syndicates include one, which protects backers on marginal deals, though it is not universal.