When founders talk to VCs, terms like equity, valuation, and runway come up all the time.
But there’s one word that quietly shapes VC behaviour behind the scenes: carry.
Understanding carry helps you decode VC motivations, as to why they want big exits, prefer certain cap table structures, or double down on specific portfolio companies.
What Is Carry in Venture Capital?
Carry (short for carried interest) is the VC’s share of the fund’s profits after returning capital to their investors (called LPs or Limited Partners).
Think of it as the VC’s “success fee.”
Most venture capital funds follow this model:
- 2% management fee (annual operating budget)
- 20% carry (share of profits after the fund returns the invested capital)
Example: How Carry Works
Let’s say a VC fund raises ₹100 crore from LPs.
Over 8–10 years, it returns ₹300 crore through startup exits.
Here’s how it plays out:
- First, the fund returns ₹100 crore (original investment) to the LPs.
- The remaining ₹200 crore is the profit.
- Of this profit:
- LPs get ₹160 crore (80%)
- VCs keep ₹40 crore as carry (20%)
This ₹40 crore is how VCs make real money. Salary is just a small component of their income, but real money comes from the big wins.
Why Founders Should Care
1. VCs Don’t Win Unless You Exit Big
Carry is only triggered when there’s meaningful upside.
That’s why VCs chase unicorns, not lifestyle businesses or slow-burn models. If a ₹5 crore exit gives you a comfortable return but doesn’t move the needle for the fund, you may find the VC disengaged.
2. Helps You Read VC Pressure
Funds usually have a 10-year lifecycle and most carry is made in the final 3–4 years. If you’re fundraising from a fund in its 7th or 8th year, they may be more focused on timely outcomes and aligned exit opportunities, rather than long-duration bets.
3. Choose the Right VC-Fit
Some micro-VCs or emerging funds may be more flexible, focusing on building strong companies over chasing unicorns. Understanding how they earn carry helps you evaluate their true incentives and long-term alignment.
4. Explains Fund Dynamics
Carry is usually split among VC partners based on their role, seniority, or deal ownership. While associates may not hold carry themselves, they play a key role in championing startups internally and influencing partner decisions. Building trust with them can amplify your visibility within the firm.
Carry vs Salary: What VCs Actually Earn
Carry is only paid after the original investment is returned to LPs. In some cases, a minimum return (hurdle rate) may be required, but this is less common in VC than in private equity.
| Role | Base Salary (India) | Carry | Comments |
|---|---|---|---|
| Analyst | ₹10 – 20 lakh | None | Entry-level, no decision power |
| Associate | ₹30 – 75 lakh (varies by fund size) | Little or none | Sometimes small carry at large/global funds |
| Principal/VP | ₹50 – 150 lakh | Small % | May start to receive carry |
| Partner | ₹70 lakh – ₹2 crore+ | Substantial (1 – 2%+) | Main recipient of carry |
| Founding GP | Varies (often highest) | Highest (5 – 10%+) | Largest share of carry |
Note: Actual numbers vary by fund, role, and market conditions.
Key Takeaway
Carry is what motivates VCs to aim big and help you build something truly valuable.
As a founder, understanding carry helps you navigate:
- How your investor thinks
- What drives their behavior during exits, down rounds, or M&A
- Whether your vision aligns with theirs
It’s not about gaming the system, it’s about knowing the rules of the game.
Disclaimer:
Salary and compensation figures mentioned are estimates for general information only. Actual numbers vary by fund, role, and market conditions. This blog is not financial or legal advice, please consult professionals before making decisions.