Let's say the pre-money valuation of a startup is $4m and they raise $1m. The syndicate would own 20% of the company.
Let's say the company exits for $20m. Let's ignore preferred stock and assume it's all common to make the math easier. The syndicate would get $4m.
The first $1m would be payed back to the entire syndicate. The lead would get an additional 20% of the $3m or $600k. Then the rest of the $2.4m would be split amongst the syndicate.
The first $1m would be payed back to the entire syndicate
i'm not an expert but i believe the carry is the portion above and beyond the promised return - in this case, the syndicated invested $1m, the promised return (let's call it 10% a year) would then be $1.1m (let's call it a year of waiting).
wouldn't the carry (the "bonus", basically) be 20% of $2.9m?
or maybe these deals lack a promised return and define the carry as anything beyond returned principal?
Comments
Let's say the pre-money valuation of a startup is $4m and they raise $1m. The syndicate would own 20% of the company.
Let's say the company exits for $20m. Let's ignore preferred stock and assume it's all common to make the math easier. The syndicate would get $4m.
The first $1m would be payed back to the entire syndicate. The lead would get an additional 20% of the $3m or $600k. Then the rest of the $2.4m would be split amongst the syndicate.
Read chapter 9 of Venture Deals for more detail.
i'm not an expert but i believe the carry is the portion above and beyond the promised return - in this case, the syndicated invested $1m, the promised return (let's call it 10% a year) would then be $1.1m (let's call it a year of waiting).
wouldn't the carry (the "bonus", basically) be 20% of $2.9m?
or maybe these deals lack a promised return and define the carry as anything beyond returned principal?