Carried interest
Carry, computed the way your operating agreement reads.
The carry line is where a venture group’s spreadsheet goes wrong quietly. A hurdle that should count the admin fee and does not. A partial exit where one investor sold and the formula forgot. A distribution already paid out that a later markdown claws back on paper. Capradix computes carry from the facts, every time, and reconciles what is owed against what was booked.
The rules, as written
- The gate counts the fee. Carry applies once a position’s gross value reaches the hurdle multiple on contributed capital plus the admin fees charged, and it is taken only on what sits above capital and fees.
- Gated per round or pooled per vehicle. An SPV that tests each round on its own, or a fund that pools every round. One setting, dated from the day it took effect.
- Grants on the record. Each carry recipient’s percentage and hurdle sit on their own grant, with a start and an end date, so a manager who left in 2023 earns on 2023 and not on 2025.
- Partial liquidity. When one investor realizes proceeds and the rest hold, the carry taken at that realization nets against the round’s carry, and the remainder follows each investor’s current stake.
- The clawback floor. An investor’s net value never falls below the cash they were paid. A later markdown reduces unrealized value; it does not reach back into a distribution.
- One reconciliation. Carry owed by the rules against carry booked and paid, grant by grant, so the number the manager is due and the number in the books are compared, not assumed equal.
A worked example
Acme Angels put $500,000 into Ridgeline Software’s Seed at $1.00 a share, 5% of a $10M post-money. Their SPV charged a 2% admin fee, $10,000, and its manager earns 20% carry above a 2x hurdle, gated round by round. Two entities funded it: Alder Family Trust with $300,000 and Birch IRA with $200,000.
| Ridgeline valued at | $19,000,000 | $20,100,000 | $30,000,000 |
|---|---|---|---|
| Our position, gross | $950,000 | $1,005,000 | $1,500,000 |
| Gross multiple on $500,000 | 1.90x | 2.01x | 3.00x |
| The gate: 2 × $500,000 + $10,000 fee | $1,010,000 | $1,010,000 | $1,010,000 |
| Carried interest | $0 | $0 | $198,000 |
| Net to investors | $950,000 | $1,005,000 | $1,302,000 |
| Net TVPI | 1.86x | 1.97x | 2.55x |
2.01x is not enough. The hurdle is two times the $500,000 plus the $10,000 of fees, so the gate opens at $1,010,000, and $1,005,000 is under it. At $30M the carry is 20% of what sits above $510,000: $198,000.
Carry is charged to the people who owe it. At the $30M mark, each entity’s line reads:
| Entity | Invested | Gross value | Carry | Net value | Net TVPI |
|---|---|---|---|---|---|
| Alder Family Trust | $300,000 | $900,000 | $118,800 | $781,200 | 2.55x |
| Birch IRA | $200,000 | $600,000 | $79,200 | $520,800 | 2.55x |
| Acme Angels SPV | $500,000 | $1,500,000 | $198,000 | $1,302,000 | 2.55x |
Each entity’s net divides by what it put in plus its share of the fee, so the multiple is the same for everyone in a round where nobody has sold. When someone has, it is not, and the ledger says by how much.
These figures come out of the same engine that runs the K-1 workpaper and every investor’s statement. There is no carry tab to maintain, and the reconciliation report shows, grant by grant, where the carry owed and the carry booked disagree.