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Through comment conversations with many of you I tried to emphasize that it isn’t enough to just have one attribute. I didn’t negotiate hard on carriedinterest. I started the series talking about what I consider the most important attribute of an entrepreneur : Tenacity. You need the whole package.
Worse, Robert Adams and his two partners got 20% of the carriedinterest in the fund, resulting in payouts of $30 million to the partnership. The success of Documentum and Document Sciences, they felt, came largely from Xerox technology and customers, yet the startup companies XTV funded got all the credit.
I found the conversation a bit disconcerting. But the celebratory nature of today’s conversation felt tone deaf and seemed to ignore the rules that get bent in favor of those with resources or born into privilege. VCs also get capital gains tax rates on “carriedinterest,” which is what irritates the masses.
We thought that you’d be interested in our conversation. Ironically, it may be true that it is better for the VCs themselves to raise smaller funds because the more volatile a fund the more valuable the carriedinterest (which has, after all, the exact same payout structure as a call option).
While many of the engineers I’ve know are perfectly sociable, well-adjusted, highly conversant people, the ‘sullen hacker in a hoodie on the spectrum’ is anywhere from an antiquated stereotype to a true segment of our community. The extroverted engineer looks at *your* shoes when he talks.
What’s a “fair” split of fee income and carriedinterest when a partner joins several years/funds after others? For example carriedinterest takes years to accrue and is based on the efforts and decisions of both the individual and the firm that happened 5-10 years ago. link] Dave Sandrowitz.
But recent conversations that I have had with bankers has carried a different, even more depressing message. But then everyone got distracted with the financial crisis and (yet) more regulation related to SEC registration and battles over the tax treatment of carriedinterest.
Sean Seton-Rogers, Partner, Profounders Capital, breaks the conversation into three areas: Control: voting/veto for new deals, share of management company. Compensation : base salary, share of profits of management company, carry. Senior partners take home a lower 15 percent of the carriedinterest….Summarizing
How many years did VCs continue to pour money into these companies before there was ever a “what if” board conversation? Was there ever that kind of conversation at the board level? Better yet, how confident are you that the investors behind the big social media and content platforms will insist on better polices going forward?
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