Carry is not all that it is cracked up to beĭespite the hype around carried interest, it shouldn’t be seen as the be-all-and-end-all. This type of compensation mimics true carry but is usually paid out as a bonus that is treated as ordinary income and does not have the tax benefits of true carry. “It can take a while to get there,” she says.įor those funds that are not set up as independent CVCs with a general partner/limited partner structure, synthetic carry can be offered to staff. All staff at the unit above a certain level are eligible to receive carry, including the business development team.Īfter seven years in business the unit just recently had its first carry-eligible exit that produced a staff pay-out, says Burr. Once that happens, 80% of the money goes to JetBlue and 20% goes to the venturing unit. But, before staff are paid out, the money generated from the exit has to pay back all its costs – the entire money invested in the company as well as the fund money of the first year it was invested in. In JetBlue’s case, its carried interest is triggered when an investment exits. It is a retention programme, essentially,” he says. “Carry is long-term in nature it only becomes something when you monetise it. Offering carried interest to CVC staff is a no-brainer, says one head of a corporate venture capital unit who asked not to be named. Most respondents to a separate CVC poll wish their CVC offered carried interest, although a lack of carry wouldn’t make them leave. Two-thirds of CVCs now have at least VC-level performance measures, with 42% of these offering synthetic carry programmes.Ī poll carried out on LinkedIn by GCV in July found carried interest is highly valued by corporate venturing practitioners. In a recent GCV Keystone survey, 35% of CVCs said they offer a form of carried interest. Global Corporate Venturing (GCV) knows of at least 40 CVCs that offer a form of carry as part of their compensation package. They are tied to goals we have around fund performance, investments, and a strategic initiative with our mothership.” Our goals aren’t tied to the mothership at all. “It works for us because we do have more of a venture focus than a lot of CVCs. “I have a lot of conversations with colleagues about carry because everyone wants it,” says Amy Burr, president at JetBlue Ventures. And, of the 30% of CVCs that are structured as independent legal entities, 65% have a synthetic form of carry. Up to two-thirds of investment professionals are recruited from an external talent pool that includes VCs, other CVCs and private equity firms, according to GCV Keystone survey for 2022-2023. And as more corporate investment arms take on external limited partners as part of their funds, the need to hire investment professionals who will drive financial performance has become greater. Nevertheless, more CVCs are offering carry, often in the form of a synthetic carried interest, to attract investment professionals from the banking and institutional venture capital sectors. This can look bad to the mothership’s management, board and shareholders. And even then, it can be a tough sell for the corporate parent because of the chance that a CVC employee will earn more compensation than the CEO of the company. CVC units have to be structured independently of their parent, often as a limited partnership, to offer carry. It is the most common way to incentivise staff performance at private equity and financial venture capital funds.įor corporate investment arms, though, carry can be a tricky construct. Carry, as it is also called, is the percentage of a private fund’s investment profits that managers receive as compensation. The founders chose this structure specifically so that they could pay staff a form of VC-style compensation known as carried interest. When JetBlue Ventures was set up seven years ago as the corporate venture arm of the US airline, it took the unusual step of structuring itself as an independent limited liability company while remaining a subsidiary of the parent corporation.
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