登录查看更多内容

How can you negotiate a carried interest deal with a venture capitalist?

由人工智能和领英社区提供技术支持

If you are an entrepreneur looking for funding from a venture capitalist (VC), you might be offered a carried interest deal. This means that the VC will receive a share of the profits from your venture, usually after a certain threshold is met. Carried interest can be a powerful incentive for both parties, but it also involves some trade-offs and risks. How can you negotiate a carried interest deal that works for you and your VC partner? Here are some tips to help you.

此文章中的业界达人

由社区从 2 条内容中精选。了解更多

Ahammadu Dako

Chief Executive Officer at Ahammadu International Ventures Limited

1 Understand the terms

Before you enter into any negotiations, you need to understand the key terms and concepts of a carried interest deal. Carried interest, also known as carry, is the percentage of the net profits that the VC will receive after deducting the initial investment and any fees. The hurdle rate is the minimum return that the VC expects to earn before getting any carry. The catch-up clause is the provision that allows the VC to receive a higher share of the profits until they reach a certain level of carry. The clawback clause is the provision that requires the VC to return some of the carry if the overall performance of the fund is lower than expected.

添加您的观点

2 Know your value

The next step is to know your value and how much carry you are willing to give up. This depends on several factors, such as the stage and potential of your venture, the size and reputation of the VC, the market conditions and competition, and the amount and terms of the funding. You should do some research and benchmarking to find out the typical range and average of carry deals in your industry and region. You should also have a clear vision and plan for your venture, and be able to communicate your value proposition and differentiation to the VC.

添加您的观点

3 Be flexible and creative

Carried interest is not the only variable that you can negotiate with a VC. You can also explore other aspects of the deal, such as the valuation, the equity stake, the board representation, the milestones, the exit strategy, and the governance rights. You can use these elements to create a balanced and mutually beneficial deal that aligns your interests and goals with the VC. For example, you can offer a lower carry in exchange for a higher valuation, or a higher carry in exchange for more operational autonomy. You can also propose different scenarios and scenarios for the carry structure, such as tiered or sliding scales, based on the performance and outcomes of your venture.

添加您的观点

4 Build trust and rapport

Negotiating a carried interest deal is not just about numbers and terms. It is also about building trust and rapport with your VC partner. You should treat the negotiation as a collaborative and constructive process, not as a zero-sum game or a confrontation. You should be transparent and honest about your expectations and concerns, and listen to and respect the VC's perspective and feedback. You should also show your enthusiasm and commitment to your venture, and demonstrate your ability to execute and deliver on your promises. By building trust and rapport, you can increase your chances of reaching a fair and favorable deal that will support your long-term success.

添加您的观点

Ahammadu Dako

Chief Executive Officer at Ahammadu International Ventures Limited
举报内容
100% agree with this situation. Apart from Building Goodwill of the company, there is need for absolute truthfulness and trust within the Board. Know your partners long term and short term goals and aspirations so you can tailor this interest to suit the Venture capitalist, the Business and all other stakeholders and stakes. Every venture partner will prefer a long term constant yield for his capital provided the terms of such inflow are intact.

已翻译

赞

5 Seek advice and support

Finally, you should not negotiate a carried interest deal alone. You should seek advice and support from experts and mentors who have experience and knowledge in this field. You can consult with lawyers, accountants, bankers, consultants, or other entrepreneurs who have done similar deals before. They can help you prepare and review your documents, analyze and compare your options, identify and avoid potential pitfalls, and negotiate and close the deal. They can also provide you with valuable insights and feedback, and act as your advocates and allies in the negotiation process.

添加您的观点

Ahammadu Dako

Chief Executive Officer at Ahammadu International Ventures Limited
举报内容
Exactly. There is no room for misguided nor hasty decisions as the interest of the Venture capitalist must be respected as a very essential stakeholder. Terms of engagement must be such that will not endanger the long-run safety of the organization. If the Capital is not such that will ensure progress for the Busibess in the long run, all things being equal, do not take it. Companies are not created to fold up but to outlive even the creators amicably.

已翻译

赞

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

添加您的观点

Financial Services

+ 关注

给文章评分

我们借助人工智能创建了此文章。您认为这篇文章怎么样？

很棒不太好

举报此文章

查看全部

How can you negotiate a carried interest deal with a venture capitalist?

1

2

3

4

5

6

1 Understand the terms

2 Know your value

3 Be flexible and creative

4 Build trust and rapport

5 Seek advice and support

6 Here’s what else to consider

Financial Services

给文章评分

感谢您的反馈

更多Financial Services相关文章

更多相关阅读内容