Monday, March 28, 2005

Is carry on the rise?

According to this column from, some top VC funds are seeking, and getting, higher carry -- to 25% and even 30% ("carry" or "carried interest" is the share of a fund's profits that the fund's managers receive).

It is especially interesting in light of the news I noted earlier that there is a $53.6B capital overhang in the industry.

Clearly there is no shortage of capital seeking action in the venture sector right now -- why else would investors be willing to pay such high carry to get into top funds. And perhaps there is more capital than can easily be spent. An interesting problem. It suggests deal valuations will continue to be driven up, which as this Red Herring article notes, seems to be happening already, and is not very good for returns.

But as noted previously, there are good reasons to believe that cleantech remains underinvested. I can tell you that my firm (Expansion Capital Partners) is seeing no shortage of intriguing deals at attractive valuations. It will be fascinating to watch how this develops over time...


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