A VC with $100 million committed capital is structured as 2% fees and 20% carry on the basis of committed capital. The first exit of a portfolio company with the VC’s investment of $10 million has happened with $50 million in the 5th year from the vintage year of the VC fund. How would this $50 million be divided between GPs and LPs in a deal-by-deal carry structure?
A VC with $100 million committed capital is structured as 2% fees and 20% carry on the basis of committed capital. The first exit of a portfolio company with the VC’s investment of $10 million has happened with $50 million in the 5th year from the vintage year of the VC fund. How would this $50 million be divided between GPs and LPs in a deal-by-deal carry structure?
Committed capital = $100 million
Fees = 2% x $100 million = $2 million
Available capital for investment = $100 million - $2 million = $98 million.
The VC's investment in this deal was $10 million, which represents 10.2% of the available capital for investment ($10 million / $98 million).
Therefore, the VC's share of the profits is also 10.2% of the total profits: VC's share of profits = 10.2% x $50 million = $5.1 million.
The remaining profits are distributed to the LPs, who receive the rest of the profits after the fees and carried interest have been deducted. The LPs share of the profits is calculated as follows:
LPs share of profits = $50 million - $2 million - $5.1 million = $42.9 millions.
Keep in mind we need to subtract the fees from the committed capital first.. then divide between GPs and LPs in a deal-by-deal carry structure.
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