Clearing the Hurdles: Women Building High-Growth Businesses

216 CLEARING THE HURDLES: WOMEN BUILDING HIGH-GROWTH BUSINESSES

The venture capitalists are usually compensated in two ways. They

are paid a fixed annual fee based on the funds under management (2–

3% per annum). They also participate in the profits produced by the

investments through their carried interest. Most venture partnerships

first return all invested capital to the limited partners, then divide the

profits in excess of the initial investment at a predetermined ratio. For

example, with a 20% carry, profits in excess of the initial investment

would be allocated to the limited and general partners on an 80:20

basis. The actual amount of the management fee and the carry are

negotiable and are set at the time the fund is raised. (Although the

terms can ...