If you've spent any time reading about venture capital or private investment funds, you've probably come across the term "carried interest" — or just "carry" for short. At Caduceus, we believe in transparency and education, so let’s break down exactly what that means and how it works in our fund.
The Basics: What Is Carried Interest?
Carried interest is the share of profits that fund managers earn only after investors have been paid back their original investment — and often after a minimum return hurdle has been met.
Think of it like this: you're a limited partner (LP) investing in a fund. The fund uses your capital (along with others’) to invest in promising startups. Years later, some of those companies succeed, and the fund sells its shares for a profit. Once you've received your initial investment back, plus any agreed-upon preferred return, the managers of the fund — also known as general partners (GPs) — earn a performance bonus from the profits. That bonus is called carried interest.
So... It’s Like a Success Fee?
Exactly. It aligns the fund managers' incentives with yours. If the fund does well, everyone wins. If not, the managers don’t earn any carry.
How Much Is It?
The industry standard is 20%, and that’s what we charge at Caduceus. This means that after returning invested capitalto our LPs, 20% of the profits from successful investments go to the general partners.
Here’s a simple example:
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You invest $100,000 in Caduceus.
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The fund invests in a medical device company.
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A few years later, the company is acquired, and your share is worth $200,000.
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After returning your $100,000, there is $100,000 in profit.
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From that profit, $20,000 (20%) is taken as carried interest, and you receive $80,000 in gain, in addition to your original investment.
Why Is This Fair?
Carried interest ensures that the fund’s managers are rewarded only when you are. At Caduceus, we’re doctors ourselves. We started this fund to give other physicians access to meaningful, science-driven investment opportunities. Our carried interest structure reflects our belief that we should only do well when you do.
We don’t charge a management fee, and we don’t get paid for just “running a fund.” We work hard to source deals, perform scientific due diligence, and support companies because we believe in their mission — and we only profit when our investments pay off for you.
In Summary
Carried interest is:
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A share of profits earned by the fund managers
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Only paid after you get your initial investment back
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20% at Caduceus, aligned with industry standards