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Carried Interest

Carried Interest is a share of the profits from an investment.  It's how venture capitalists make money from their own investors (called limited partners), typically when a startup is acquired or after an IPO. 

Example: A venture capitalist invests $1M at a $10M valuation. In five years, the initial $1M of equity is sold for $300M. If carried interest is 20%, the venture capitalist would earn $59.8M [($300M - $1M) * 20%]. 

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