006: The Origin and Modern Practice of Carried Interest in Investments

VestCapital Podcast

In this episode, we explore the historical origins of the carried interest role, dating back to the Renaissance era, and how VestCapital adopts a similar approach today. By aligning its risk profile with investors through profit-sharing structures, VestCapital ensures mutual success, drawing parallels between the investment strategies of Venetian sailors and modern real estate funding.

• Investment Deal Structure at VestCapital

  • VestCapital structures its investment deals to align the interests of both the company and its investors.
  • The approach ensures that when VestCapital performs well, the investors also see benefits.
  • This alignment of interests aims to "rise all ships," fostering mutual success.

• Historical Origin of the Standard Carried Interest Role

  • The concept traces back to the 16th century during the Renaissance era.
  • Venetian investors provided capital to sailors who undertook risky voyages to purchase and trade spices.
  • Profits were split 80/20, with 20% going to the investor, establishing an early model for shared profits.

• Parallels Between Renaissance Investment and Modern Practices

  • Just as Venetian investors backed entrepreneurs in risky ventures, VestCapital backs modern entrepreneurs by providing necessary capital.
  • The 80/20 profit split model is mirrored in VestCapital's approach to aligning with investors' goals.
  • This method of structuring deals ensures that both parties share in the risks and rewards of the investment.