To democratize venture capital, ARK created a fund that eliminates the traditional 20% carried interest (a share of profits). Instead, it charges a flat 2.75% management fee. This structure aims to give retail investors with as little as $500 direct access to premier private company cap tables without the performance fees that typically benefit fund managers disproportionately.

Contrary to the VC fear that early liquidity demotivates founders, Amanda Kahlow argues it does the opposite. Taking money off the table provides comfort and security, allowing founders to put more energy into the company and take bigger risks for a larger outcome.

Sophisticated investors no longer use secondaries just to quickly build a private equity program. The strategy has matured into a core allocation, valued for offering faster deployment, better cash flow control, and consistent performance across market cycles.

Taking a small amount of money off the table via a secondary sale de-risks a founder's personal finances. This financial security empowers them to reject large acquisition offers and pursue a long-term, independent vision without the pressure of life-changing personal wealth decisions.

To participate in highly competitive late-stage deals, some VCs organize SPVs without management fees or carry. While not directly profitable, this helps the startup fundraise, strengthens the relationship, protects the VC's original investment, and signals access to LPs for future funds.

A significant, yet uncommon, sign of an LP-friendly VC is returning a portion of the carry from Special Purpose Vehicles (SPVs) to the original fund's LPs. This acknowledges that the main fund's resources and reputation sourced the follow-on investment opportunity in the first place.

Despite perceptions of quick wealth, venture capital is a long-term game. Investors can face periods of 10 years or more without receiving any cash distributions (carry) from their funds. This illiquidity and delayed gratification stand in stark contrast to the more immediate payouts seen in public markets or big tech compensation.

In hot secondary markets, investors often buy shares in a Special Purpose Vehicle (SPV) that holds the stock (L1). These SPVs can be nested (L2, L3), moving the investor further from the actual asset and introducing hidden layers of fees and significant counterparty risk.

First-time fund managers often try to differentiate with creative or complex terms. However, institutional investors prefer standard structures (like 2 and 20) because it allows them to quickly compare new offerings to established funds on a "like for like" basis. Uniqueness should come later, in a second or third fund.