A Venture Fund Shares Up to Half Its Carried Interest With 150 Deal Helpers
The 150 backers put in $57 million as a group, then can earn a cut of investment profits by sourcing, winning, and building deals.
Scaling-Europe · Matt Miller: Founding Partner of Evantic Capital in his FIRST interview since leaving Sequoia!Matt Miller, who started the venture firm Avantic, does not just ask successful founders for favors. He makes them partners.
The partners are 150 founders, company builders, and investors Miller calls the legends. Most are people he had known from earlier in his career, plus people he met in the last year. They run startups, lead large technology companies, and specialize in engineering, marketing, sales, product, legal, finance, and business development.
The arrangement starts with money. The group of legends has put about $57 million into Avantic's funds, Miller says, and the legends are co-investors in every investment the firm makes. When Miller pitches a founder, he says the founder gets not just the Avantic team and its experience, but access to the experience of all 150 people, who are investing alongside the firm.
The second part is work for pay. From the capital raised from outside backers, Avantic shares up to 50% of its carried interest, the share of investment profits that normally goes to the venture firm, with legends who help. They earn it in three ways: by helping source investments, by helping win investments, and by helping build the companies afterward.
That middle job, winning, is where Miller says the model changes the usual dynamics. When he worked at Sequoia, he said, he would ask people to help him sell into an opportunity. At Avantic, he said, the legends have been elevated as business partners, so when they write to founders about why they invested in Avantic and how they could help, it hits a little differently.
The startups then join the network, through group chats and events, surrounded by experienced operators. Miller says founders seem to love the community and be very receptive to it.
Questions people ask
What is carried interest?
Carried interest, usually shortened to carry, is the share of profits a venture firm keeps from successful investments. A common split is 20% to the firm and 80% to the investors who supplied the capital, after returning the original investment.
Why would help winning deals matter so much?
It can be hard to get into popular startups because founders have their pick of investors. A message from dozens of respected founders saying they have invested themselves, and will help, can persuade a founder to make room for a new firm.
Is this normal in venture capital?
Venture firms have long used advisers, scouts, and expert networks. Sharing up to half the profit pool with 150 co-investors who are promised work on sourcing, winning, and company building is unusual in its size and structure.