Carried interest is taxed as long-term capital gains (max 20%) instead of ordinary income (up to 37%), a major tax break for GPs that's repeatedly come under political fire. Despite years of reform attempts, including efforts in 2017 and 2022, the loophole remains—and the debate over its future is far from over.

Carried interest is the share of a fund’s profits GPs earn—typically 20%—but only after LPs are repaid and a minimum return (the hurdle rate) is met. It’s paid through a structured waterfall and varies by fund model, making it a high-reward but performance-dependent incentive for venture fund managers.

In venture capital, returning a fund isn’t enough—LPs expect outsized returns to justify the high risk. Due to high failure rates and dilution, only a massive outlier (100x+) can make the math work, making power-law outcomes essential for top-tier fund performance.

Venture capital thrives in low-rate environments, but rising interest rates and strong public equity returns have made VC less attractive on a risk-adjusted basis. If high rates persist, LPs may shift capital away from VC—unless macro conditions or tech growth swing the pendulum back.

VC teams are structured with distinct roles and incentives—from analysts seeking career growth to GPs driven by fund performance and personal capital at stake. Founders should understand who they’re talking to during fundraising, recognizing that while junior team members are valuable allies, investment decisions ultimately rest with partners.

A well-structured ESOP motivates employees and helps startups attract top talent, but it must be balanced to manage dilution for founders and investors. As your company grows, so should your option pool—aligning team incentives with long-term success is key to building a high-performing startup.

An ESOP is essential for attracting talent and aligning teams in early-stage startups, but its structure can significantly impact founder and investor dilution. Creating the ESOP pre-money protects new investors but dilutes existing shareholders more, so founders must strategically plan size and timing with legal and financial guidance.

Preferred shares give investors downside protection and priority in exits, while common shares are typically reserved for founders and employees. With tools like liquidation preferences and conversion options, preferred shares—especially participating ones—offer investors strong exit upside, making it crucial for founders to understand and negotiate these terms carefully.

A cap table is the foundation of your startup’s ownership, tracking how equity is distributed and how fundraising impacts it over time. Understanding it is critical, and using a dynamic model with SAFE, Series A, and ESOP scenarios can help founders make smarter equity decisions.

Venture funding can accelerate growth, but founders must be strategic with equity to avoid excessive dilution and misaligned investors. The best investors offer more than capital—aligning on vision and long-term value is key to maintaining a healthy cap table and founder motivation.

SAFEs let early-stage startups raise capital quickly by promising investors future equity, typically triggered during the next priced round or an acquisition. Key terms like valuation caps and discounts determine how much equity investors get.

Despite Trump’s vow to repeal the IRA, a full rollback is unlikely due to economic gains in red states and internal GOP resistance; a partial repeal is more realistic. Even if scaled back, core clean energy incentives are expected to survive, keeping climate tech investment cautiously optimistic.