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.

In this episode of the VestCapital podcast, host Tanner Wideriksen delves into the intricacies of the capital stack within private equity, specifically focusing on different financing layers: senior debt, mezzanine financing, preferred equity, and common equity. He explains the roles and risk profiles of each, emphasizing their importance in real estate development. Tanner highlights that senior debt carries the least risk with the first claim on assets, while common equity, often held by sponsors, is the riskiest but aligns developer and investor interests. The discussion centers on how these layers impact investment strategies, particularly in short-term real estate projects, typically spanning 36 months. Tanner concludes by stressing the importance of aligning interests between developers and investors to ensure project success.