Twenty-three percent.

Twenty-three percent.

That is the median carry I have seen on lower-middle-market independent sponsor deals over the last twelve months. Five years ago it was twenty. The shift is not because LPs are getting more generous. It is because the sponsors closing real deal flow are getting harder to replace.

Five years ago, an independent sponsor pitching a $40M EV deal to a family office could expect the LP to anchor at twenty percent carry above an eight preferred return, with a 50/50 catch-up. That number lived in the deal-by-deal playbook for a decade. It was easy to negotiate. It became the default.

Then two things happened. First, the independent sponsor pool got more sophisticated. The sponsors closing $25M to $100M deals today are mostly second-time or third-time around. They have a track record. They have a roster of capital partners. They have a thesis that has held up across two cycles. The LP cannot replace them with a generic search-funder profile.

Second, the LP pool got more crowded. Family offices that used to back one or two deals a year are now allocating to four or five. The supply of LP capital has grown faster than the supply of structured, ready-to-close deals at the right altitude. The independent sponsor is the bottleneck.

When the independent sponsor is the bottleneck, the economics move toward the independent sponsor.

If you are negotiating sponsor economics today and the starting number from the LP is twenty percent above an eight preferred, that is the conversation, not the conclusion. The right number for your firm and your deal almost always lives in the 22 to 25 range, with a clean 50/50 catch-up. Push for the 25 if you have an operating partner of substance, a sourcing advantage, or a thesis that the LP has explicitly bought into.

Defend the carry number in the LPA, not in conversation. Once it is in the LPA, it is the firm. Once it is only in conversation, it is the next negotiation.