Yea, normally in a fund with 10 investments you pay carry on the net performance of the fund. So let's say the fund is $100 and 10 investments of $10 each. One ends up being worth $110 and everything else goes broke. Normally the carry would be 20% of $10 (the profit), but on a deal by deal, the carry is 20% of the profit on each investment (there was only one) so you pay it on the $100 (110 - 10) for the one deal that made money.

This is obviously a particularly bad case, but I think if you looked at the "normal" distribution of fund returns, it's quite a bit worse as an investor (although unclear what the means since they're investing in different companies potentially).

I not sure this really creates a perverse incentive, the distribution already looked pretty close the the worst case from the investor's point of view. It's just generally going to be quite a bit more expensive than the quoted rate in practice.