Fund Structure
Catch-Up Provision
A clause in a fund's waterfall allowing GPs to receive 100% of distributions until they've caught up to their target carry percentage after LPs receive their preferred return.
A catch-up provision in a fund's waterfall ensures that after LPs receive their preferred return (hurdle rate), the GP receives 100% of subsequent distributions until they've 'caught up' to their full carry allocation. Example: if the hurdle is 8% and carry is 20%, once LPs receive 8% annual returns, the next distributions go 100% to the GP until the GP has received 20% of total profits. After that, the standard 80/20 split resumes. Without a catch-up, GPs would only receive carry on profits above the hurdle — the catch-up ensures they ultimately receive 20% of total profits (not just profits above the hurdle). Not all venture funds include catch-up provisions — it's more common in private equity and growth equity.