Fund Structure
DPI Catch-Up
Last updated
Quick Answer
The stage in fund distributions where GPs begin receiving carried interest after LPs have received back their full invested capital plus preferred return.
In the standard waterfall structure: LPs first receive return of all invested capital, then LPs receive their preferred return (hurdle rate, typically 8%). Then comes the 'catch-up' — the GP receives 100% of distributions (or a high percentage) until they have received their full carry (typically 20%) on all profits earned so far. After catch-up, distributions split at the carry rate going forward.
The catch-up provision ensures GPs are fully compensated for their carry entitlement before profit-sharing reverts to the standard split.
In Practice
If a fund has $100M in profits above the hurdle, the GP's catch-up is $25M (getting them to 20% carry on $125M total above-hurdle distributions). Until that $25M catch-up is paid, LPs receive nothing further — all distributions go to the GP to catch them up.
Why It Matters
Understanding catch-up provisions matters when evaluating fund economics as an LP. In a fund with significant catch-up provisions, LPs receive no distributions for an extended period after the hurdle is cleared — the GP catches up first. This affects LP cash flow planning significantly.
Related Concepts
Further Reading
The Math Behind VC Returns: From Entry to Exit
From entry valuation to exit proceeds, this breakdown covers the full math behind VC returns — including dilution, MOIC, IRR, carry, and the metrics LPs actually use to evaluate fund performance.
Distributions in Venture Capital: Waterfall, Timing, and Tax Implications
Learn how venture capital distribution waterfalls work, when LPs receive proceeds, and the key tax implications every fund manager and LP needs to understand.
How to Get a Job in Venture Capital: The Definitive Guide (2026)
The complete guide to venture capital careers: roles from analyst to partner, salary ranges at every level, interview prep, and proven strategies to break in — even without a finance background.
Frequently Asked Questions
What is DPI Catch-Up in venture capital?
In the standard waterfall structure: LPs first receive return of all invested capital, then LPs receive their preferred return (hurdle rate, typically 8%).
Why is DPI Catch-Up important for startups?
Understanding DPI Catch-Up is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does DPI Catch-Up fall under in VC?
DPI Catch-Up falls under the fund-structure category in venture capital. This area covers concepts related to how venture capital funds are organized, managed, and governed.
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