Fund Structure
Last updated
Quick Answer
When a fund returns enough capital to LPs to cover their original investment, making all subsequent distributions pure profit.
Recoup is the milestone where cumulative distributions equal the total capital invested by LPs. After recoup, every additional dollar distributed is profit. This is closely related to DPI reaching 1.0x — a critical threshold that separates paper returns from real returns.
In Practice
After two major exits totaling $150M in distributions on a $100M fund, the fund had recouped. The remaining portfolio of 15 companies represented pure upside for LPs.
Why It Matters
Recoup transforms the LP experience from 'hoping for returns' to 'playing with house money.' Funds that recoup early earn disproportionate LP loyalty for future fundraises.
VC Beast Take
Recoup is the moment a fund goes from theoretical to real. Until DPI hits 1.0x, it's all just marks on paper. After recoup, it's actual money in LP pockets.
Recoup is the milestone where cumulative distributions equal the total capital invested by LPs. After recoup, every additional dollar distributed is profit. This is closely related to DPI reaching 1.0x — a critical threshold that separates paper returns from real returns.
Understanding Recoup is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Recoup 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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