Fund Structure
Throwback Provision
An LP protection that requires the GP to return previously distributed carry if the fund ultimately underperforms.
A throwback provision (similar to a clawback) requires the GP to return excess carried interest distributions if, at the end of the fund's life, the total distributions to the GP exceed what they would have been entitled to based on overall fund performance. This protects LPs from scenarios where early winners generate carry that isn't justified by total fund returns.
In Practice
A GP receives $5M in carry from early exits, but the fund's remaining investments decline in value. The throwback provision requires the GP to return $3M so total carry aligns with actual fund-level performance.
Why It Matters
Throwback provisions align GP compensation with total fund performance rather than individual deal outcomes, protecting LPs from early carry distributions on ultimately underperforming funds.
Related Concepts
Newsletter
The VC Beast Brief
Join thousands of founders and investors. Every Tuesday.
VentureKit
Ready to launch your fund?