waterfalls
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Quick Answer
Waterfall True-Up is a structure used by distribution and carry economics to manage waterfall economics with clearer timing, ownership, and follow-through.
Waterfall True-Up is the control used to keep waterfall payments aligned with the governing documents after interim distributions, valuation changes, fees, expenses, or exit proceeds are known. It should explain when amounts are held back, recalculated, repaid, or released so the sponsor does not over-distribute carry before investor return requirements are satisfied.
In Practice
Example: A sponsor uses Waterfall True-Up before an interim distribution to decide how much carry should be reserved in case later proceeds, expenses, or clawback language require a repayment or reallocation.
Why It Matters
Waterfall True-Up matters because interim distributions can overpay the sponsor if reserves, true-ups, and clawback exposure are not modeled before cash leaves the vehicle.
VC Beast Take
SponsorBeast treats Waterfall True-Up as waterfall operating content, not a generic finance definition. The useful read is how it explains reserve policy, interim distribution risk, repayment obligations, and final true-up language in a way that matches both the model and the governing agreement.
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Waterfall True-Up is the control used to keep waterfall payments aligned with the governing documents after interim distributions, valuation changes, fees, expenses, or exit proceeds are known.
Understanding Waterfall True-Up is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Waterfall True-Up falls under the waterfalls category in venture capital. This area covers concepts related to important concepts in venture capital.
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