Fund Structure
Yield Enhancement
Strategies used to increase the current income generated from a venture portfolio beyond capital appreciation.
Yield enhancement in venture describes strategies to generate current income from a portfolio that would otherwise only produce returns through capital appreciation at exit. Examples include charging portfolio companies for services, earning interest on subscription credit facilities, structured notes with coupon payments, or revenue-based financing structures that provide periodic cash returns.
In Practice
A growth equity fund structures deals with 8% PIK dividends on preferred stock, generating yield while waiting for exits, improving the fund's DPI timeline.
Why It Matters
As VC fund terms extend and exits take longer, yield enhancement strategies help funds demonstrate returns to LPs earlier, improving fundraising prospects for successor funds.
Related Concepts
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