catch-up provision

Definition

A term in VC fund agreements where once LPs get their initial investment back, GPs get an accelerated share of profits until their normal split is reached. Basically letting the manager 'catch up' to their 20% after paying back investors.

Example Usage

Our fund has a 100% catch-up provision, so after returning capital, I get all profits until hitting my 20% carry.

Origin

Private equity and venture capital fund structure terminology, standard since 1980s

Fun Fact

Some funds negotiate 'no catch-up' terms, meaning GPs never fully catch up to their carried interest percentage on early distributions.

Source: VC fund formation and limited partnership agreements

Related Terms

Intermediate

up-stack

Moving to build or sell products at higher layers of technology infrastructure, typically where margins are better and you're further from commoditized infrastructure. The opposite of down-stack, and usually more profitable.

🚀 Startup / VC

Advanced

drag-along rights

A contractual provision that lets majority shareholders force minority investors to join in selling the company, whether they like it or not. Democracy dies in cap tables.

🚀 Startup / VC

Advanced

non-participating preferred

Preferred stock that must choose between taking its liquidation preference OR converting to common and sharing the remaining proceeds—can't do both. The slightly-less-greedy version of investor terms.

🚀 Startup / VC

Intermediate

equity crowdfunding

Raising capital from numerous small investors through online platforms, democratizing access to startup investment and the opportunity to lose money on early-stage companies. Kickstarter, but instead of getting a T-shirt, you get illiquid securities.

🚀 Startup / VC

Intermediate

capital call

The formal demand from a general partner to limited partners to wire their committed funds, usually with 10-30 days notice and an implied "or else" hanging in the air. It's how venture funds move committed money from promised to deployed.

🚀 Startup / VC

Intermediate

Moat

A competitive advantage so strong that rivals can't easily replicate your business, borrowed from medieval castle terminology because startup founders fancy themselves as kings defending their kingdoms. Most startup moats are about as deep as a puddle.

🚀 Startup / VC

Translate This Term

See “catch-up provision” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.

Try the Translator

Share This Term

Post on X Share on Facebook Share on LinkedIn

Discover a Term

Beginner

nifoc

naked in front of computer...