Definition
The minimum return a VC fund must achieve before partners can collect carried interest—usually 8% annually. The bar LPs set to ensure their capital at least beats a boring index fund before the GP gets rich.
Example Usage
The fund had a 8% hurdle rate, meaning limited partners got all profits until they'd earned that return, then the 20% carry split kicked in.
Origin
Investment management term dating to 1980s private equity as LPs sought to align interests
Fun Fact
Some funds have 'catch-up' provisions where once the hurdle is cleared, GPs get 100% of profits until they've caught up to their 20% overall—making the first dollars past the hurdle extremely lucrative.
Source: Private equity and venture capital fund documentation
Related Terms
Translate This Term
See “hurdle rate” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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