What is Hurdle Rate in VC funds?
Nexa Consultancy | Startup & Finance Glossary
The hurdle rate is the minimum rate of return that a VC fund must achieve before its general partners can start receiving carried interest. It ensures that the fund managers are rewarded only after delivering a baseline return to their investors (LPs).
Startup Example: A VC fund has an 8% hurdle rate. It must provide an 8% annualized return to its investors before the fund managers can claim their 20% profit share.
This is a key term in understanding the fundraising ecosystem.