Soft hurdle
Last updated
Quick Answer
A "soft hurdle" is market usage for a preferred return that, once cleared, allows the general partner to receive carry on all profits rather than only those above the threshold.1
What it is
The contrast is with a hard hurdle, where carry applies only to profits above the threshold. The mechanic is documented; the label is market vocabulary rather than a defined term, and it is used inconsistently enough that a term sheet using it should be read for what the tiers actually do rather than for the phrase.1,2
Operational context
What good looks like
Why It Matters
The label is used inconsistently enough that it cannot be relied on, so a term sheet carrying it should be read for what its tiers actually do rather than for the phrase itself.1
Term Family
Related concepts
Frequently Asked Questions
What is Soft hurdle in venture capital?
The contrast is with a hard hurdle, where carry applies only to profits above the threshold. The mechanic is documented; the label is market vocabulary rather than a defined term, and it is used inconsistently enough that a term sheet using it should be read for what the tiers actually do rather...
Why is Soft hurdle important for startups?
Understanding Soft hurdle is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.ilpa-model-lpa-wof-ts — ILPA Model LPA Term Sheet — Whole-of-Fund Waterfall Version (July 2020)ILPA Model LPA Term Sheet — Whole-of-Fund Waterfall Version (July 2020)ILPA(A "soft hurdle" is market usage for a preferred return that, once cleared, allows the general partner to receive carry on all profits rather than only those above the threshold.)primary · T1 · waterfall-models · term
- 2.metrick-yasuda — Metrick & Yasuda, *The Economics of Private Equity Funds* (Rev. Fin. Stud. 2010)Metrick & Yasuda, *The Economics of Private Equity Funds* (Rev. Fin. Stud. 2010)Wharton / Rodney White Center(A "soft hurdle" is market usage for a preferred return that, once cleared, allows the general partner to receive carry on all profits rather than only those above the threshold.)secondary · T2 · waterfall-models · term
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