GP catch-up
Last updated
Quick Answer
The GP catch-up is the mechanism by which the general partner receives a disproportionate share of distributions until the agreed profit split is restored.1,2
What it is
After the preferred return has been paid, the catch-up allocates distributions preferentially to the general partner so that, measured cumulatively, it holds its agreed percentage of profit. The catch-up rate determines how fast this happens, and whether the catch-up is full or partial determines whether it happens completely at all.1,2
Operational context
What good looks like
Why It Matters
The catch-up is where the preferred return is reconciled with the intended profit split, and its rate decides how much of a fund's proceeds pass to the general partner before the residual tier begins.1
Term Family
Related concepts
Related Questions
What is the correct order of distribution in a typical distribution waterfall?
The conventional order is return of capital, then preferred return, then GP catch-up, then the residual split.
What is the distribution waterfall mechanism?
A distribution waterfall is the ordered sequence of tiers that determines how a fund's proceeds are split between limited partners and the general partner.
Frequently Asked Questions
What is GP catch-up in venture capital?
After the preferred return has been paid, the catch-up allocates distributions preferentially to the general partner so that, measured cumulatively, it holds its agreed percentage of profit.
Why is GP catch-up important for startups?
Understanding GP catch-up 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(The GP catch-up is the mechanism by which the general partner receives a disproportionate share of distributions until the agreed profit split is restored.)primary · T1 · waterfall-models · term
- 2.duanemorris-clawbacks — Private Equity Funds: Clawbacks and Investor GivebacksPrivate Equity Funds: Clawbacks and Investor GivebacksDuane Morris LLP(The GP catch-up is the mechanism by which the general partner receives a disproportionate share of distributions until the agreed profit split is restored.)secondary · T2 · waterfall-models · term
- 3.cooley-carry-primer — Primer: Carried Interest in Private Equity and Venture Capital Funds (*TheFundLawyer*)Primer: Carried Interest in Private Equity and Venture Capital Funds (*TheFundLawyer*)Cooley LLP(The GP catch-up is the mechanism by which the general partner receives a disproportionate share of distributions until the agreed profit split is restored.)secondary · T2 · waterfall-models · term
- 4.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(The GP catch-up is the mechanism by which the general partner receives a disproportionate share of distributions until the agreed profit split is restored.)secondary · T2 · waterfall-models · term
- 5.preqin-pro-glossary — Preqin Pro Glossary of TermsPreqin Pro Glossary of TermsPreqin (BlackRock)(The GP catch-up is the mechanism by which the general partner receives a disproportionate share of distributions until the agreed profit split is restored.)secondary · T2 · waterfall-models · term
Newsletter
CarryBeast Brief
Carry math, waterfall tiers, and incentive design. Every Tuesday.
CarryBeast Brief
The weekly brief on carry and fund economics
Weekly analysis of waterfall structures, promote splits, and incentive design across private funds. Every Tuesday, free.
Archstone
Run your fund like an institution.