VC funds don’t have a hurdle?
Recently learnt from a friend that VC funds don’t have the typical 8% hurdle that PE / RE funds do. How have they been able to get away with this?
Trending Content - Venture Capital Forum
| +27 | Getting the VP Promote at the "Wrong" Firm | 10 | 2d |
| +18 | Growth Equity Compensation | 2 | 1w |
| +14 | Biotech VC path from Patent Law | 3 | 4d |
| +9 | Anyone join a startup that actually paid a fat check at exit? | 3 | 3w |
| +3 | Hedosophia US | 3 | 13h |
| +3 | Insight Partners WLB and deal flow in 2026 | 3 | 1w |
| +2 | Classic Turnaround VC cases? | 3 | 1w |
Career Resources
Based on the most helpful WSO content, it's true that many VC funds don't have the typical 8% hurdle rate that is common in PE or RE funds. This is largely due to the nature of venture capital investing. VC funds often operate with a different risk-return profile compared to PE or RE funds. They invest in early-stage, high-growth companies where the potential for outsized returns compensates for the lack of a hurdle rate.
Additionally, the structure of VC funds is such that they rely heavily on the "home run" investments to drive returns, as many portfolio companies may fail or generate minimal returns. This high-risk, high-reward dynamic allows VC funds to justify not having a hurdle rate, as LPs are often more focused on the potential for exponential returns rather than a guaranteed minimum return.
Moreover, the competitive fundraising environment for top-tier VC firms, which are often oversubscribed, gives them the leverage to structure their funds without a hurdle rate. LPs are willing to accept this because of the potential for significant upside, especially with firms that have a strong track record of success.
Sources: Venture Capital Salary versus BB and Private Equity, https://www.wallstreetoasis.com/forum/venture-capital/vc-is-a-laughable-shitshow-change-my-mind?customgpt=1, https://www.wallstreetoasis.com/forum/private-equity/why-i-left-pe-switched-to-the-public-markets?customgpt=1, Starting a Private Equity Fund/Firm, Why I Left PE & Switched to the Public Markets
Dolorem minus earum eos facere ipsam. Non earum libero accusantium et velit. Temporibus quidem ipsa esse et temporibus. Accusantium eos velit qui enim mollitia sint. Voluptatem dolorum laboriosam excepturi facere magnam officiis aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...