Business Pitch Dictionary by pitch.dog
Exits, liquidity & investor returns · Working

Hurdle rate

Also called: preferred return

ELI5

Investors receive a minimum return before profit sharing begins.

Used in conversation

“The fund has an eight-percent hurdle rate.”

Definition

A minimum return threshold that may need to be met before carried interest is earned.

Here “Hurdle rate” means: A minimum return threshold that may need to be met before carried interest is earned.

Pitch context

You will see “Hurdle rate” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches exits, liquidity & investor returns.

Why it matters: In exits, liquidity & investor returns, a loose definition can change rights, obligations, approval, disclosure or enforceability.

Caution

Meaning, enforceability and required process vary by jurisdiction and agreement; this definition is not legal advice.

Sources & evidence · 6

Direct term-level sources and supporting source families.