Are LPA terms becoming more favorable to LPs?

Apr 26

Data Insights


In an environment where it’s becoming more difficult for VCs to close new funds and obtain investments from Limited Partners (LPs), Aumni-tracked venture deals reveal that some terms within Limited Partnership Agreements (LPAs) are becoming more favorable for LPs.

For example, LPA distribution waterfalls, which dictate how the profits of a fund are distributed between the LPs and General Partners (GPs), are trending back toward the European style, though American waterfall was temporarily increasing in popularity between 2020 and 2022. European waterfall generally favors the LP, since GPs do not receive carried interest until all the LPs’ capital contributions have been recovered and their preferred rate of return has been achieved. In contrast, in American waterfall distributions, GPs do receive carried interest from investments by the fund before limited partners are made whole.

Want to explore more? This is one of dozens of charts and related insights in Aumni’s Venture Beacon Year End 2023 Report

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Photo by Spenser Sembrat on Unsplash.