Distribution waterfall

Distribution waterfall — the contract clause in a syndication or fund that orders who gets paid what, in what sequence: typically return of LP capital first, then a preferred return (a hurdle rate LPs receive before the GP shares), then the promote/carry splits above it. The waterfall, not the projected returns slide, tells you who a deal is really for — it is the first document a trained LP reads and the last one a funnel pitch shows.

First used in: 5.2 · The ten breakthrough patterns