What is the hurdle rate?
The hurdle rate (or “preferred return”) is the minimum annualised return: typically 8% IRR: a venture fund must deliver to LPs before the GP can start collecting carried interest. It is the threshold inside the carry waterfall: until LPs cross it, all profits flow to LPs; after it, the GP catches up and then participates in 20% of further profits.
How 8% became standard
The 8% IRR hurdle dates from US private equity in the 1980s, anchored to long-term Treasury yields plus an equity risk premium. In venture capital the hurdle is far less universal: the majority of US venture funds have no hurdle rate, while hurdles are much more common in venture funds outside the US.
The hurdle in the waterfall
Standard “European” carry waterfall: (1) Return of capital: LPs receive their full paid-in capital. (2) Hurdle: LPs receive 8% IRR on contributed capital. (3) GP catch-up: until the LP/GP split on profits-above-hurdle reaches 80/20. (4) Carry: all subsequent profits split 80% LP / 20% GP. The “American” deal-by-deal waterfall applies similar logic to each profitable exit individually.
Hurdle math in Türkiye
CMB-licensed Turkish girişim sermayesi yatırım fonu (GSYF) GP-LP agreements typically import the 8% hurdle from international ILPA templates, sometimes denominated in USD or EUR to insulate LPs from TRY depreciation. The fund vehicle’s corporate tax exemption (KVK 5/1-(d)) applies regardless of hurdle structure, but GP-side carry taxation depends on whether the GP entity is structured domestically or offshore.
Why founders should care
A fund still below hurdle has GPs working “for free” on the carry side: strong incentive to push winning portfolio companies to exits or markups. A fund well above hurdle has GPs already earning carry: incentive to optimise for compound growth in remaining winners rather than rush exits.
Related: Preferred Return, Carry, Fund Returns, IRR, GP Catch-Up.