#9TDAYVC-DAY-17 đŻTypes of Waterfalls in VC? đŻWhat is Clawback? Two types that are âEuropean & American Waterfallâ-Under European Waterflow, 100% of all Investment Cash is paid out to Investors on a pro-rata basis & therefore preferred returns are paid out in full. Pro-Rata means that all capital is invested treated equally & also distributions done accordingly. For example if a person invested 10% of the fund then he is entitled to receive only 10% of the Distributions. The âAmerican Waterfallâ structure tries to improve the waiting time for the manager to earn additional returns. This structure allows managers to get paid before investors get 100% preferred returns. ClawBack-This is American Waterfall clawback provision built in for Investors.It also addresses the both profits & losses in portfolio.This recover the performance fees from the manager from failed investments.Hence Claw back give the right to pull back money from the managers at any time of the fund life.đ
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