# What is Hurdle Rate? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Funding  
> **Canonical Citation:** [https://spidits.com/startup-glossary/hurdle-rate](https://spidits.com/startup-glossary/hurdle-rate)

## Definition
A Hurdle Rate is the minimum rate of return a venture capital fund must achieve for its investors before the fund managers (GPs) can begin collecting carried interest.

## Architectural Mechanics & Deep Dive
A Hurdle Rate is the minimum rate of return a venture capital fund must achieve for its investors before the fund managers (GPs) can begin collecting carried interest.

## Industry Applications & Real-World Use Cases
VC performance fee regulation

## Frequently Asked Questions

### What is a standard hurdle rate in venture capital?
Typically between 6% and 8% annualized.

### What happens if a fund does not meet the hurdle rate?
The GPs receive zero carried interest, and all profits are distributed solely to the LPs.

## Related Terminology
- [carried-interest](https://spidits.com/startup-glossary/carried-interest)
- [gp](https://spidits.com/startup-glossary/gp)
- [irr](https://spidits.com/startup-glossary/irr)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*