<ul data-eligibleForWebStory="false"><li>Distribution waterfalls in venture capital and private equity funds determine how returns are distributed between investors and fund managers.</li><li>In the American-style waterfall model, investors receive their capital back first after each exit, followed by fund managers who receive a share of the remaining profits known as carry.</li><li>The European-style waterfall model delays distributions until the entire fund's performance is assessed, ensuring all investors receive their capital and preferred return before fund managers receive their share.</li><li>Both waterfall models have distinct advantages and reflect different approaches to sharing returns, with the American model offering quicker rewards and the European model emphasizing alignment and long-term performance.</li></ul>

Puppy’s VC Journal (Entry #2): VC/PE distribution waterfalls

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