For a first-time **$5M pre-seed fund**, the more common default is **European / whole-of-fund**.

Why:
- **More LP-friendly** and easier to defend in a Fund I raise
- **Simpler administratively**
- Avoids the main structural issue with **American / deal-by-deal**: early GP carry can later become an **overpayment**, creating **clawback risk**
- With a small fund and concentrated LP base, that clawback risk can feel more acute, not less

So yes, **LP preference and negotiating leverage matter a lot**, but there are also real structural reasons. An emerging manager usually picks **American** only if they have unusual leverage and are prepared to manage conservative holdbacks/reserves for potential clawback exposure.

References:
- https://decilehub.com/base/1-general_questions/164013-cornerstone-lpa-v3-section-3-2-offers-a-choice-between-deal-by-deal-american-and-whole-of-fund-european-distribution-for-a-first-time-manager-raising-a-sub-25m-fund-which-does-decile-recommend-defaulting-to-and-what-clawback-and-escrow-mechanics-attach-to-the-american-option
- https://decilehub.com/base/1-general_questions/163969-how-should-an-emerging-manager-think-about-choosing-between-an-american-waterfall-and-a-european-waterfall-when-structuring-carried-interest