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The Cornerstone waterfall has no preferred return and no GP catch-up — is that deliberate, and how do LPs who expect an 8% hurdle react?

In both the American and European options in Article 3, LPs receive their Capital Contribution Value back and then the split goes straight to the Carried Interest Percentage. There is no preferred return step and no GP catch-up. Coming from a development finance and PE background where an 8% hurdle plus catch-up is standard, I want to understand whether this is a deliberate simplification for venture, and what happens when an institutional LP asks for a pref during negotiation. Do managers typically add one, or hold the line on the standard document?

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Yes — that is generally deliberate. In venture, especially for first-time or emerging managers, a **“return capital, then split”** waterfall is a common simplification.

- **Why omit pref/catch-up**
- Venture cash flows are long-dated and uneven
- A pref can add complexity without changing many outcomes
- A **European waterfall** still gives LP protection by requiring return of contributed capital first

- **How LPs react**
- Many venture LPs accept no pref
- Institutional or PE/DFI-style LPs may still ask for an **8% hurdle**

- **What managers do**
- Usually **hold the standard document** unless the LP has real leverage
- If needed, add economics through negotiation, often preserving the base LPA

References:
- https://decilehub.com/base/1-general_questions/163956-cornerstone-lpa-question-there-is-no-preferred-return-anywhere-in-this-lpa-both-waterfall-options-in-3-2-just-return-capital-and-then-split-why-is-there-no-hurdle-when-8-seems-to-be-the-standard-everywhere-else
- https://decilehub.com/base/7129-ai_toolkit_feedback/163743-cornerstone-lpa-standard-docs-faster-cheaper-setup-gp-edits-economics-only

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