What is a Clawback?

A clawback is the refund or repayment of money that has already been contributed. In venture capital, a clawback obligation is when an adviser has to return a carried interest amount that exceeds the carried interest percentage provided in a fund agreement.

Excess carried interest occurs when (1) a fund is using an American waterfall where distribution happens on a deal-by-deal basis and (2) some deals overperformed while other deals in the fund underperformed.