Recruiter's Glossary

Examples: Burn Rate • Pay-to-Play • Ratchet

Clawback

Term from Venture Capital industry explained for recruiters

A clawback is a business arrangement where money that was already paid out must be returned under certain conditions. In venture capital, it's like an insurance policy that protects investors. For example, if a fund manager gets paid bonuses for good performance early on, but later investments don't do well, they might have to give back some of their earlier earnings. It's similar to a money-back guarantee, but for investments. This term is common in investment agreements and employment contracts, especially in financial services and venture capital firms.

Examples in Resumes

Developed and implemented clawback provisions for partner compensation agreements

Managed investor relations regarding clawback clause activations across multiple funds

Successfully negotiated clawback terms with limited partners in new fund formation

Typical job title: "Investment Professionals"

Also try searching for:

Venture Capital Associate Investment Manager Fund Administrator Private Equity Professional Investment Operations Manager Legal Counsel Fund Controller

Where to Find Investment Professionals

Professional Networks

Industry Resources

Example Interview Questions

Senior Level Questions

Q: How would you structure a clawback provision to protect both the firm and its limited partners?

Expected Answer: A senior professional should discuss balancing investor protection with fair compensation, timing of clawback calculations, and methods to secure potential clawback obligations through escrow accounts or personal guarantees.

Q: What are the key considerations when implementing a clawback provision across multiple funds?

Expected Answer: Should explain the importance of clear documentation, tracking mechanisms, tax implications, and communication strategies with both investors and fund managers.

Mid Level Questions

Q: Explain how clawback provisions typically work in venture capital funds.

Expected Answer: Should be able to explain the basic concept of returning excess carried interest, calculation periods, and typical trigger events that might cause a clawback.

Q: What documentation is needed to properly track potential clawback obligations?

Expected Answer: Should discuss performance reports, distribution waterfall calculations, and ongoing monitoring of fund performance against clawback thresholds.

Junior Level Questions

Q: What is a clawback provision and why is it important?

Expected Answer: Should explain that it's a mechanism to return excess payments to investors if certain conditions aren't met, protecting investor interests in the long term.

Q: How do you calculate a basic clawback amount?

Expected Answer: Should demonstrate understanding of the relationship between distributed carried interest and actual fund performance over time.