Hurdle Rate
A Hurdle Rate is the minimum return on investment that venture capital firms or investors expect to earn before they will invest in a project or company. Think of it as a bar that needs to be cleared - like a hurdle in a race. If a potential investment can't show it might earn more than this minimum rate, investors usually won't consider it. It's similar to having a minimum passing grade in school. This term is commonly used when discussing investment decisions, fund performance, and deal evaluation.
Examples in Resumes
Developed investment models to evaluate deals against Hurdle Rate requirements
Managed portfolio of investments exceeding Hurdle Rate by 25%
Led deal evaluation process using Hurdle Rate and other key metrics
Typical job title: "Investment Analysts"
Also try searching for:
Where to Find Investment Analysts
Professional Networks
Industry Resources
- • PitchBook
- • CB Insights
- • Crunchbase
Events & Conferences
Example Interview Questions
Senior Level Questions
Q: How do you determine an appropriate hurdle rate for different types of investments?
Expected Answer: Should explain how factors like market conditions, risk level, investment stage, and industry standards influence hurdle rate setting. Should mention practical examples from past experience.
Q: How do you handle situations where promising investments don't meet the hurdle rate?
Expected Answer: Should discuss methods for balancing quantitative metrics with qualitative factors, risk adjustment strategies, and experience with exception cases.
Mid Level Questions
Q: What factors do you consider when comparing investments against the hurdle rate?
Expected Answer: Should mention market conditions, company stage, industry comparables, and risk factors. Should demonstrate understanding of basic financial modeling.
Q: How do you communicate hurdle rate requirements to portfolio companies?
Expected Answer: Should explain how to clearly present expectations to entrepreneurs and discuss tracking methods for performance against targets.
Junior Level Questions
Q: What is a hurdle rate and why is it important?
Expected Answer: Should explain that it's the minimum return required for investment consideration and its role in investment decision-making.
Q: How do you calculate if an investment meets the hurdle rate?
Expected Answer: Should demonstrate basic understanding of return calculations and commonly used tools/spreadsheets for analysis.
Experience Level Indicators
Junior (0-2 years)
- Basic financial modeling
- Investment return calculations
- Deal screening
- Market research
Mid (2-5 years)
- Advanced financial analysis
- Deal evaluation
- Portfolio monitoring
- Investment memorandum preparation
Senior (5+ years)
- Investment strategy development
- Complex deal structuring
- Risk assessment
- Portfolio management
Red Flags to Watch For
- Unable to explain basic return calculations
- No understanding of risk assessment
- Lack of experience with financial modeling
- Poor grasp of market analysis
Related Terms
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