---
title: "What Is Distribution?"
term: "Distribution"
description: "In venture and private equity, a distribution is cash or assets returned from a fund to its limited partners after a liquidity event—an exit, dividend recap, or partial sale."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/distribution
---

# What Is Distribution?

> In venture and private equity, a distribution is cash or assets returned from a fund to its limited partners after a liquidity event—an exit, dividend recap, or partial sale.

**Distribution** is the moment a fund actually returns capital to its limited partners—turning a portfolio mark into cash (or sometimes public stock) in an LP's account.

## How it works

When a portfolio company exits—IPO, acquisition, secondary sale, or dividend—the general partner allocates proceeds according to the limited partnership agreement. After returning contributed capital and applying the **waterfall** (preferred return, catch-up, carried interest), the GP wires the LP's share.

Example: a VC fund invested $10M in a startup and sells its stake for $40M. After fees, carry, and any return of prior capital calls, the fund might distribute $30M to LPs pro rata by commitment. Each LP receives their percentage of that pool.

Distributions can be **interim** (partial sale, dividend recap) or **final** (full exit). Some funds also distribute public stock after an IPO; LPs may hold or sell.

## Why it matters

- **Founders:** An exit that triggers distributions is a real liquidity event. Understand whether your investors are distributing because they sold primary shares, secondary, or the whole company—it affects signaling and relationship dynamics.
- **Investors (LPs):** Distributions drive DPI and cash-on-cash returns. A fund with high TVPI but zero DPI has not yet proven it can return money.
- **GPs:** Distribution pace affects fundraising for the next fund. LPs want to see a track record of returning capital, not just marking up positions.

## Common mistake

Confusing **distribution** with **capital call**. A capital call is money flowing *into* the fund from LPs; a distribution is money flowing *out*. They move in opposite directions.

## Related ideas

- [DPI](/glossary/dpi) — distributions divided by paid-in capital
- [Distribution in Kind](/glossary/distribution-in-kind) — returning stock instead of cash
- Carried interest — GP's share before LPs receive full distributions
- Waterfall — the payout order in a fund

## FAQ

### What is Distribution in simple terms?

It is money (or sometimes stock) that a fund sends back to its LPs after selling or partially monetizing a portfolio company. It is the 'D' in DPI—distributions to paid-in capital.

### Why does Distribution matter?

LPs judge GPs on cash back, not paper marks. For founders, a distribution often means your company was sold or your investors sold secondary shares—signals that matter for cap table and future rounds.


---
Source: https://venturecapitaltracker.com/glossary/distribution