General VC Questions

No you do not. It's not necessary unless there is an administrative task that needs to take place as a result of the LPAC approval.

No you do not. It's not necessary unless there is an administrative task that needs to take place as a result of the LPAC approval.

A Certificate of Good Standing is a document, typically issued by the state, that verifies a company's current status as being in compliance with state regulations and requirements, ensuring it can legally operate. It is often used as pa...

A Certificate of Good Standing is a document, typically issued by the state, that verifies a company's current status as being in compliance with state regulations and requirements, ensuring it can legally operate. It is often used as part of standard due diligence requests as well as for various other applications for service providers such as banks.

No, you can not warehouse a deal for start fund. 

No, you can not warehouse a deal for start fund. 

The J Curve in venture capital is a phenomenon where a fund shows negative losses in the first one to three years, as the management fees and fund expenses create negative returns before the portfolio matures and has time to experience m...

The J Curve in venture capital is a phenomenon where a fund shows negative losses in the first one to three years, as the management fees and fund expenses create negative returns before the portfolio matures and has time to experience markups. The return curve of a traditional venture capital fund looks like a capital "J" (ideally).

If there are a significant amount of funds contributed by limited partners sitting in a VC firm's bank account, something has most likely gone wrong with planning and/or execution. It can mean: • a deal fell through; • there is an issue ...

If there are a significant amount of funds contributed by limited partners sitting in a VC firm's bank account, something has most likely gone wrong with planning and/or execution. It can mean: • a deal fell through; • there is an issue with the fund's deal flow; • there was no planning for pace of capital deployments vs pacing of capital calls; • etc. Note that this will also drag down a fund's metrics, and that of course, FDIC insurance limit is $250K.  This money could theoretically accrue interest - however remember that the VC firm and the fund manager owe a fiduciary duty to the limited partners to invest this money into startups (per the Limited Partnership Agreement). This money most definitely cannot be invested into cryptocurrencies, mutual funds, public company securities, etc. 

The rules regarding limited partners are defined in the Limited Partner Agreement. Generally, limited partners are unable to withdraw without significant penalties, including forfeiting a portion or all of previously invested capital. Li...

The rules regarding limited partners are defined in the Limited Partner Agreement. Generally, limited partners are unable to withdraw without significant penalties, including forfeiting a portion or all of previously invested capital. Limited partners are sometimes allowed to see their positions in secondary transactions with the consent of the general partner.

In venture capital terminology, Total Addressable Market (TAM) is an estimate of the potential revenue a company (or its product) could theoretically generate if it somehow completely captured the market (100%). It is a metric used to es...

In venture capital terminology, Total Addressable Market (TAM) is an estimate of the potential revenue a company (or its product) could theoretically generate if it somehow completely captured the market (100%). It is a metric used to essentially try to determine the size of any potential business opportunity - however note there are several approaches, so it's important to understand how a TAM is calculated when evaluating. 

Limited Partners generally should not have any particular expectations around a Fund's portfolio startups generating profits - this is not the point of venture capital investing.   Limited Partners typically only receive distributions w...

Limited Partners generally should not have any particular expectations around a Fund's portfolio startups generating profits - this is not the point of venture capital investing.   Limited Partners typically only receive distributions when one of the Fund's portfolio startups has an exit (gets acquired in some fashion most commonly, or goes IPO). Limited Partners invest and think on longer time scales - a Fund is often a ten year vehicle (or more). 

Generally speaking, Limited Partners do not hire auditors. If a Fund, due to its own decision, or at the behest of its Limited Partners, decides to be audited, the auditor will be a third-party one by definition. An internal audit, while...

Generally speaking, Limited Partners do not hire auditors. If a Fund, due to its own decision, or at the behest of its Limited Partners, decides to be audited, the auditor will be a third-party one by definition. An internal audit, while a good idea periodically, would not typically count as an actual third-party audit. 

The minimum closing requirement to launch a Start Fund is $250,000

The minimum closing requirement to launch a Start Fund is $250,000

Generally speaking, Series B and later Preferred Stock Financings do not fit into an investment thesis for "early-stage" or "seed-stage" startups - however it's important to keep in mind that there is not necessarily a singular definitio...

Generally speaking, Series B and later Preferred Stock Financings do not fit into an investment thesis for "early-stage" or "seed-stage" startups - however it's important to keep in mind that there is not necessarily a singular definition of "early-stage" agreed upon throughout the world. 

Venture capital funds generally only involve themselves to ensure that after a priced round in which they are participating (or leading for that matter), there is a large enough option pool (aka stock plan, aka equity incentive plan, and...

Venture capital funds generally only involve themselves to ensure that after a priced round in which they are participating (or leading for that matter), there is a large enough option pool (aka stock plan, aka equity incentive plan, and many more) to grant equity to and incentivize hires on the roadmap, with a buffer as needed (as well as for any bonus grants for performance, etc.).  Otherwise, in the normal course of business for the startup, venture capital funds do not have any say in any changes to the option pool, unless they have negotiated for and included specific requirements into the priced round's legal agreements. With respect to startups, they generally try to reserve sufficient stock in the option pool to last for a while, as reserving additional stock for issuance from the option pool requires paperwork and corresponding securities filings, in many instances. 

The Post-Money Valuation Cap SAFE from YC Template (this is the standard SAFE document template) the valuation cap is explicit. Other versions of the SAFE are discount, where valuation is the priced round minus the agreed discount, or MF...

The Post-Money Valuation Cap SAFE from YC Template (this is the standard SAFE document template) the valuation cap is explicit. Other versions of the SAFE are discount, where valuation is the priced round minus the agreed discount, or MFN (Most Favored Nations) where the SAFE holder gets the best terms of all SAFEs in that funding round.

At least 25% with target 25-40% of the company, with the lower end being more common for high-valuation rounds or when there’s significant dilution from earlier funding (e.g., seed rounds). This exemplifies the need for capital journey p...

At least 25% with target 25-40% of the company, with the lower end being more common for high-valuation rounds or when there’s significant dilution from earlier funding (e.g., seed rounds). This exemplifies the need for capital journey planning and detailed pro forma cap table review, the Taylor Davidson model can help, and you may be able to advise here for mutually good outcomes.  An area that deserves special attention on cap tables is equity allocated to incubators/accelerators, confirming this is reflective of the value added to the company and - if disproportionate work with the founders and attempt to renegotiate - prior to a priced round. 

Here are some instructions to build a world-class pitch deck for a venture capital fund. To start, if you have a bad Thesis, you will have a bad presentation. Start by refining your Thesis until 1 in 5 people that you pitch your Thesis t...

Here are some instructions to build a world-class pitch deck for a venture capital fund. To start, if you have a bad Thesis, you will have a bad presentation. Start by refining your Thesis until 1 in 5 people that you pitch your Thesis to express interest in investing. When you are ready to build your deck, keep your slide design clean with a simple and mostly white background. Use 1 or 2 word titles for each slide following the slide structure. Ensure that the content of every slide matches and supports your Thesis. Below is a list of the different slides needed. We recommend that you follow the guidelines exactly to build the early versions of the deck, then refine the presentation with feedback from pitching LPs. NECESSARY SLIDES: • Title: Displays the name of the fund, date of last update, and contact information of key individuals. • Thesis: Provides the one sentence investment Thesis. • Team: Introduces Managing Partners with a picture and three short bullets on each. • Team (Continued): Introduces Partners and Venture Partners with a picture and three short bullets on each. • Value Add: Describes the unique value that the fund offers to portfolio companies to generate LP returns. • Market: Demonstrates the market attractiveness through a simple chart, table, or statistic. • Track Record: Showcases 1-3 relevant deals with logos, few word descriptions, value added, and markup achieved. • Pipeline: Highlights 1-3 potential deals by sharing a general overview of the company without sharing specifics. • Allocation: Tabulates the number of deals by stage along with estimated investment, valuation, and ownership details. • Returns: Exhibits anticipated returns from hypothetical portfolio companies categorized by exit sizes. • Liquidity: Illustrates up to three projected fund outcome scenarios using multiple or IRR, possibly through a pie chart. • Economics: Provides a table outlining fund economic terms like Minimum Investment Amount, Management Fees, and Carried Interest. • Thank You: Provides the fund's tagline, target closing date, and contact information for the General Partners. • Disclaimer: Contains legal disclaimers to mitigate liability. OPTIONAL SLIDES: • Deal Warehouse: Highlights 1-5 completed deals that will be transferred into the fund with company logos, brief descriptions, relevance to thesis, and investment terms. • Strategy: Describes how you will access the market for the best returns. • Operations: Explains any unique operational processes or systems. • Competition: Identifies relevant firms focused on the same markets with differentiation points. • Partners: A list of partners, possible as a logo pile, to improve the credibility of the fund. • Advantages: A list of items that help the fund to stand out. • Appendix: Houses updated old slides or additional research and data pertinent to the market segment.

All LPs must be on the same capital call schedule. If they are not, that poses major fiduciary and ethics related challenges. In the event that an LP pre-funds their entire position, their money would get accepted into an escrow bank acc...

All LPs must be on the same capital call schedule. If they are not, that poses major fiduciary and ethics related challenges. In the event that an LP pre-funds their entire position, their money would get accepted into an escrow bank account and the fund would call the same % as all other LPs on the escrow account.

No it does not. Each VC fund adopts a valuation policy and the hub accounting system reflects markups and markdowns based on this document. The vast majority of VC valuation policies markup an investment if there is a new priced round of...

No it does not. Each VC fund adopts a valuation policy and the hub accounting system reflects markups and markdowns based on this document. The vast majority of VC valuation policies markup an investment if there is a new priced round of financings. Otherwise they keep the investment at cost or they write it off.