All Questions

The largest check size you can accept should not allow any one LP to own 25% or greater of the fund, as this would give them control. If you oversubscribe, the largest check size can increase proportionally, but it should still remain be...

The largest check size you can accept should not allow any one LP to own 25% or greater of the fund, as this would give them control. If you oversubscribe, the largest check size can increase proportionally, but it should still remain below 25% of the total fund size to prevent any single LP from having control.

0. There are various broker dealer laws that make compensation for money raised illegal, unless the person has the proper broker licenses. Please note that these type of arrangements often don't work and are usually a major waste of time.

0. There are various broker dealer laws that make compensation for money raised illegal, unless the person has the proper broker licenses. Please note that these type of arrangements often don't work and are usually a major waste of time.

I can’t speak to ARK, however General Solicitation applies to funds that are fundraising. If a fund is fully subscribed and closed, it’s typically ok to speak publicly about the fund and it’s strategy.

I can’t speak to ARK, however General Solicitation applies to funds that are fundraising. If a fund is fully subscribed and closed, it’s typically ok to speak publicly about the fund and it’s strategy.

Though it is possible to diversify your fund's bank accounts, it's not a realistic option for the small funds of emerging managers. First, your banking options are very limited. Most big banks don't want to work with emerging managers, h...

Though it is possible to diversify your fund's bank accounts, it's not a realistic option for the small funds of emerging managers. First, your banking options are very limited. Most big banks don't want to work with emerging managers, have excessive fees and are very difficult to deal with. Second, it's a big pain for you to manage multiple accounts operationally. It's not only going to be more expensive due to the added fees, but it creates a lot of treasury and compliance lift for your firm and for your fund administrator. For example, the administrator would need to reconcile multiple bank accounts on a regular basis which more then doubles their work and their fees. Finally, the majority of emerging managers the operational experience to handle this level of complexity or the time. Once an emerging firm becomes an enduring firm, you can afford to hire treasury and accounting resources in house and you can experiment with more complexity like this. Finally, the risk that you're trying to hedge against is minimal because: 1) VCs don't have a lot of money in the account for a long period of time. If they do, this is an indicator that they are mismanaging their capital call schedule which then creates a major drag on metrics like IRR. 2) By managing the capital call schedule well, it's unlikely that the bank account will have more money your bank account for an extended period of time beyond what's insured by FDIC 3) Changing bank accounts is fast and relatively easy. We had Decile Partners on SVB during the crisis and we migrated them off SVB in less then a week because bank accounts are pretty easy to change later.

The issue with doing a high capital call on the first close of say 30%+ is that all future LPs post the 1st close will also need to wire 30% to catch up. This is not a major point of friction with high net worth individuals that are inve...

The issue with doing a high capital call on the first close of say 30%+ is that all future LPs post the 1st close will also need to wire 30% to catch up. This is not a major point of friction with high net worth individuals that are investing <$500k. However, once you get into the $1m+ level institutional LPs, the high initial capital call can become a problem because they are just not used to investing this much upfront. It also may indicate that you're not managing the capital super well since having a good amount of extra money in your bank account for an extended period affects your metrics. 

The number of operating VC firms that are either raising funds or deploying capital is an unknown number. The amount deployed is also unknown.  Research providers make best guess estimates based on panels, so these research numbers are ...

The number of operating VC firms that are either raising funds or deploying capital is an unknown number. The amount deployed is also unknown.  Research providers make best guess estimates based on panels, so these research numbers are at best a "guesstimate." Pitchbook numbers are notoriously inaccurate, whereas numbers from Stanford are much better. Estimates on the number of operating VC firms worldwide range from 4,000 to 7,000, and the US represents just under half of the global venture market. Based on these assumptions, an estimate would be roughly 2,500 operating VC firms in the US.  The amount deployed becomes much trickier to determine because there are a number of large PE style firms calling themselves VC, such as Tiger Global or Softbank, and their investments get counted in the totals by research firms. If you want good number on venture capital, then you will need to do some analysis. The numbers from third party research firms will often be worse than your own work.

TL'DR: By combining an excruciatingly difficult fundraising process with operational costs that are an order of magnitude higher - evergreen structures are often not viable for early stage VC. Ultra Difficult Fundraising Since there ar...

TL'DR: By combining an excruciatingly difficult fundraising process with operational costs that are an order of magnitude higher - evergreen structures are often not viable for early stage VC. Ultra Difficult Fundraising Since there are currently no examples of succesful evergreen style VCs, especially at the early stage, professional limited partners are unfamiliar with the structure and approach. As a result, managers that try this approach are making a fundraising process that's already extremely difficult nearly impossible by adding even more complexity. With evergreen structures, mangers need to convince professional LPs that the model works in addition their investment strategy. Because professional LPs have allocations to various asset classes, they will struggle to figure where to bucket funds of this type. The net effect is that mangers who try this approach find it excruciatingly difficult to scale their fundraising process beyond high net worth individuals. Operational Complexity & Costs The fund operations of an evergreen structure is significantly more complex because frequent audit ready valuations, as well as distributions are necessary to accomodate an atypical valuation policy (see below), for LPs that would like to exit their positions. This creates a massive lift for the fund and it's service providers due to the frequency. Processing distributions is extremely expensive because the following service providers must all be activated at the same time: legal, fund admin, compliance and tax. In an evergreen structure, distributions often need to take place monthly or quarterly. In a classic VC structure, distributions often take years and audits happen annually. Since the operational lift is so intense for evergreen funds, the operational costs are very high. When one combines these high operational costs with the massive fundraising issues mentioned above - this creates a very high risk for default. Liquidity Challenges Investing in startups is extremely illiquid. It's typical for liquidity to take 7-15 years. Secondary markets are not yet developed enough to provide a stable source of liquidity that is typically necessary industries where evergreen funds to thrive such as Hedge and PE. As a result, evergreen funds must create a non standard valuation policy that allows them to 'value' the portfolio at any given point in time accurately enough to provide distributions to the LPs in need of liquidity. Over 50% of startups in any given VC portfolio will go to 0 and typically 1-2 companies are responsible for a multiple on the fund. Therefore, traditional VC valuation policies keep the investment at cost, unless there is a priced round that marks up the investment. Priced rounds often take place years post a pre-seed or seed investment and are intermittent. In an evergreen structure, GPs would have to create a non-standard valuation policy to be able to value the assets in between rounds. This is extremely difficult to do because additional inputs besides priced round valuations, are: a) difficult to collect from founders (especially in companies that have broken out and are succesful); b) early stage startup valuations are not always correlated to metrics; c) different startups measure different metrics; d) unlike in the public markets where one can mark to market, it is pretty much impossible to collect real time metrics for the majority of the startups that are on thesis.

Yes, a $20 million fund can allocate $15 million for global investments and $5 million specifically for Uzbekistan. However, this allocation should be clearly outlined in the fund's strategy and legal documents. It's important to ensure ...

Yes, a $20 million fund can allocate $15 million for global investments and $5 million specifically for Uzbekistan. However, this allocation should be clearly outlined in the fund's strategy and legal documents. It's important to ensure compliance with any regulatory requirements in both the global and Uzbekistan markets. Consulting with legal and financial experts is advisable to manage any complexities related to such allocations.

Listing VCs on public stock exchanges has not been successful to date. There are a few instances in Israel and a couple in London. Such a structure adds many inconvenient requirements for fund managers. Also, startups don't like to have ...

Listing VCs on public stock exchanges has not been successful to date. There are a few instances in Israel and a couple in London. Such a structure adds many inconvenient requirements for fund managers. Also, startups don't like to have their internal data (valuation, business updates) publicly exposed via investor reports.