General VC Questions

"Prohibited Sectors" are simply such industries, sectors of the economy, etc. that a Fund will not invest in. Some of these prohibitions are driven by regulatory and compliance matters, while others are a matter of strategic decisions ma...

"Prohibited Sectors" are simply such industries, sectors of the economy, etc. that a Fund will not invest in. Some of these prohibitions are driven by regulatory and compliance matters, while others are a matter of strategic decisions made by the fund managers, factoring in their track record, expertise, as well as the types of limited partners they wish to raise funds from.  Commonly, publicly traded securities are prohibited (because it's not venture capital), as well as alcohol, gambling, weapons and real estate. Crypto currencies are also commonly prohibited, as they introduce a tremendous amount of complexity into a fund's operations (accounting, legal, taxes, etc.). For more information, please query the AI Agreement Reviewer on the LPA.

The Maximum Portfolio Investment Percentage (typically set at 10%) is the maximum amount of the fund's total capital commitments that can be invested into any single portfolio company. This prevents the fund from concentrating too much r...

The Maximum Portfolio Investment Percentage (typically set at 10%) is the maximum amount of the fund's total capital commitments that can be invested into any single portfolio company. This prevents the fund from concentrating too much risk in any one investment.

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.

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.

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. 

To avoid violating general solicitation rules, ensure the newsletter does not explicitly solicit investments or provide specific details about the fund. Instead, focus on sharing general information about the sector, the management team,...

To avoid violating general solicitation rules, ensure the newsletter does not explicitly solicit investments or provide specific details about the fund. Instead, focus on sharing general information about the sector, the management team, and their expertise. Highlight the fund's achievements or insights without mentioning fundraising activities. Ensure that any recipients of the newsletter have a pre-existing relationship with the fund or are accredited investors. Always consult with a legal advisor to ensure compliance with applicable regulations.

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.

The amount of capital that you close on is your fund size, not your target. In other words, if you have a fund target of $10m and you do a 1st close on $1m, your fund size is $1m until you close on more capital. 

The amount of capital that you close on is your fund size, not your target. In other words, if you have a fund target of $10m and you do a 1st close on $1m, your fund size is $1m until you close on more capital. 

TL'DR - No. All Limited Partners must go through an AML/KYC prior to being accepted into the fund during an proper institutional grade LP onboarding process. This is because banks perform significant compliance checks on onboarded LPs. W...

TL'DR - No. All Limited Partners must go through an AML/KYC prior to being accepted into the fund during an proper institutional grade LP onboarding process. This is because banks perform significant compliance checks on onboarded LPs. When a bank determines that an LP is not compliant, they typically shut down the bank account and often report this action to the regulatory authorities. 

A search fund functions in a similar way to venture capital funds and PE funds where the fund manager raises capital from investors and deploys it into companies with the goal of creating a liquidity event. However, the execution of the ...

A search fund functions in a similar way to venture capital funds and PE funds where the fund manager raises capital from investors and deploys it into companies with the goal of creating a liquidity event. However, the execution of the approach is much different. The fund searches for companies to acquire, which are usually legacy small business with strong metrics. Once the company is identified, the fund acquires the company and installs new leadership with an ambitious plan to scale the business. After holding the company for some time (typically 5+ years), the fund typically pursues a liquidity event via an exit.

Decile Group promotes and adheres to the Mensarius Oath (https://decilegroup.com/mensarius-oath/). In general, the principles of the Oath are enforced by the community. When a member of the community feels that the Oath has been violated...

Decile Group promotes and adheres to the Mensarius Oath (https://decilegroup.com/mensarius-oath/). In general, the principles of the Oath are enforced by the community. When a member of the community feels that the Oath has been violated, then it is up to the individual or entity in question to either dispute the accusation or reconcile the breach. So far, the community has done an excellent job of self policing, and, when there has been an incident, the individual or entity in question has been removed from the community until the breach has been reconciled.  The Mensarius Oath v2As a financial professional investing with personal or investor capital, I pledge to uphold these values. If determined by myself or a panel of my peers that I have violated these values without reconciliation agreed between all involved parties, then I will voluntarily leave the industry. Integrity: I vow to invest with integrity, ensuring my actions benefit humanity and consciously avoid harm to any parties. Excellence: I commit to maintaining the highest professional standards, setting an exemplary ethical benchmark in finance. Fairness: I endeavor to be fair in my dealings, standing against abuse of power, unfair advantage, seduction, corruption, or mistreatment. Equality: I pledge to promote inclusivity and equitable treatment in all financial endeavors, consciously working to reduce inequality. Respect: I promise to treat individuals and opportunities with the respect and the attention deserved in business interactions. Transparency: I affirm to be transparent and honest in dealings with investors, founders, and colleagues. Confidentiality: I swear to safeguard private, confidential, or personal information, keeping it safe from public or other unwanted disclosure. Growth: I am resolved to embrace feedback from clients and peers, committing to ongoing personal and professional growth.

The business model of early stage startups is often a guess that gets refined by constant customer development. In this context, red flags are not knowing who the actual customer is, not being diligent with customer development, and not ...

The business model of early stage startups is often a guess that gets refined by constant customer development. In this context, red flags are not knowing who the actual customer is, not being diligent with customer development, and not running tests to understand pricing and demand. It is also a red flag when a Founder doe not appear to care about revenue.

Typically, you select "Pooled Investment Vehicle" for the LP Entity (the fund)

Typically, you select "Pooled Investment Vehicle" for the LP Entity (the fund)

Decile Launch is a structured program designed to establish a venture capital firm and close its fund. It offers a unified fund formation service with bundled legal, accounting, and strategic advice. The program includes forming all nece...

Decile Launch is a structured program designed to establish a venture capital firm and close its fund. It offers a unified fund formation service with bundled legal, accounting, and strategic advice. The program includes forming all necessary legal entities, business advisory on closing agreements, a structured 8-week closing program, unlimited closing support, LP negotiation assistance, LP wiring assistance, and due-diligence assistance. After launch, the fund becomes part of Decile Partners for ongoing support.

To change the name of your Firm go to Settings > Firm Settings. To change the name of your Fund go to Settings > Firm Settings > Entity Management.

To change the name of your Firm go to Settings > Firm Settings. To change the name of your Fund go to Settings > Firm Settings > Entity Management.

Please review the Venture Share agreement and compensation model: https://govclab.com/venture-share/ IMPORTANT: It's critical that you avoid signing any agreements with venture partners until after you form the fund and complete a 1st c...

Please review the Venture Share agreement and compensation model: https://govclab.com/venture-share/ IMPORTANT: It's critical that you avoid signing any agreements with venture partners until after you form the fund and complete a 1st closing. 

It's 2% average over the life of the fund. Read this article: https://govclab.com/2023/06/21/venture-capital-management-fee-model/

It's 2% average over the life of the fund. Read this article: https://govclab.com/2023/06/21/venture-capital-management-fee-model/

TL'DR - no, unless it's specified in your fund's valuation policy. Markups are recorded based on your adopted valuation policy. Most VC valuation policies, including Decile Group's, work as follows: SAFEs & Convertible Notes - Keep inv...

TL'DR - no, unless it's specified in your fund's valuation policy. Markups are recorded based on your adopted valuation policy. Most VC valuation policies, including Decile Group's, work as follows: SAFEs & Convertible Notes - Keep investments marked at cost Priced Rounds - Realize a markup Since most Decile Partners are pre-seed and seed, we have developed a cap-adjusted projection to help managers show LPs that the investments are in fact getting more valuable.  The issue with non-dilutive funding is that it doesn't come in the form of an investment and it does not set a new valuation when the funding is received by the company. As a result, the vast majority of valuation policies in VC, especially for early-stage funds, don't count inputs from such financings. 

VC Lab participants have three packages based on the level of help and guidance desired. The basic Program is free. For group office hours and more hands on support, there is a Plus package. For one-on-one guidance, including a private c...

VC Lab participants have three packages based on the level of help and guidance desired. The basic Program is free. For group office hours and more hands on support, there is a Plus package. For one-on-one guidance, including a private communication channel and weekly meetings, there is the Platinum package. The strongest managers coming out of the program have nearly all done the Platinum package, as it provides hands-on assistance with every aspect of launching and building a world-class fund. BasicEssential training and community to quickly close a fund COST: FREE • Weekly curriculum and mentoring to accelerate fund closing • Global peer community and collaborative working groups • Basic access to VC operations platform and resources For all Founders, General Partners, and Managing Partners in a Firm PlusExtended support and guidance for accelerated fund closing COST: $3,000 Post Start / $2,500 Pre Program Start • Enhanced platform access and regular group office hours • Dedicated support channels for program and operations • Diligence support and presentation assistance for LPs For Firm’s Leadership, Venture Partners, and/or Senior Team Members PlatinumOne-on-one support and hands-on assistance for firm success COST: $6,000  Post Start / $5,000 Pre Program Start  • Private expert channel and one-on-one office hours • Comprehensive fundraising support and closing planning • Deal review services and free associate assistance For Firm’s Leadership, Venture Partners, and/or Senior Team Members   Payments are made by one team member for each member of the firm, and the cost is an Organizational Expense, which will be reimbursed by the fund when the fund is formally established. 

@Grant Rogers If you scroll down on event settings you will see a section named Email Templates.  The first template here is the invite itself which you should customize to your own tone of voice.  Within this template is a green variabl...

@Grant Rogers If you scroll down on event settings you will see a section named Email Templates.  The first template here is the invite itself which you should customize to your own tone of voice.  Within this template is a green variable called "prospect.networking_event_url".  This is a personalized URL for registration by the recipient of that email. This is required to stay as the variable otherwise it can cause some complications with managing the registration list and controlling those invited if it is a private event.  When you have these details setup you can populate the guestlist.  You can do this through a few methods 1. Clicking the Event Details tab of a draft event will show you a box for GUESTLIST with a button for add a guest. this will add prospects one by one 2. Clicking the Event Attendees tab of an event will open the event pipeline for guest management, you can add a prospect one by one or through importing a csv as you would in your fundraising pipeline 3. You can go to any other pipeline or your directory and bulk select (clicking the checkbox next to each name desired to be invited) then copy them all in bulk to the event pipeline. When you bulk select a green banner shows at the top, clicking the Copy To link will open a box to select the target pipeline. Select the event you created and select guestlist - NOT YET INVITED as the stage. et voila you have populated the guestlist.  Now that you have: - the event set up with event details - the emails are set up in your voice - determined if you want the invited stage to automatically send out reminder and last call emails - the guestlist populated You will click the green button "Publish Event & Send Invites" What this button will accomplish is two things: 1. you will switch your event from draft to live allowing registrations to flow in 2. you will send out the event invite to all prospects in your guestlist When someone registers, they will then be moved to the "RSVP - Yes" stage and a registration confirmation email will be automatically sent to the registrant.  While the event is live and upcoming, if you would like to invite more, all you need to do is add the prospect(s) to the invited stage and the invite will again be automatically sent out.  Feel free to ask any other questions on this system. Congratulations on getting your first event set up!

Decile Group provides a full suite of legal agreements for funds: Alignment Agreement (ManCo), Stewardship Agreement (GP), Cornerstone LPA (LPA), and the Venture Share (Venture Partner). There are many other agreements needed depending o...

Decile Group provides a full suite of legal agreements for funds: Alignment Agreement (ManCo), Stewardship Agreement (GP), Cornerstone LPA (LPA), and the Venture Share (Venture Partner). There are many other agreements needed depending on the circumstances of your fund. 

Typically this is done at the LP entity level because it's the fund's portfolio company. If you were to do it at the ManCo level you would have an audit trail that showed that the stock was transferred to the manager and you would need t...

Typically this is done at the LP entity level because it's the fund's portfolio company. If you were to do it at the ManCo level you would have an audit trail that showed that the stock was transferred to the manager and you would need to explain the reason even if it was temporary.

A brokerage account should generally be opened for the fund entity (the Limited Partnership in most cases) that the investment into the portfolio company was made from. We don't have any particular recommendations for best brokerage acco...

A brokerage account should generally be opened for the fund entity (the Limited Partnership in most cases) that the investment into the portfolio company was made from. We don't have any particular recommendations for best brokerage accounts - however in these cases funds often ask the portfolio company for one. Fidelity should work, as should any of the well-known brokerage houses. 

Yes, however it's not a good idea to do so from a business perspective because: 1. Most SPV providers are not setup to do capital calls. As a result the costs involved in setting up an SPV that can manage capital calls is prohibitive.  ...

Yes, however it's not a good idea to do so from a business perspective because: 1. Most SPV providers are not setup to do capital calls. As a result the costs involved in setting up an SPV that can manage capital calls is prohibitive.  2. There is no benefit to the GP because every member of the SPV counts towards the 99 investor limit. 3. They can make investor relations more challenging.

Yes, E*TRADE, Fidelity, and Schwab generally allow VC funds to open brokerage accounts to hold shares before distribution to LPs. However, it's advisable to check with each institution for specific requirements and services tailored to V...

Yes, E*TRADE, Fidelity, and Schwab generally allow VC funds to open brokerage accounts to hold shares before distribution to LPs. However, it's advisable to check with each institution for specific requirements and services tailored to VC funds.

UK is not a desirable domicile unless you're based in the UK and all your LPs are in the UK. Indian GPs that are based in India and plan to invest in local companies domicile in India. Alternatively, many also domicile in Delaware if the...

UK is not a desirable domicile unless you're based in the UK and all your LPs are in the UK. Indian GPs that are based in India and plan to invest in local companies domicile in India. Alternatively, many also domicile in Delaware if the companies they invest in also are headquartered in a major domicile like Delaware or Singapore. 

A deal warehouse involves a prospective fund manager making an investment personally or through a wholly-owned entity before the venture capital fund is set up and reaches its first close. After the fund's first close, these investments ...

A deal warehouse involves a prospective fund manager making an investment personally or through a wholly-owned entity before the venture capital fund is set up and reaches its first close. After the fund's first close, these investments are transferred into the fund, typically at cost. To warehouse a deal not part of the current fund, you need to: 1. Invest personally or via a wholly-owned entity. 2. Secure approval from the company to change the owner. 3. Transfer the investment to the fund after the first close, following consistent rules for such transfers. Ensure all warehoused investments are disclosed to LPs before closing.