Decile Partners generally works with and recommends the following standardized and scalable structure for Venture Capital firms/funds (Delaware domicile):
- Management Company (ManCo) formed as a limited liability company. This is where the founders and owners of the Firm sit as managing partners. The ManCo owns the brand, any intellectual property - this is also where vendors and staff (long term) sit.
- General Partner (GP) formed as a limited liability company. This entity is majority owned by the ManCo, receives the carried interest, and is also where any partners managing only one Fund (as opposed to the Firm) sit. Venture Partners earning a % of the carried interest for only one Fund will also sit here. Note that while confusing, "GP" here refers to the entity, not to an individual who may be titled as a "General Partner" separately - be sure to distinguish.
- Limited Partnership (the Fund) formed as a limited partnership. This entity is where the limited partners invest into, and where deployments into portfolio companies come out of. This is also the entity from which distributions flow.
There are other common ways to set up a Venture Capital firm/fund, though structures can become quite complex over time to accommodate:
- side vehicles;
- parallel funds;
- master-feeder structures;
- blockers;
- more than one domicile/jurisdiction;
- tax optimizations;
- connected incubators, accelerators, and studios;
- local regulatory requirements;
- etc.
*Note that fund managers should not be attempting to be creative, cut corners, or DIY on any of the above - seeking experienced, specialized fund counsel is best. We recommend also using vetted, standardized, and streamlined structures (and agreements) such as Decile Partners provides.