All Questions

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. 

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.

Generally speaking, increasing or decreasing an LP's capital commitment post-admittance is accomplished via a simple change agreement countersigned by all parties (a new LPA is not required). In the case of an increase, a "catch-up" ca...

Generally speaking, increasing or decreasing an LP's capital commitment post-admittance is accomplished via a simple change agreement countersigned by all parties (a new LPA is not required). In the case of an increase, a "catch-up" capital call is usually sent. In the case of a decrease, it can only decrease to the amount the LP may have already paid-in. In summary, the requirements are that the requested decrease not go below any paid-in capital (or other measures may need to be discussed), and that the proper paperwork is put into place so that fund accounting can reflect this change appropriately. 

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. 

As of the end of 2024, you can not filter LPs based on country of residence or geography directly in the pipeline. However, you can Tag LPs based on their country or region, and then filter based on Tags. This is good functionality to ad...

As of the end of 2024, you can not filter LPs based on country of residence or geography directly in the pipeline. However, you can Tag LPs based on their country or region, and then filter based on Tags. This is good functionality to add, so we will add it to the roadmap.

Cap table adjustments for the ManCo are managed by the firm’s legal counsel. There are no short cuts here because mistakes in this are have severe consequences and are often fatal. We dedicate significant time to cap-tables during Decil...

Cap table adjustments for the ManCo are managed by the firm’s legal counsel. There are no short cuts here because mistakes in this are have severe consequences and are often fatal. We dedicate significant time to cap-tables during Decile Launch since the consequences are so severe. The most critical component is that you must be extremely careful about whom has ownership in the ManCo. Owners of the ManCo have ownership in all future funds. Therefore you must avoid giving ownership to people or entities or investors who are not build the Firm with you over multiple funds.

Generally speaking, venture fund advisors (management companies and the underlying individuals in the standard Decile structure, registered as Exempt Reporting Advisors) are exempt from BOI reporting so long as they 1) meet certain crite...

Generally speaking, venture fund advisors (management companies and the underlying individuals in the standard Decile structure, registered as Exempt Reporting Advisors) are exempt from BOI reporting so long as they 1) meet certain criteria and 2) make certain filings. You may find this article generally helpful regarding this topic.  With respect to the GP Entity, if it is an entity controlled by a venture fund advisor, it is generally exempt as well. A Limited Partnership is also generally exempt from BOI reporting so long as it is a pooled investment vehicle, as defined by FINCEN. 

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.

The brackets in the base PACT agreement are placeholders for jurisdiction-specific legal references.  The language in the bracket is suggested language. For example, if you're in the US or launching a fund in Delaware, you can remove the...

The brackets in the base PACT agreement are placeholders for jurisdiction-specific legal references.  The language in the bracket is suggested language. For example, if you're in the US or launching a fund in Delaware, you can remove the brackets and the PACT will then work in Delaware. If, on the other hand, you plan to launch the fund in a different jurisdiction, you can replace the content in the brackets to match that jurisdiction.