All Questions

Managers of emerging venture capital funds are typically exempted reporting advisers to their funds. They can loan money to the fund, but the loan must adhere to specific conditions outlined by the SEC under the Investment Advisers Act o...

Managers of emerging venture capital funds are typically exempted reporting advisers to their funds. They can loan money to the fund, but the loan must adhere to specific conditions outlined by the SEC under the Investment Advisers Act of 1940, particularly in relation to the venture capital fund exemption: • Loan Amount and Conditions: The venture capital fund can borrow, issue debt obligations, provide guarantees, or otherwise incur leverage up to 15% of the fund's aggregate capital contributions and uncalled committed capital. However, any such borrowing or leverage must be for a non-renewable term not exceeding 120 calendar days. This means that the total amount of leverage cannot exceed 15% of the fund's total capital (including uncalled commitments), and any loan or other form of leverage must be paid back within 120 days without the possibility of renewal.  • Venture Capital Strategy: The fund must represent to its investors that it pursues a venture capital strategy, which typically involves investing in early-stage companies with significant growth potential. • Non-Qualifying Investments: After any investment, at least 80% of the fund's assets must be qualifying investments (direct equity investments in operating companies), with no more than 20% in non-qualifying investments or short-term holdings, which would include the loan you're considering. These conditions ensure that the fund remains compliant with the venture capital fund exemption under the Advisers Act, avoiding the need for SEC registration as an investment adviser while still being subject to certain reporting requirements. 

Hi Catarina, right now, there's no ability to change pipeline headers or add summing functionalities. But, as you've seen, both the dealflow and investment pipeline types have these, so you might consider using one of those pipeline typ...

Hi Catarina, right now, there's no ability to change pipeline headers or add summing functionalities. But, as you've seen, both the dealflow and investment pipeline types have these, so you might consider using one of those pipeline types. (Also if you need us to remove any duplicate pipelines let us know and we can clean one of those up once you've decided the best way to manage this)

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.

Being an Exempt Reporting Adviser (ERA) is beneficial because it lets smaller investment managers or those only dealing with venture capital funds skip the heavy paperwork and rules that come with registering with the SEC. This makes run...

Being an Exempt Reporting Adviser (ERA) is beneficial because it lets smaller investment managers or those only dealing with venture capital funds skip the heavy paperwork and rules that come with registering with the SEC. This makes running the business easier and cheaper. But, to get this special status, if you're setting up a company like an LLC for this purpose, you will mostly likely need to fill out and submit a form called Form ADV to FINRA.   Here's what you need to know: Who Can Be an ERA: People or companies advising funds that either invest in venture capital only or manage less than $150 million in private fund money can opt for ERA status. This means they don't have to go through the full registration process if their business is small enough or focused on venture capital. What You Need to Do to Become an ERA: You must file Form ADV with the SEC within 60 days of starting to advise your first fund. You do this online through a system called IARD, run by FINRA. You'll need to give some basic info about yourself, your business, and anyone in control of your company.   Keeping Form ADV Up-to-Date: Once you're an ERA, you need to update this form every year within 90 days of the end of your business year. If something big changes, you need to update your form right away. What Happens If You Don't Do It Right: If you don't file on time or at all, you could face legal action from the SEC, which might lead to fines or orders to stop what you're doing. You could also lose your ERA status and be required to register fully, which means more rules to follow. Your reputation could be hurt, making it harder to get or keep clients. The SEC might also take other actions against you if they find out during checks or if someone complains. In Short:   To become an ERA, you most likely need to file Form ADV if you manage less than $150 million or just venture capital funds. It's important to do this correctly and on time to keep your status, avoid trouble, and stay on the right side of the law. Addendum:   For an individual adviser (or an adviser operating out of one LLC), the Form ADV must cover all investment vehicles, be they SPVs, venture capital funds, other forms of syndicates, etc.    *Should any questions arise, consultation with a securities or regulatory attorney is strong recommended. 

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.