Fund Operations

They are both compensated with a venture partner agreement and advisors typically get a bit less carry. 

They are both compensated with a venture partner agreement and advisors typically get a bit less carry. 

Fund Admin is a component of the Back Office function. Typically Fund Admin includes accounting, reporting and filings. Back Office includes a variety of other functions that can be in house or outsourced or both, such as Treasury, inves...

Fund Admin is a component of the Back Office function. Typically Fund Admin includes accounting, reporting and filings. Back Office includes a variety of other functions that can be in house or outsourced or both, such as Treasury, investment reviews, software, etc.. 

A capital call is a request made by a venture capital fund to its investors to contribute capital to the fund. This is typically done when the fund needs additional funds to make investments or to cover its ongoing expenses. Capital Call...

A capital call is a request made by a venture capital fund to its investors to contribute capital to the fund. This is typically done when the fund needs additional funds to make investments or to cover its ongoing expenses. Capital Calls are commonly paid by the Limited Partners as defined by the Limited Partner Agreement (LPA). You can learn more about the capital call process here: https://govclab.com/2023/05/07/vc-capital-calls/

We do not recommend an audit for Delaware funds <$20m. Audits are expensive they will negatively effect your metrics as a result. 

We do not recommend an audit for Delaware funds <$20m. Audits are expensive they will negatively effect your metrics as a result. 

Generally speaking, yes - this can be done (though the LP may wish to consult a tax advisor).  If the LP has already wired in some capital, an Assignment and Contribution Agreement or its equivalent is typically signed between the LP an...

Generally speaking, yes - this can be done (though the LP may wish to consult a tax advisor).  If the LP has already wired in some capital, an Assignment and Contribution Agreement or its equivalent is typically signed between the LP and the LP's trust. If the LP has not yet wired any capital, it is often easier to have the LP sign a Withdrawal Agreement or its equivalent and then sign the LPA again in the name of the trust (or another name/entity as desired).  Decile Partners has standardized templates for both of the above situations (designed to work with Decile Group's standard suite of templates), and will coordinate to assist Decile Launch customers in completing them. Please contact your Venture Associate to inquire. 

You may be able to, however, please note in practice transferring the warehoused investment to your fund would be difficult because you would have to obtain consent from the fund you invested in to transfer your ownership to your own fun...

You may be able to, however, please note in practice transferring the warehoused investment to your fund would be difficult because you would have to obtain consent from the fund you invested in to transfer your ownership to your own fund. If you are still actively fundraising, you will not know your fund's final underlying ownership count and this may cause the fund you invested in to blow its securities exemption. In addition if you do transfer this interest to your fund, the investment would count towards your fund's 20% non-qualifying investment bucket.

Fund managers can warehouse an investment for the fund in their personal capacity or through an entity they wholly own and control, prior to the fund's initial closing. 

Fund managers can warehouse an investment for the fund in their personal capacity or through an entity they wholly own and control, prior to the fund's initial closing. 

Warehoused deals are a great way to have an immediate markup and provide incentive for LPs to invest. You will need to set up a consistent rule for transferring warehoused deals - like "all seed deals in the fund thesis made in the last ...

Warehoused deals are a great way to have an immediate markup and provide incentive for LPs to invest. You will need to set up a consistent rule for transferring warehoused deals - like "all seed deals in the fund thesis made in the last 12 months", you can't pick and choose deals to transfer in.

The recycling provision does not refer to the Fund's target size.  The recycling language in the Cornerstone LPA template means that: • After a limited partner receives distributions equal to its total capital contributions (not commitm...

The recycling provision does not refer to the Fund's target size.  The recycling language in the Cornerstone LPA template means that: • After a limited partner receives distributions equal to its total capital contributions (not commitment) to the Fund; • The limited partner's "Unused Capital Commitment" (amount available to be called and deployed) will be increased by an amount up to the Recycled Amount.  For example: • A limited partner commits a total of $X to the Fund, which has Y% as the Recycled Amount; • Total capital called is 50% after a few years; • The limited partner's Unused Capital Commitment is now 50%; • There is an exit/distribution that returns 100% of the limited partner's capital contribution; • The limited partner's Unused Capital Commitment can be increased by up to Y% of the total commitment. 

The Recycle Amount percentage, as set forth in the Cornerstone LPA, will be the upper limit of what is able to be recycled and deployed - however a fund manager is not required to deploy up to that exact Recycled Amount percentage (and i...

The Recycle Amount percentage, as set forth in the Cornerstone LPA, will be the upper limit of what is able to be recycled and deployed - however a fund manager is not required to deploy up to that exact Recycled Amount percentage (and in fact this would be very unusual). 

It may be possible to lead SPVs outside of a fund manager's Fund - however it is generally not recommended.  Fund managers owe fiduciary responsibility (and usually a stated time commitment) to the Fund and its limited partners - so any...

It may be possible to lead SPVs outside of a fund manager's Fund - however it is generally not recommended.  Fund managers owe fiduciary responsibility (and usually a stated time commitment) to the Fund and its limited partners - so any activities that might come into conflict with these obligations could potentially become a conflict of interest.  Even if the SPV is outside of the Fund's thesis, best practice is to disclose any such intended investments up front to limited partners and to clear each such SPV by a limited partner advisory committee. Managing these may be time consuming and not worth the additional effort - limited partners may also believe there is a misalignment of interests. 

Class A votes and votes by members of the Limited Partner Advisory Committee are entirely unrelated concepts. Generally speaking (when discussing Decile Group's standard structure and templates): • Class A is what is issued to the Manage...

Class A votes and votes by members of the Limited Partner Advisory Committee are entirely unrelated concepts. Generally speaking (when discussing Decile Group's standard structure and templates): • Class A is what is issued to the Management Company (the majority), and Venture Partners from the General Partner entity - these Class A Shares vote on certain matters as defined in the General Partner entity's Stewardship Agreement; • The Limited Partner Advisory Committee exists at the Fund level only and is not related to the General Partner entity - each member receives one vote. 

Generally speaking, fund expenses will be allocated from the capital called from the limited partners (there is no separate call in any way) - please read this for more information: https://govclab.com/2022/11/07/managing-fund-expenses...

Generally speaking, fund expenses will be allocated from the capital called from the limited partners (there is no separate call in any way) - please read this for more information: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/

Please see think link to learn more about Decile Partners: https://govclab.com/2023/05/26/meet-decile-launch/

Please see think link to learn more about Decile Partners: https://govclab.com/2023/05/26/meet-decile-launch/

If a Fund has portfolio investments that are operating but have not exited, and the Fund Life is coming to an end,  an extension period may be needed to wait for an exit. The other option would be to distribute any privately held equity ...

If a Fund has portfolio investments that are operating but have not exited, and the Fund Life is coming to an end,  an extension period may be needed to wait for an exit. The other option would be to distribute any privately held equity to LPs. Funds are usually created with one or two optional 1 year extensions - please see the Cornerstone LPA for more details. 

The total amount of capital committed to a VC or PE Fund, including the GP commit. 

The total amount of capital committed to a VC or PE Fund, including the GP commit. 

Capital Recycling is the process of reinvesting proceeds from the sale/exit of a portfolio company into new investments. VC Lab strongly recommends avoiding this for Fund I. 

Capital Recycling is the process of reinvesting proceeds from the sale/exit of a portfolio company into new investments. VC Lab strongly recommends avoiding this for Fund I. 

The fund manager “calls” capital to request the Limited Partners (LPs) contribute (by wire) a portion of their Committed Capital to the fund for deployment (and for fees). Called Capital is simply the amount that has been called. 

The fund manager “calls” capital to request the Limited Partners (LPs) contribute (by wire) a portion of their Committed Capital to the fund for deployment (and for fees). Called Capital is simply the amount that has been called. 

If you want to be an independent fund manager and to launch an enduring venture capital firm, co-branding is a bad idea. You will be an employee of the other firm for 10+ years and you will have little control.

If you want to be an independent fund manager and to launch an enduring venture capital firm, co-branding is a bad idea. You will be an employee of the other firm for 10+ years and you will have little control.

Funds normally compensate people that make introductions to portfolio companies by making them a Venture Partner using the Venture Share agreement here: https://govclab.com/2022/03/10/venture-share/. The formal discussion to be a Venture...

Funds normally compensate people that make introductions to portfolio companies by making them a Venture Partner using the Venture Share agreement here: https://govclab.com/2022/03/10/venture-share/. The formal discussion to be a Venture Partner is done after the individual starts adding value to the fund, not before. Deal by deal carry, which is not recommended, is an arrangement where the fund grants an individual, usually a venture partner, a share in the upside generated by the performance of one or more deals allocated to that individual. This is struck as a carry share, where the percentage is calculated against the total carried interest for the fund. For example, if a venture partner has 10% deal by deal carry on a fund that has a 20% total carried interest, then the venture partner would receive 2% of the proceeds from the deal. Deal by deal carry is not recommended for three major reasons. First, it is technically difficult to administer because of how different carry waterfalls work within a fund. As an example, a single deal may have positive returns while the total fund may not be in carry, so then a venture partner expecting a return may get nothing. Second, in the United States, the most popular fund domicile, the underlying structure of granting deal by deal carry violates the 409a tax code for deferred compensation and places the whole general partner entity at risk for a very high tax and penalty rate (>50%). Third, the underlying premise of granting deal by deal carry is that the associated person, often a venture partner, will add value around the deal in question, and often this expectation does not match reality. As a result, Decile Group and VC Lab do not support deal by deal carry. Instead, the fund is encouraged to make anyone that they might offer deal by deal carry into a regular venture partner with a smaller carry share.

Usually the reason that language is there to allow for capital call lines. You would probably need to specify this or work with your IC if you have one to get this done. That being said, you can also just do recycling to achieve the sam...

Usually the reason that language is there to allow for capital call lines. You would probably need to specify this or work with your IC if you have one to get this done. That being said, you can also just do recycling to achieve the same effect, with less risk. One final thing on this, I’m not sure that a bank would loan you the money for something like this. Banks are super conservative and the amount of paperwork that you would need to make this happen is probably prohibitive.

No - a fund manager cannot call and deploy 100% of the capital from a first close before going on to raise the rest of the Fund. This would likely be fatal for the Fund - all limited partners must be on the same capital call schedule.  ...

No - a fund manager cannot call and deploy 100% of the capital from a first close before going on to raise the rest of the Fund. This would likely be fatal for the Fund - all limited partners must be on the same capital call schedule.  Say you want to do a capital call for ~25%. So, if you close on $2m, you will pull down ~$500k. Then, you will do a second close, and do another ~25% on the next close etc.. until you close the whole fund. Then, you can change the capital call schedule - please go here to learn more about capital calls: https://govclab.com/2023/05/07/vc-capital-calls/

Deal by deal carry, which is not recommended, is an arrangement where the fund grants an individual, usually a venture partner, a share in the upside generated by the performance of one or more deals allocated to that individual. This is...

Deal by deal carry, which is not recommended, is an arrangement where the fund grants an individual, usually a venture partner, a share in the upside generated by the performance of one or more deals allocated to that individual. This is struck as a carry share, where the percentage is calculated against the total carried interest for the fund. For example, if a venture partner has 10% deal by deal carry on a fund that has a 20% total carried interest, then the venture partner would receive 2% of the proceeds from the deal. The returns from deal by deal carry depend on the waterfall defined in the limited partner agreement, which are either the American or European waterfall. However, deal by deal carry is not recommended for three major reasons. First, it is technically difficult to administer because of how different carry waterfalls work within a fund. As an example, a single deal may have positive returns while the total fund may not be in carry, so then a venture partner expecting a return may get nothing. Second, in the United States, the most popular fund domicile, the underlying structure of granting deal by deal carry violates the 409a tax code for deferred compensation and places the whole general partner entity at risk for a very high tax and penalty rate (>50%). Third, the underlying premise of granting deal by deal carry is that the associated person, often a venture partner, will add value around the deal in question, and often this expectation does not match reality. As a result, Decile Group and VC Lab do not support deal by deal carry. Instead, the fund is encouraged to make anyone that they might offer deal by deal carry into a regular venture partner with a smaller carry share.

I recommend between 2 and 5. We have seen some funds that have dozens, but they need to be owners in the general partnership, so this can be a burden.

I recommend between 2 and 5. We have seen some funds that have dozens, but they need to be owners in the general partnership, so this can be a burden.

It’s very difficult, if not downright impossible, to receive LP commitments via crypto. Your LPs will need to cash out and then make their LP commitments in fiat. 

It’s very difficult, if not downright impossible, to receive LP commitments via crypto. Your LPs will need to cash out and then make their LP commitments in fiat. 

Pulley is one of the best cap-table tools on the market: https://pulley.com/

Pulley is one of the best cap-table tools on the market: https://pulley.com/

No

No

Reverse it and say you’re going to be selective with your investments to ensure the fund succeeds. If you call higher than the recommended, all future LPs will have to be on the higher capital call schedule. This will make it harder for...

Reverse it and say you’re going to be selective with your investments to ensure the fund succeeds. If you call higher than the recommended, all future LPs will have to be on the higher capital call schedule. This will make it harder for you to close later LPs who are expecting this amount.

Managing Partners tend to remain constant in over 90% of firms, and the General Partner team, which includes Partners and Venture Partners, frequently changes beatween funds. When there are changes, a new General Partner entity is formed...

Managing Partners tend to remain constant in over 90% of firms, and the General Partner team, which includes Partners and Venture Partners, frequently changes beatween funds. When there are changes, a new General Partner entity is formed for the new fund. The Management Company (ManCo) remains the same.

Everyone has to be on the same schedule.

Everyone has to be on the same schedule.

Case by case. But, in general, you want to handle the relationship because the VP is part time and they may not be there long term.

Case by case. But, in general, you want to handle the relationship because the VP is part time and they may not be there long term.

The larger the fund, the bigger the reporting requirements. Yes, it’s not uncommon for LPs to require detailed info about each company. This is typically done monthly. In addition, there are also annual reporting requirements too. In...

The larger the fund, the bigger the reporting requirements. Yes, it’s not uncommon for LPs to require detailed info about each company. This is typically done monthly. In addition, there are also annual reporting requirements too. In summary, be prepared to do a lot of reporting for LPs.

A fund manager taking out a loan for the GP commit is not commonly done. More commonly, the fund manager can sell a part of the GP entity for money to use for building the firm and for the GP commit. However this must be done correctly a...

A fund manager taking out a loan for the GP commit is not commonly done. More commonly, the fund manager can sell a part of the GP entity for money to use for building the firm and for the GP commit. However this must be done correctly and with the appropriate legal agreements. 

Yes, please review this article: https://govclab.com/venture-share-2/

Yes, please review this article: https://govclab.com/venture-share-2/

Please see the Venture Partner Agreement and the included footnotes on 409A. Class A shares are issued to managers and partners in the GP, and Class V are issued to investors in the GP. Venture Partners are traditionally issued Class A. ...

Please see the Venture Partner Agreement and the included footnotes on 409A. Class A shares are issued to managers and partners in the GP, and Class V are issued to investors in the GP. Venture Partners are traditionally issued Class A. The Shares are generally issued at the inception of the Fund for a nominal value per Share, though there can be many complicating factors to consider. 

No it does not. Venture Partners are part time and by definition have limited bandwidth, as a result. So in this case, they can only handle a limited number of companies.

No it does not. Venture Partners are part time and by definition have limited bandwidth, as a result. So in this case, they can only handle a limited number of companies.

We use SumSub for AML and KYC purposes (though they are not true "background check" services"). We don't have a deal with these vendors for accelerator participants as of this message. 

We use SumSub for AML and KYC purposes (though they are not true "background check" services"). We don't have a deal with these vendors for accelerator participants as of this message. 

The allocation strategy between initial investments and reserving capital for follow-ons depends on the fund size and the strategy. Many, or even most, small Fund 1s don’t have reserves because due to their size. 

The allocation strategy between initial investments and reserving capital for follow-ons depends on the fund size and the strategy. Many, or even most, small Fund 1s don’t have reserves because due to their size. 

Those VPs will definitely have conflicts and the firms they work for will have to disclose this conflict to their LPs.

Those VPs will definitely have conflicts and the firms they work for will have to disclose this conflict to their LPs.

Don’t do this for your first fund. The ROI is not worth it.

Don’t do this for your first fund. The ROI is not worth it.

Yeah, they can be. It depends on the company and their responsibility. Venture partners can serve various roles: https://govclab.com/2022/03/10/venture-share/

Yeah, they can be. It depends on the company and their responsibility. Venture partners can serve various roles: https://govclab.com/2022/03/10/venture-share/

The answer is No. That being said, depending on your strategy, you may want to put together a set of LP dinners where the LPs can meet the companies. But just set the expectations straight about the rules of engagement.

The answer is No. That being said, depending on your strategy, you may want to put together a set of LP dinners where the LPs can meet the companies. But just set the expectations straight about the rules of engagement.

Yes, Limited Partners can serve as Venture Partners.

Yes, Limited Partners can serve as Venture Partners.

Most Advisors are venture partners, through some funds have a scientific advisory board. All of the VC Lab curriculum work around venture partners is essentially advisor work. They are compensated with a venture partner agreement.

Most Advisors are venture partners, through some funds have a scientific advisory board. All of the VC Lab curriculum work around venture partners is essentially advisor work. They are compensated with a venture partner agreement.

I’m assuming you’re referring to a Venture Partner. To prevent this outcome, you can add a vesting schedule. Please see review the VC Lab venture share agreement: https://govclab.com/2022/03/10/venture-share/

I’m assuming you’re referring to a Venture Partner. To prevent this outcome, you can add a vesting schedule. Please see review the VC Lab venture share agreement: https://govclab.com/2022/03/10/venture-share/

I recommend avoiding deal by deal offers, as team members in a first time fund need to help with everything. If someone is helping with a deal, just give them less carry for the whole fund.

I recommend avoiding deal by deal offers, as team members in a first time fund need to help with everything. If someone is helping with a deal, just give them less carry for the whole fund.

Yes, they will be Venture Partners. Click this link to learn more about Venture Partner Agreements: https://govclab.com/2022/03/10/venture-share/

Yes, they will be Venture Partners. Click this link to learn more about Venture Partner Agreements: https://govclab.com/2022/03/10/venture-share/