Fund Operations

For small funds, the managers frequently take distributions and do not get paid as either an employee or as a contractor. Only when the fund sizes are above $20 MM do managers start looking at salaries, and the salaries are reserved for ...

For small funds, the managers frequently take distributions and do not get paid as either an employee or as a contractor. Only when the fund sizes are above $20 MM do managers start looking at salaries, and the salaries are reserved for junior team members without carry.

The Management Company owns the brand. So yes, you’re usually branding for the management company. When you get to your 2nd or 3d decade with multiple funds under the Management Company, you may set up funds with different focuses that m...

The Management Company owns the brand. So yes, you’re usually branding for the management company. When you get to your 2nd or 3d decade with multiple funds under the Management Company, you may set up funds with different focuses that may have a slight deviation like Sequoia India, but not much.

It can, yes. Generally, these end up being distractions. Make great investments, and that is where all of the money will come from.

It can, yes. Generally, these end up being distractions. Make great investments, and that is where all of the money will come from.

It depends on your agreement with them, but most are active after closing, yes. Venture partners can serve various roles: https://govclab.com/2022/03/10/venture-share/

It depends on your agreement with them, but most are active after closing, yes. Venture partners can serve various roles: https://govclab.com/2022/03/10/venture-share/

Ideally 0% of fund capital is laying around in cash before deployment into an investment. If you have a lot of money in your bank account you messed up.

Ideally 0% of fund capital is laying around in cash before deployment into an investment. If you have a lot of money in your bank account you messed up.

No - it is not common for venture partners to be compensated with both a fixed amount per deal in addition to carry. The compensation is typically only carry. 

No - it is not common for venture partners to be compensated with both a fixed amount per deal in addition to carry. The compensation is typically only carry. 

Potentially, however you will need to be careful of potential conflicts of interest. These may need to be managed via an additional agreement - otherwise it may not be a good idea to proceed.  If the charity provides separate additional...

Potentially, however you will need to be careful of potential conflicts of interest. These may need to be managed via an additional agreement - otherwise it may not be a good idea to proceed.  If the charity provides separate additional legal agreements, we would strongly recommend having an expert fund attorney review before signing anything. There may be implications for your Fund (or for tax purposes) that may arise. 

You will not be able to predict your schedule until you do a first close. Before that, you can assume a 25% capital call on first close LPs. You will do the same on all future closed LPs (but not the LPs who you have already called capit...

You will not be able to predict your schedule until you do a first close. Before that, you can assume a 25% capital call on first close LPs. You will do the same on all future closed LPs (but not the LPs who you have already called capital on before), until the entire $5m is closed. Then, you are free to set a new schedule because all LPs have been equalized.

You could ask the companies to comply with the For Progress (https://fi.co/progress) designation, and then the company would publish their results every month or quarter. You can then roll up the results into your own reporting.

You could ask the companies to comply with the For Progress (https://fi.co/progress) designation, and then the company would publish their results every month or quarter. You can then roll up the results into your own reporting.

Read this: https://govclab.com/2022/03/10/venture-share/

Read this: https://govclab.com/2022/03/10/venture-share/

This is another example of confusing venture capital terminology. They are often the same thing. Venture Investors can refer to Venture Partners that help with investing, primarily.

This is another example of confusing venture capital terminology. They are often the same thing. Venture Investors can refer to Venture Partners that help with investing, primarily.

Distributions are usually done upon exits and the Fund's LPA usually specifies the details. 

Distributions are usually done upon exits and the Fund's LPA usually specifies the details. 

The goal is to communicate on a regular schedule to set expectations about communication with LPs, otherwise some will start demanding heavy communication. I would look to send one good update once a quarter, a larger update at the end o...

The goal is to communicate on a regular schedule to set expectations about communication with LPs, otherwise some will start demanding heavy communication. I would look to send one good update once a quarter, a larger update at the end of the year, and hold one or two virtual events per year, unless you can afford to do a nice in person event, which can be done once per year.

You can use a venture partner agreement. Click this link to learn more about Venture Partner Agreements: https://govclab.com/2022/03/10/venture-share/

You can use a venture partner agreement. Click this link to learn more about Venture Partner Agreements: https://govclab.com/2022/03/10/venture-share/

No - a Fund does not need to finalize arrangements with specific Venture Partners at fund formation.   Typically, the Fund authorizes a Share Pool (similar to an option pool or stock plan) for future and intended Venture Partners, and a...

No - a Fund does not need to finalize arrangements with specific Venture Partners at fund formation.   Typically, the Fund authorizes a Share Pool (similar to an option pool or stock plan) for future and intended Venture Partners, and after hitting a first close, it will issue specific amounts (usually subject to vesting) using the Venture Partner Share Agreement template.  If you are a Decile Launch customer, we will prepare these agreements using the template - please contact your Venture Associate to coordinate. 

In most cases yes, and these are marketing terms.

In most cases yes, and these are marketing terms.

VC insurance policies, usually called Venture Capital Asset Protection Insurance (VCAP for short), are not designed for emerging mangers with small fund sizes. As a result, they are mis-priced and are not affordable. Vouch does have an o...

VC insurance policies, usually called Venture Capital Asset Protection Insurance (VCAP for short), are not designed for emerging mangers with small fund sizes. As a result, they are mis-priced and are not affordable. Vouch does have an offering for VCs, but it's cost-prohibitive for new and emerging managers with fund sizes of less then $20 million.

Under 5% carried interest, which is under 5% of the 100% that represent the 20% carried interest. See this for more information: https://govclab.com/2022/03/10/venture-share/

Under 5% carried interest, which is under 5% of the 100% that represent the 20% carried interest. See this for more information: https://govclab.com/2022/03/10/venture-share/

We do not recommend recycling on a first fund. It is complicated to manage. It delays starting your second fund. It is hard to explain to inexperienced limited partners. If you want to recycle despite the warnings, then you can set an a...

We do not recommend recycling on a first fund. It is complicated to manage. It delays starting your second fund. It is hard to explain to inexperienced limited partners. If you want to recycle despite the warnings, then you can set an amount in the Cornerstone, correct.

It is hard to make ownership based on fundraising for a number of reasons. First, it is just hard to track who does what if the partnership is functioning well, since one partner may know the investor, yet another partner closes the inve...

It is hard to make ownership based on fundraising for a number of reasons. First, it is just hard to track who does what if the partnership is functioning well, since one partner may know the investor, yet another partner closes the investor. Furthermore, compensating directly based on money brought in is regulated in most domiciles. So, VC Lab recommends that founding team that will run the firm for decades be Managing Partners in the Management Company with ownership based on overall contribution, and everyone else be Partners or Venture Partners in the General Partner with lessor ownership in the carry of the specific fund.

It really depends on many variables, but good experience is rare in the VC industry. *Principal*: $250K to $500K per year plus 0.5 to 5.0% carried interest. *Partner*: $500K to $2 MM per year plus 2.5 to 10+% carried interest. Salarie...

It really depends on many variables, but good experience is rare in the VC industry. *Principal*: $250K to $500K per year plus 0.5 to 5.0% carried interest. *Partner*: $500K to $2 MM per year plus 2.5 to 10+% carried interest. Salaries will go down with higher carried interest in some cases. Your best bet is to try and hire someone that you know from outside the industry, and then things are more negotiable.

You should try banking with a VC friendly financial institution like Grasshopper Bank.

You should try banking with a VC friendly financial institution like Grasshopper Bank.

It's possible but there are conflicts of interest within their own funds that must be disclosed and overcome to make this happen. It's usually pretty complicated, that it's not worth it.

It's possible but there are conflicts of interest within their own funds that must be disclosed and overcome to make this happen. It's usually pretty complicated, that it's not worth it.

You will likely setup an LPAC to help you manage conflicts. It’s not uncommon for at least one LP to be on it.

You will likely setup an LPAC to help you manage conflicts. It’s not uncommon for at least one LP to be on it.

VC funds typically have a reporting system which will show this type of information to your LPs.

VC funds typically have a reporting system which will show this type of information to your LPs.

There are three ways to compensate Scouts:  1. With a thank you and reciprocation. 2. As a regular Venture Partner using the Venture Share agreement: https://govclab.com/2022/03/10/venture-share/ 3. Using a deal by deal structure that is...

There are three ways to compensate Scouts:  1. With a thank you and reciprocation. 2. As a regular Venture Partner using the Venture Share agreement: https://govclab.com/2022/03/10/venture-share/ 3. Using a deal by deal structure that is complicated (and it is also risky to do from a tax perspective) We recommend that most funds do #1 or #2.

Decile Group currently uses Sumsub: https://sumsub.com/

Decile Group currently uses Sumsub: https://sumsub.com/

Founder Institute created For Progress, which you can check out here: https://fi.co/progress

Founder Institute created For Progress, which you can check out here: https://fi.co/progress

LPs are not flexible in terms of changing portfolio construction.

LPs are not flexible in terms of changing portfolio construction.

No. VCs will commonly charge portfolio companies for legal fees associated with a deal up to a cap in the term sheet, but it is uncommon to charge for due diligence fees, such as a software audit. These fees can be charged to Limited Par...

No. VCs will commonly charge portfolio companies for legal fees associated with a deal up to a cap in the term sheet, but it is uncommon to charge for due diligence fees, such as a software audit. These fees can be charged to Limited Partners as Fund Expenses versus coming from Management Fees.

Exits can take longer than the standard fund life. However, typically, when extending the fund, VCs don’t charge management fees. The earlier you invest, the more likely that you may need an extension.

Exits can take longer than the standard fund life. However, typically, when extending the fund, VCs don’t charge management fees. The earlier you invest, the more likely that you may need an extension.