All Questions

Generally - no, the Fund should not appoint new LPs to the LPAC, unless it is someone the Fund Manager trusts implicitly and has worked with over a long period of time. It is important to be cautious about giving unfamiliar LPs a seat on...

Generally - no, the Fund should not appoint new LPs to the LPAC, unless it is someone the Fund Manager trusts implicitly and has worked with over a long period of time. It is important to be cautious about giving unfamiliar LPs a seat on your LPAC as it can lead to complications for the Fund and limit the Fund Manager's ability to make decisions on behalf of the Fund. Regardless of their financial contribution, prioritize placing individuals you trust on the LPAC. 

For emerging managers, generally - no, the carry structure should be as follows: First, return 100% to each Partner until the amount distributed equals the Capital Contribution Value for each Partner for the exited investment, Fund Expe...

For emerging managers, generally - no, the carry structure should be as follows: First, return 100% to each Partner until the amount distributed equals the Capital Contribution Value for each Partner for the exited investment, Fund Expenses, and Realized Investments. Then, Carried Interest % to GP and LP % to LPs for the exited investment. This is used as it can be unfair for smaller funds to wait until the entire fund is returned before they are in the carry, and the existing carry structure creates maximum alignment around the Fund providing top decile performance.  A hurdle rate is uncommon in VC in the US, especially at smaller funds, as the main form of compensation is carry and it doesn’t significantly de-risk the fund.

Generally, no - an emerging, smaller Fund should not support a yearly audit request.  Since the goal is to maximize the returns for LPs, it is preferred to use as much of LP's capital as possible to make investments rather than on fund ...

Generally, no - an emerging, smaller Fund should not support a yearly audit request.  Since the goal is to maximize the returns for LPs, it is preferred to use as much of LP's capital as possible to make investments rather than on fund expenses. However, our tax partner, Spicer Jeffries, can do an audit every year. It is not very common for smaller funds to have audits and we strongly recommend against an audit due to the expense and extra lift required for reporting.

Please reference: Venture Capital Management Fee Model. If you are working with Decile Partners, and you would like to adjust your management fee schedule per this article, please contact your Venture Associate. 

Please reference: Venture Capital Management Fee Model. If you are working with Decile Partners, and you would like to adjust your management fee schedule per this article, please contact your Venture Associate. 

With pre-seed funds, exits can take up to 10+ years, making extensions potentially necessary.  Decile Group's Cornerstone LPA includes two optional one-year extensions on top of a standard 10-year Fund Life. 

With pre-seed funds, exits can take up to 10+ years, making extensions potentially necessary.  Decile Group's Cornerstone LPA includes two optional one-year extensions on top of a standard 10-year Fund Life. 

You can use a standard template like the SAFE. We recommend that you do not modify template. 

You can use a standard template like the SAFE. We recommend that you do not modify template. 

We recommend that you do not attempt to draft a term sheet without a lawyer. However, you can use standard templates like the SAFE as long as you don't modify them. 

We recommend that you do not attempt to draft a term sheet without a lawyer. However, you can use standard templates like the SAFE as long as you don't modify them. 

New and emerging managers are strongly discouraged from signing side letters. They are complicated to administer, and changing regulations require that you share them with all other limited partners in the US. This creates challenging si...

New and emerging managers are strongly discouraged from signing side letters. They are complicated to administer, and changing regulations require that you share them with all other limited partners in the US. This creates challenging situations where all limited partners will request the same "perks." The best solution is to encourage limited partners to invest is to raise the minimum between closings. Then, you can informally offer first look at co-investment and follow-on opportunities. Do not put anything specific in writing. 

Most VC firms set up the fund, the general partner and the management company in Delaware, including firms with foreign Managing Partners. This provides a clear structure with unified control and governance, and it helps to manage costs,...

Most VC firms set up the fund, the general partner and the management company in Delaware, including firms with foreign Managing Partners. This provides a clear structure with unified control and governance, and it helps to manage costs, which can escalate quickly when law firms in different jurisdictions need to coordinate. All of the Delaware companies are passthrough entities under US law, which means that profits and losses are passed directly to the owners of those entities without being taxed. The Managing Partners, who are the owners of the management company, traditionally take distributions to have passthrough treatment of management fees and other gains. They then pay taxes personally. With foreign Managing Partners, the tax treatment of passthrough gains distributed from the management company is governed by tax treaties. With some treaties, the ideal tax optimization strategy is to set up a blocker company or other entity in their local country or in an intermediary country. The best way to determine the tax strategy is to interview a few local tax specialists that are familiar with US venture and ask during the interview. With this said, aggressive tax optimization can be very expensive and time consuming, distracting Managing Partners from the core activities of fundraising and investing. Tax optimization can also be done closer to the time of an exit, when the proceeds and the details are clearer.

For distributed teams, pick the country or region where most of the active team members are located and where most of the deals are being done. If one team member is likely to be the most active in the team, then you can also pick the ci...

For distributed teams, pick the country or region where most of the active team members are located and where most of the deals are being done. If one team member is likely to be the most active in the team, then you can also pick the city where that team member is based.  It should be noted that distributed teams in venture face a harder operating environment that may negatively affect returns. For example, deal decisions for the top opportunities need to be made quickly, and time zone differences can slow decisions down. In addition, partners may have different tax and regulatory burdens based on where they live, which will impact the fund operating costs and overhead. Lastly, since venture teams normally last 16 years or more, the required cammaraderie can be hard to build and develop when people live far away from one another. 

In a recent survey of limited partners, only 17% were interested in generalist VC funds. 83% of limited partners prefer specialist VC funds. The specialization is normally in an industry, such as healthcare, and also potentially a sector...

In a recent survey of limited partners, only 17% were interested in generalist VC funds. 83% of limited partners prefer specialist VC funds. The specialization is normally in an industry, such as healthcare, and also potentially a sector, such as precision medicine. The industry and the sector chosen by a manger to focus on has to (1) have enough dealflow to find top companies and (2) have enough potential to generate venture returns, which means that any one investment can have a 20x+ return on investment. Media is not considered an industry with venture returns by both GPs and LPs. 

Running a fund and an AngelList syndicate at the same time presents a number of problems.  First, most LPAs prevent managers from working on multiple funds at the same time because managers have fiduciary duties to their limited partner...

Running a fund and an AngelList syndicate at the same time presents a number of problems.  First, most LPAs prevent managers from working on multiple funds at the same time because managers have fiduciary duties to their limited partners, such as the duty of care to act prudently, prioritizing beneficiaries' interests. Second, there are conflicts of interest around investment decisions that arise from having two funds in one focus area, since a manager may choose to cherry pick deals or feel pressure to invest in deals with companies that are failing to save the company.  Third, there are issues around the time and attention that a manager must place on the respective funds that detract from time and attention required for the the other fund, such as when diligencing deals, working on reports, or managing operations.  These various problems can be overcome by disclosing everything to limited partners up front, having a limited partner advisory committee to clear conflicts, and providing full transparency during operations, but this can be time consuming and difficult for a manager to do, and may also make limited partners skeptical. 

A fund cannot deploy capital to any portfolio company until it has done a first closing. The minimum in PACTS are as follows: • $10m+ fund: 10% or $1m+ in PACTs are the minimum necessary to complete a first closing. • $5m fund: 20% or $1...

A fund cannot deploy capital to any portfolio company until it has done a first closing. The minimum in PACTS are as follows: • $10m+ fund: 10% or $1m+ in PACTs are the minimum necessary to complete a first closing. • $5m fund: 20% or $1m+ in PACTs are the minimum necessary to complete a first closing. Once a fund completes the 1st closing, it will do a capital call from its LPs for ~25% of committed capital. The fund will use the capital received from the capital call to pay for organizational expenses and to invest in its first portfolio companies. During this time, the fund manager must continue to fundraise until reaching the target fund size - it is critical to keep the pedal to the metal on fundraising. 

The startup typically will retain their lawyer to manage this transaction because they want to control their cap-table. However, since it's a fairly common practice, the law firm can be pretty efficient here.  With respect to the fund, ...

The startup typically will retain their lawyer to manage this transaction because they want to control their cap-table. However, since it's a fairly common practice, the law firm can be pretty efficient here.  With respect to the fund, it really depends on what fund administrator and the law firm the firm retains. Warehouse transfers are included in the Decile Launch offering. However, it's not uncommon for other law-firms and administrators to charge for this service. 

Generally speaking, transferring a warehoused investment from an entity/company is fine so long as it is wholly owned by the investor.  Warehoused investments intended to be transferred to a fund should be invested into directly by the ...

Generally speaking, transferring a warehoused investment from an entity/company is fine so long as it is wholly owned by the investor.  Warehoused investments intended to be transferred to a fund should be invested into directly by the fund manager. If there are other angel investors investing into the same company/opportunity, they can invest via an SPV if they choose.

A warehoused investment is an investment a (prospective) fund manager makes personally (or via a wholly owned entity) before the venture capital fund is set up and reaches a first close. Shortly after reaching a first close, the warehous...

A warehoused investment is an investment a (prospective) fund manager makes personally (or via a wholly owned entity) before the venture capital fund is set up and reaches a first close. Shortly after reaching a first close, the warehoused investments are then transferred into the fund. Planned investments do not count as warehoused investments. Warehoused investments are required to be disclosed to LPs before closing - this is typically done by listing them on the schedule of warehoused investments. The information required includes but is not limited to: • Company name; • Number and type of shares (if equity); • Amount of money paid, and currency used; • Potential conflicts of interest. Be sure to provide fully executed copies of your warehoused investments' legal agreements to your law firm or Decile Partners (if working with Decile Launch).

The PACT is a non-binding letter of intent. You can use your proposed names for your fund in the PACT until your form your entities on first close. With regards to the domicile, given that likely will domicile in Delaware and because it'...

The PACT is a non-binding letter of intent. You can use your proposed names for your fund in the PACT until your form your entities on first close. With regards to the domicile, given that likely will domicile in Delaware and because it's by far the most popular domicile for funds, I would just leave it as is. If the LPs that sign the PACT prefer that you change the domicile later in the process, you can always edit the PACT moving forward to accomodate your local jurisdiction. 

In general, no. However, if the LP(s) invested your prior fund, it's usually good practice to let the managing partners know that you are planning to reach out to them. 

In general, no. However, if the LP(s) invested your prior fund, it's usually good practice to let the managing partners know that you are planning to reach out to them. 

The GP commit is not part of the first close because it is the General Partner's contribution to the fund, which typically amounts to 1% of the target fund size. This commitment is separate from the investments made by Limited Partners d...

The GP commit is not part of the first close because it is the General Partner's contribution to the fund, which typically amounts to 1% of the target fund size. This commitment is separate from the investments made by Limited Partners during the first close. The GP commit demonstrates the General Partner's alignment of interests with the Limited Partners and their confidence in the fund's success. It is important to follow standard protocol and not let LPs influence the GP commit during the fundraising process.