All Questions

The estimate of doing 40 $100K deals with a $5 MM fund is a dispersed strategy. You will not sit on Boards with $100K investments. Your capital deployment strategy is dependent on your fund strategy. If you want to get a lot of shots of ...

The estimate of doing 40 $100K deals with a $5 MM fund is a dispersed strategy. You will not sit on Boards with $100K investments. Your capital deployment strategy is dependent on your fund strategy. If you want to get a lot of shots of goal because you are very early, then investing in more deals is a good strategy.

Question: What is this 506(c) thing I keep hearing about? SEC Rule 506(c) covers General Solicitation - in essence publicly advertising that a Fund is raising money (via social media, public speaking, etc.).  This is in contrast to SEC...

Question: What is this 506(c) thing I keep hearing about? SEC Rule 506(c) covers General Solicitation - in essence publicly advertising that a Fund is raising money (via social media, public speaking, etc.).  This is in contrast to SEC Rule 506(b) for private placements - this is the regulatory framework Funds traditionally raise under (privately), and which we strongly, strongly recommend.  Question: Sounds great, so shouldn’t VCs (like me) fundraise under 506(c)?  TL:DR - NO Question: Why the heck not? First and foremost - generally soliciting for fundraising for an enduring VC firm has a very low probability of success. As a professional money manager, LPs will hire you to take care of their hard earned capital. LPs who are wealthy enough to participate in your fund ($100K per LP minimum for a Fund I, rapidly scaling up from there), are not looking online for random money managers that they don’t know or trust. They simply don’t need to - and it’s an extremely risky endeavor.   It is up to you, the fund manager, to find (or network your way) such LPs - and then crucially convince them you will do a great job professionally managing their money for the next 10 to 15 years. Trying to fundraise online for $10K checks is not effective from a time or cost perspective - even with emerging fund sizes of say, $5M (never mind certain regulatory limits on how many investors can be in a Fund).  Fundraising under 506(c) also increases costs, administrative burden and LP friction. As a 506(c) fund, you (or a 3rd-party vendor) must affirmatively verify the accreditation status of each and every LP you accept into the Fund (no exceptions and no take backs). As you can imagine, this takes additional time and money - not to mention it creates a lot of friction with your potential LPs, who will need to provide personal/confidential documents to a third-party vendor or loop in their attorneys, accountants or similar professional service providers to assist. This can extend the time it takes to close an LP by weeks to even months in some cases - some also just pass due to the friction. This situation becomes even more problematic with large check LPs who are often unwilling to provide tax information to your back office team (or a third-party vendor) to verify accreditation. Finally, general solicitation often appears unprofessional to limited partners and removes the exclusivity of your offering, and is often perceived as desperate by experienced LPs. Question: But people do so on AngelList, so why can’t I?  AngelList is a great platform for syndicating deals out to amateur investors. AngelList owns and manages the vehicles, and it is typically not a viable option for enduring VC firms.  While some investors on AngelList may also invest into your Fund, as a general matter LPs often do not overlap with the archetype LPs necessary for a VC fund because: 1) they like doing deal by deal investments instead of having a manager do this for them and 2) they generally do not have the capacity to make the minimum investment commitment which starts at ~$100k for a VC fund. "Angel’List is a platform that’s designed for angel investors, and those angels that want scale their practice. Most of the best practices that apply to angel investors do not apply to founders of enduring VC firms - they are fundamentally different. 

A template Stewardship Agreement is available below: https://docs.google.com/document/d/1_wo2K7adTcEjARB3AgoPzW_PC8XHIUH7GrMTvutDsMQ/edit

A template Stewardship Agreement is available below: https://docs.google.com/document/d/1_wo2K7adTcEjARB3AgoPzW_PC8XHIUH7GrMTvutDsMQ/edit

Avoid promising targeted returns to LPs. You may want to model out some returns based on your strategy showing High, Medium, Low scenarios at some point, but the answer to the LPs should be: "I will share our deck which will describe sev...

Avoid promising targeted returns to LPs. You may want to model out some returns based on your strategy showing High, Medium, Low scenarios at some point, but the answer to the LPs should be: "I will share our deck which will describe several returns scenarios for our fund. Since VC fund returns have asymmetric upside and follow a Pareto distribution, one successful investment can be the difference between a 10x+ on the fund and a 2x"

It's not uncommon to see 10 - 20% of the carry with vesting and a cliff for an additional partner at this stage. Sometimes more. Use the guidlines of the Venture Share agreement: https://govclab.com/venture-share-2/ However, don't put a...

It's not uncommon to see 10 - 20% of the carry with vesting and a cliff for an additional partner at this stage. Sometimes more. Use the guidlines of the Venture Share agreement: https://govclab.com/venture-share-2/ However, don't put anything in writing. Once you come to terms verbally, then ask your Decile Partners team to help you get the agreements setup, check and update your cap-table and manage the process.

Most investments are in USD, so use USD. Use CAD if you are primarily planning to invest in CAD in Canadian startups, raising primarily from Canadian LPs.

Most investments are in USD, so use USD. Use CAD if you are primarily planning to invest in CAD in Canadian startups, raising primarily from Canadian LPs.

Decile Group strongly recommends not accepting any investors who are not accredited investors into a Fund, even if it is technically and legally possible (depending on the jurisdiction and the Fund's legal agreements). Such investors are...

Decile Group strongly recommends not accepting any investors who are not accredited investors into a Fund, even if it is technically and legally possible (depending on the jurisdiction and the Fund's legal agreements). Such investors are generally not worth the extra effort and cost.  For specific advice about a jurisdiction, please consult an experienced fund attorney in said jurisdiction. 

You should set the default percentage of the PACT at 75% if you're in a developed market and to 50% for emerging markets. The 'best practice' is to increase fundraising momentum. If you have momentum and an increasing number of investor...

You should set the default percentage of the PACT at 75% if you're in a developed market and to 50% for emerging markets. The 'best practice' is to increase fundraising momentum. If you have momentum and an increasing number of investors are committing to the fund, you will be in a strong position to close.  Once you have $1m - $2m in PACTs from a group of LPs (not one LP), then you can begin a formation and closing process, which typically takes 2-3 months.

It is generally not recommended for an LP to also be a Venture Partner - it could introduce conflicts of interest but the LP may also lose their "limited" status and corresponding protection from liability in the case an LP is involved i...

It is generally not recommended for an LP to also be a Venture Partner - it could introduce conflicts of interest but the LP may also lose their "limited" status and corresponding protection from liability in the case an LP is involved in decision-making for the Fund. 

The Venture Studios in the VC Lab program have a VC fund attached. Please review this article: https://govclab.com/2023/04/25/how-to-build-a-venture-studio/ The capital calls for the VC fund that's attached to the studio will work the s...

The Venture Studios in the VC Lab program have a VC fund attached. Please review this article: https://govclab.com/2023/04/25/how-to-build-a-venture-studio/ The capital calls for the VC fund that's attached to the studio will work the same as any other VC fund.

Hi John, in that situation you can manually move them to the appropriate stage in the closing pipeline. This can be done by checking the box next to the LP's name and changing their stage or by simply clicking on the dropdown menu button...

Hi John, in that situation you can manually move them to the appropriate stage in the closing pipeline. This can be done by checking the box next to the LP's name and changing their stage or by simply clicking on the dropdown menu button underneath the column 'STAGE' and changing the stage.

“The identity of the LPAC members will be disclosed to all the investors of the fund. Disclosure happens as part of the process of providing notice to investors of changes or approvals that have been made.”

“The identity of the LPAC members will be disclosed to all the investors of the fund. Disclosure happens as part of the process of providing notice to investors of changes or approvals that have been made.”

Not necessarily. While LPs will contribute their commitment through multiple capital calls, they do not need to contribute all of their committed capital during the Investment Period. It would be correct to make capital calls for managem...

Not necessarily. While LPs will contribute their commitment through multiple capital calls, they do not need to contribute all of their committed capital during the Investment Period. It would be correct to make capital calls for management fees and fund expenses in the post-investment period.

No LP can own more then 25% of the fund and ideally they should own less then 20%.  LP ticket sizes are based on demand and capacity. Your minimum ticket for the 1st close should be not be lower then $100k.

No LP can own more then 25% of the fund and ideally they should own less then 20%.  LP ticket sizes are based on demand and capacity. Your minimum ticket for the 1st close should be not be lower then $100k.

Correct - if you call 100% of their commitment over the 1st two years, then you would have money sitting in the fund's bank account for future management fee payments.

Correct - if you call 100% of their commitment over the 1st two years, then you would have money sitting in the fund's bank account for future management fee payments.

Decile Hub manages the signature process for members of Decile Launch and Decile Partners.  Venture capital funds do not use a SHA. Limited partners sign a Limited Partner Agreement, or LPA. They normally also sign a Subscription Agreem...

Decile Hub manages the signature process for members of Decile Launch and Decile Partners.  Venture capital funds do not use a SHA. Limited partners sign a Limited Partner Agreement, or LPA. They normally also sign a Subscription Agreement, which is not required when using the Cornerstone LPA.  

Go to: 1. Dealflow 2. Deal Memos 3. Add a deal Memo The tool is designed to ask you important questions about the deal and provide a good baseline. I would encourage you to also update these questions based on the approach of your thes...

Go to: 1. Dealflow 2. Deal Memos 3. Add a deal Memo The tool is designed to ask you important questions about the deal and provide a good baseline. I would encourage you to also update these questions based on the approach of your thesis. 

In my view, it's your job as VC to help your company. If you have expertise in this area, just help them without charging them. It's part of your value add.  It is a bit of a conflict if you charge them and it may require some sort of d...

In my view, it's your job as VC to help your company. If you have expertise in this area, just help them without charging them. It's part of your value add.  It is a bit of a conflict if you charge them and it may require some sort of disclosure. 

As a manager, you need to get to know every potential limited partner before you pitch them, including doing research to understand if they are accredited. At the ned of the day, you need to use your best judgement. This is governed by g...

As a manager, you need to get to know every potential limited partner before you pitch them, including doing research to understand if they are accredited. At the ned of the day, you need to use your best judgement. This is governed by general solicitation regulations, which are explained below: https://govclab.com/2022/06/28/general-solicitation/