All Questions

The financial statement reports do not include a Cash Flow Statement. With that being said, a Cash Flow Statement can be produced within Hub and exported if needed.

The financial statement reports do not include a Cash Flow Statement. With that being said, a Cash Flow Statement can be produced within Hub and exported if needed.

The difference would only come if there were offsetting fees that would reduce the base management fees. The base management fees would be calculated from what is stated within an LPA.

The difference would only come if there were offsetting fees that would reduce the base management fees. The base management fees would be calculated from what is stated within an LPA.

A capital call is a request made by a venture capital fund to its limited partners (LPs) to contribute a portion of their committed capital to the fund. This is typically done when the fund needs additional funds to make investments or t...

A capital call is a request made by a venture capital fund to its limited partners (LPs) to contribute a portion of their committed capital to the fund. This is typically done when the fund needs additional funds to make investments or to cover its certain ongoing expenses. A venture capital fund should not commit to a set schedule for capital calls, however, and should call capital only when needed - no significant amount of investors' capital should sit in the venture capital fund's bank account either.  LPs should be aware that they are expected to contribute their committed capital upon request, and failure to do so may have consequences as outlined in the LPA.

Venture Capitalists engage in a variety of conscious and unconscious unethical behavior with different stakeholders. Some example of unethical behavior commonly seen in venture capital include: Founders / Deals • Disrespecting Founders ...

Venture Capitalists engage in a variety of conscious and unconscious unethical behavior with different stakeholders. Some example of unethical behavior commonly seen in venture capital include: Founders / Deals • Disrespecting Founders • Offering Below Market Financing Terms • Hidden Economic Terms in Template Agreements • Switching Terms in Diligence • Not Marking to Market Limited Partners • Providing Overly Optimistic Return Analysis • Using Pre-called Capital for Investments • Offering Special Economics or Co-investment to Specific LPs • Providing Advantageous Information Rights to Specific LPs • Using the LPAC as a Investment Committee • Investing Personally in Deals not Cleared with the Fund Team Members • Removing Team Members to Consolidate Gains • Engaging in Sexual Misconduct • Having Double Standards • Not Promoting Talented Team Members

When a capital call is completed, an investor's total capital commitment does not change, but the portion of that investor's committed capital that has been paid into the fund has increased. The fund's size (as described on the LPA) does...

When a capital call is completed, an investor's total capital commitment does not change, but the portion of that investor's committed capital that has been paid into the fund has increased. The fund's size (as described on the LPA) does not necessarily limit the maximum total capital investors commit - this is typically referred to as over-subscribing.  Note that all LPs must be on the same capital call schedule and the fund cannot call and deploy 100% of the capital from a first close before raising the rest of the fund. 

Capital calls are not typically treated as taxable events. They represent the contribution of committed capital from limited partners (LPs) to the fund, which is then used for investments or to cover ongoing expenses. This is a transfer ...

Capital calls are not typically treated as taxable events. They represent the contribution of committed capital from limited partners (LPs) to the fund, which is then used for investments or to cover ongoing expenses. This is a transfer of capital rather than income or profit, so it does not generally trigger a tax liability. However, any gains or income generated from the use of that capital in investments could potentially be subject to tax. Always consult with a tax professional for specific advice.

Venture Capital funds typically do not specify whether a capital call is for investment or management fees when requesting funds from Limited Partners (LPs). The capital call is generally used to cover both investments and ongoing expens...

Venture Capital funds typically do not specify whether a capital call is for investment or management fees when requesting funds from Limited Partners (LPs). The capital call is generally used to cover both investments and ongoing expenses such as management fees, legal and accounting fees, and other operational costs. The specific allocation of the funds is determined by the fund manager as per the terms of the Limited Partnership Agreement (LPA).

The process to apply the Valuation Policy to a portfolio of 20 startups each quarter would involve several steps.  First, you would need to gather the latest financial and operational data from each startup. This could include recent fi...

The process to apply the Valuation Policy to a portfolio of 20 startups each quarter would involve several steps.  First, you would need to gather the latest financial and operational data from each startup. This could include recent financing rounds, revenue figures, and other key performance indicators.  Next, you would apply the valuation methodology outlined in the Valuation Policy to each startup. This could involve using market comparables, discounted cash flow analysis, or other valuation techniques.  After valuing each startup, you would update the portfolio's overall valuation. This process would be repeated each quarter to ensure the portfolio's valuation remains accurate and up-to-date.

The frequency of capital calls is generally determined by the needs of the fund (for deployment, fund expenses, etc.) and the discretion of the management. Most funds call 20% or 25% of committed capital upon the first close, after which...

The frequency of capital calls is generally determined by the needs of the fund (for deployment, fund expenses, etc.) and the discretion of the management. Most funds call 20% or 25% of committed capital upon the first close, after which it normally takes 12 to 18 months to close the remainder of the fund. During this period, funds typically do not call additional capital. When the fund is fully closed but within the active investment period, managers generally make capital calls as needed.  Capital calls are not normally done per deal or on a set percentage each month or quarter. 

Markdowns for a struggling portfolio company that hasn't raised funds in 3 years are determined by the valuation policy adopted by the fund. The valuation policy should provide guidelines on how to value such investments. This could invo...

Markdowns for a struggling portfolio company that hasn't raised funds in 3 years are determined by the valuation policy adopted by the fund. The valuation policy should provide guidelines on how to value such investments. This could involve considering the company's financial performance, market conditions, or other relevant factors. If the company's performance has deteriorated or if it's facing significant challenges, a markdown may be appropriate.

Yes - cost and fair market value can differ. Cost in this context refers to the amount initially paid for an investment, while fair market value (commonly referred to as FMV) is the current market value of that investment. Changes in mar...

Yes - cost and fair market value can differ. Cost in this context refers to the amount initially paid for an investment, while fair market value (commonly referred to as FMV) is the current market value of that investment. Changes in market conditions, performance of the investment, financings, and other factors can cause the fair market value to be higher or lower than the initial cost paid. 

At a minimum, portfolio companies should be reevaluated on a quarterly cadence. This ensures the most up to date metrics are being reported to Limited Partners.

At a minimum, portfolio companies should be reevaluated on a quarterly cadence. This ensures the most up to date metrics are being reported to Limited Partners.

Typically, VC Firms will determine a company's initial FMV as the cost in which it was purchase as the purchase price is usually done at the company's latest FMV.

Typically, VC Firms will determine a company's initial FMV as the cost in which it was purchase as the purchase price is usually done at the company's latest FMV.

Yes, investing via a SAFE (Simple Agreement for Future Equity) means that the investment won't have a set valuation until a future priced round - there is also no share price set during a seed round comprised of SAFEs.  The valuation (a...

Yes, investing via a SAFE (Simple Agreement for Future Equity) means that the investment won't have a set valuation until a future priced round - there is also no share price set during a seed round comprised of SAFEs.  The valuation (and thus price per share) is essentially deferred until more information is available, typically at the time of a preferred stock financing. The SAFE then converts into equity, usually preferred stock, at the predetermined terms, which often include a valuation cap or discount rate. 

What an investor can ask in terms of a percentage of equity or an investment amount depends nearly entirely on variables, so it is impossible to generalize. Some factors to consider for startup: • Geography (US, LatAm, etc.) • Market (B...

What an investor can ask in terms of a percentage of equity or an investment amount depends nearly entirely on variables, so it is impossible to generalize. Some factors to consider for startup: • Geography (US, LatAm, etc.) • Market (B2B, B2C, Enterprise, etc.) • Sector (Deeptech, Agritech, AI, etc.) • Stage (seed, Series A, etc.) • Size and type of financing round • Runway (cash in bank) Some factors to consider for investor: • Name Brand • Investment strategy/stage • Typical check size • Value-add beyond $$$ Just to contrast, emerging managers of small venture capital funds (say $5M total) may be able to invest $100K into early pre-seed type deals, but may not have leverage to get anything in addition. If we're talking about Sequoia Capital, then they might invest millions at a later stage, get on the startup's board of directors, etc.  Regardless, it's important for founders to maintain control of the company as long as possible to avoid financing risk and optimize for the best outcome - so percentages are often highly negotiated. Founders should take care to model the capital journey, as there are a number of models available and many variables can affect them as the startup gets built. 

Funds generally call capital from limited partners (LPs) in several tranches in order to optimize fundraising - it's simply easier if upon admittance to the Fund, an LP only has to wire say, 20% of its full capital commitment rather than...

Funds generally call capital from limited partners (LPs) in several tranches in order to optimize fundraising - it's simply easier if upon admittance to the Fund, an LP only has to wire say, 20% of its full capital commitment rather than 50%. Sometimes, an LP may wish to send its full capital commitment ahead of time, as "pre-paid" capital, often for convenience. While this is possible, it creates more work administratively and on the banking side to track and silo the pre-paid funds separately - so it's not something to recommend or broadly offer in most cases.  IMPORTANT: Capital calls will "draw down" on pre-paid capital on the same percentage/schedule as the rest of the LPs. However, any pre-paid funds that have not been called CANNOT be used for any purposes, including deployment. 

Generally speaking, if contemplating SAFEs, convertible notes, or other types of convertible instruments which feature a discount, the discount does not factor into the portfolio company's valuation. These are typically held at cost (wha...

Generally speaking, if contemplating SAFEs, convertible notes, or other types of convertible instruments which feature a discount, the discount does not factor into the portfolio company's valuation. These are typically held at cost (what the investor paid) until a priced round where such instruments convert into preferred equity, though you will need to verify per the Fund's valuation policy.  When a convertible instrument is converted into preferred equity during a priced round (a preferred stock financing), the discount is applied at that time and typically affects the number of shares of preferred stock issued. Afterwards, the portfolio company's valuation is generally based on the price-per-share of the preferred stock of the latest financing applicable. 

We recommend the investor add a Follow-On Investment Information Rights side letter to the SAFE. This would be something like:  While the Investor’s Safe remains in force, the Investor shall have the right to receive copies of subsequent...

We recommend the investor add a Follow-On Investment Information Rights side letter to the SAFE. This would be something like:  While the Investor’s Safe remains in force, the Investor shall have the right to receive copies of subsequent Safe or convertible debt instruments executed by the Company at any future date. The Company will provide such copies physically by mail or by electronic mail within 10 days of execution to the address(es) provided.

A fund back office normally includes multiple functions, including legal, accounting, tax, and audit. Normally, these functions are provided by multiple external vendors. There is also a set of software offerings used by funds, commonly ...

A fund back office normally includes multiple functions, including legal, accounting, tax, and audit. Normally, these functions are provided by multiple external vendors. There is also a set of software offerings used by funds, commonly referred to as the VC Tech Stack, that includes a file system, cloud storage, document sharing, data room, digital signature, CRM, normal accounting system, fund accounting system, databases, email solutions, and middleware. The Decile Group provides a flat rate and unified offering with Decile Hub as the venture platform and Decile Partners as a single back office provider.

Should LPs ask for a shorter term for a venture capital fund than 10 years, it may be an indication that the LPs do not understand the asset class and are not aligned with the fund and its managers. Proceed with caution - further discuss...

Should LPs ask for a shorter term for a venture capital fund than 10 years, it may be an indication that the LPs do not understand the asset class and are not aligned with the fund and its managers. Proceed with caution - further discussions may be warranted.