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How GAAP and ASC820 are involved in valuation policy?

Here is the response of the decile LLM: The Generally Accepted Accounting Principles (GAAP) and ASC 820 (formerly FAS 157) are involved in valuation policy by providing a framework for measuring and reporting the fair value of assets and liabilities. Under ASC 820, investments are categorized into three levels based on the observability of inputs used in their valuation. Level 1 investments have quoted prices in active markets, Level 2 investments use observable inputs other than quoted prices, and Level 3 investments use unobservable inputs. These standards ensure consistency and transparency in financial reporting.

Top answer:

The Generally Accepted Accounting Principles (GAAP) and ASC 820 (formerly FAS 157) are involved in valuation policy by providing a framework for measuring and reporting the fair value of assets and liabilities. Under ASC 820, investments...

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What are the approximate number of Global Venture Firms forecasted by the end of 2023?

By my estimates, this number can range from 30,000- 45,000.  There are a multitude of variables to consider.

Top answer:

There is no hard data on this because most of the filings are done at a fund level, instead of at the Firm level. A firm will often manage a family of funds. VC Lab estimates that ~9,500 new VC firms will launch within 5 years.

 -  Mike Suprovici
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Cornerstone LPA 2.0 agreement specifies that the fund can be dissolved, liquidated, and terminated by the election of the general partner. What are the typical cases making GP to make such a decision? Isn't it too risky for LP leaving it possible to have the fund terminated for any reason by the GP?

I wonder what are the provisions in the Cornerstone LPA 2.0 that will protect the LP from unjustified termination, such as LP approval of termination and what is the best industry practice to protect LP rights.

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For the General Partner to unilaterally decide to wind up a fund is an edge-case - there aren't "typical" types of cases to speak of here. However as one example, a pending SEC investigation (which could implicate the General Partner) co...

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Clawbacks and Cornerstone LPA 2.0

With respect to a Cornerstone LPA 2.0 agreement; under what conditions would partners in a venture capital fund give back up to 20% of distributions to satisfy [fund] obligations?

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Clawbacks would be very unusual - here are two examples of situations in which the Fund may need to claw back distributions to satisfy the Fund's obligations (but this is by no means all-inclusive): • If proceeds have been over-distribut...

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what are level 1, 2, and 3 investments with regards to valuation policy?

"The Valuation Policy has been prepared in the context of FASB Accounting Standards Codification Topic 820 (“ASC 820”), “Fair Value Measurements and Disclosures,” which has been adopted by General Partner for the purposes of valuing the Portfolio Investments of the Fund.  ASC 820 requires that investments be classified as Level 1, 2, or 3 investments. It is anticipated that Level 3 investments will comprise the majority of the Fund’s Portfolio Investments. This Valuation Policy shall be reviewed on an annual basis."

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Valuation policies take various approaches. Assuming that you are referring to the VC Lab Valuation Policy, SAFE or a Convertible Note investments will held at cost on the fund's financials until there is a priced round. Upon a priced ro...

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How do you apply a valuation policy to a portfolio?

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The fund typically adopts a valuation policy after the first close. All portfolio investments will be valued quarterly or yearly depending on the terms of the LPA via the guidelines of the valuation policy.

 -  Mike Suprovici
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what is the difference between TVPI and RVPI?

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TVPI - The amount of money distributed plus the fund’s unrealized value divided by the paid-in capital. RVPI - The amount of the fund’s unrealized value divided by the paid-in capital.

 -  Mike Suprovici
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what is RVPI?

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Residual Value to Paid-In Capital (RVPI) is a term used to measure the residual value of a private equity fund as a multiple of the capital paid in by the investors. The residual value is the current fair value of all assets held by the ...

 - 
Community Member
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Roles and limitations for LPs in portfolio companies

What roles in portfolio companies can LPs play, given their expertise or network? What are the considerations for these roles in order to avoid conflicts of interest?

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It's not uncommon for LPs to take advisory roles in some portfolio companies. In addition, many LPs are often offered direct investment opportunities in follow-on or pro-rata opportunities. 

 -  Mike Suprovici
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What is an investor discount in a SAFE?

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Convertible notes sometimes include a conversion discount, which enables the investor to convert their debt into equity at a lower valuation then new investors in the subsequent financing round. SAFE notes also sometimes include a discou...

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Not able to submit deal memo for review

Unable to submit the deal memo for review. The top right side button is disabled and on tab of submit - clicking on button does not work - tried on both safari and chrome on macbook.

Top answer:

As of now, deal reviews are for Decile Partners members only. Please visit Decile Launch for more information, and/or to apply.

 -  Matt Shields
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Why is there a strong preference by US LPs, for VC firms to be incorporated specifically in Delaware?

Why is there a strong preference by US LPs, for VC firms to be incorporated specifically in Delaware?

Top answer:

Delaware is the domicile of choice for most new and emerging managers world wide for the following reasons: • Cost-effectiveness • Regulatory Clarity and Stability • Efficient Formation and Management • Global Investor Familiarity and Co...

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Applying the Pareto Law for forecasting

So with an understanding of the power law in its concept, does anyone know of an excel formula or model for figuring out what level of growth is needed by the 20% to break-even? the numbers to consider: I have written 50 checks for $100,000 Suppose 40 of them collapse to 0 suppose 8 of them have a 5x exit for me What would the other 2 need to reach as exit value to maintain breakeven, and then growth? What should i be considering in my model for this question? Is this something that can be easily modeled in excel? Has someone put something like this together?

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Your model largely depends on your strategy. It's sub-optimal to create a strategy based on a model. Instead, a model needs to based on the strategy. You can find a good model template here: https://foresight.is

 -  Mike Suprovici
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Where to find trends in the industry?

What are the resources that everyone here uses for staying on top of trends. There are oodles of media out there, which would be most trustworthy for keeping a finger on the pulse? Currently looking at Pitchbook, Carta newsletter, ExecSum Newsletter, and some Fortune Newsletters, anything in particular I should add to this roster?

Top answer:

Pitchbook does not have accurate data for early stage funds or startups. Avoid them. Neither do some of the other sources you mentioned. To get more accurate information on trends, specialize in areas of focus and find industry publicati...

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Getting Started: Lawyer onboarding

My life-long pal is a successful lawyer with a few PE firms on his docket. Since I already have this connection, would it be wise to put down a retainer with his firm for purposes of fund formation et al. before the first day of accelerator?

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Avoid this approach. DO NOT WORK with lawyers that don't specialize with VC fund formation. If the lawyer practices fund formation in other areas besides VC, they are not going to be a good partner. Also, do not spend any time speaking w...

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what are the roles in VC?

Can someone explain this to me like I'm five? The more I read heading into the VC Lab Accelerator the more I feel like a dunce. It seems like everyone is a partner, but what are they doing, I know I am the General Partner and will be responsible for the first fund and distribution of capital. and I know that Limited Partners will be my source of capital. But what about everyone else?  Venture Partner? Not a clue Principal? Thinking this is like a GM or a Director of Product? Managing Partner? Thinking this is like a COO Venture Associate? This I can approximate from investment banking associates Similar to IB, are there VPs of the same style in venture capital? I might be putting the horse in front of the cart here but i want to make sure i am talking the talk at all events.  My goal is to really blow this out of the water, so looking down the road to multiple funds with hundreds of millions in AUM what roles should i be considering for proper organizational structure? Are there any case studies on this? How should I go about breaking apart responsibilities so there is collaboration but no toe-stepping.  Cheers, Eager to Succeed

Top answer:

The venture capital roles are: • Managing Partners • Partners • Venture Partners • Principals • Associates   • Analysts • Interns You can learn more about each role in this article: https://govclab.com/2021/10/28/venture-capital-roles/

 -  Mike Suprovici
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