All Questions

In the US, offerings of securities must be registered with the SEC or made pursuant to an exemption from registration. Regulation S provides an exemption for issuers to offer and sell securities in offshore transactions.  Regulation S ha...

In the US, offerings of securities must be registered with the SEC or made pursuant to an exemption from registration. Regulation S provides an exemption for issuers to offer and sell securities in offshore transactions.  Regulation S has two general conditions: (i) the offer or sale must be made in an offshore transaction; and (ii) there are no “directed selling efforts” – activity which could have the effect of conditioning the market in the United States.  VC funds can consider whether a certain offering of its fund interests outside the US can qualify for exemption under Regulation S.  VC funds should consult counsel to determine whether an offering qualifies for the Regulation S exemption and whether the offering complies with the laws of the overseas jurisdiction where the offering takes place.

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...

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 include listed stocks, bonds, funds, or any assets that have a regular mark-to-market mechanism for setting a fair market value, Level 2 investments use observable inputs other than regular mark-to-market mechanisms, and Level 3 investments use unobservable inputs. These standards ensure consistency and transparency in financial reporting.

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.

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.

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...

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) could be one of the causes for a General Partner to make such a decision.  While it's an edge-case, should a General Partner choose to go this route, they would be obligated to liquidate the Fund's assets and distribute the the proceeds to Limited Partners (see Cornerstone 6.3) - so it generally isn't considered "too risky" for the asset class.  It is not industry standard for LPs to need to approve of such a decision by the General Partner - however per the Cornerstone a majority of the LPs can also put the Fund into limited operations mode. 

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...

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-distributed, particularly in a fund with "deal by deal" distribution; or • In lawsuits where the Fund must indemnify.  Please now refer to Cornerstone V3: https://govclab.com/2024/02/04/cornerstone-lpa-v3/

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...

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 round, subsequent equity round valuations will be used to value the asset. Below are the definitions of the Levels: Level 1 investments are quoted prices (unadjusted) in Active Markets for assets or liabilities that the reporting entity has the ability to access at the valuation date. Level 2 investments are inputs other than quoted prices included within Level 1 Inputs that are observable for the asset or liability, either directly or indirectly. Level 3 investments are unobservable inputs for the asset or liability. Level 3 Inputs should be used only to the extent that Level 1 Inputs and Level 2 Inputs are not available. Level 3 Inputs may be relied upon when little to no market activity exists for a particular asset or liability.

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.

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.

As it pertains to the Cornerstone LPA 2.0, yes. 

As it pertains to the Cornerstone LPA 2.0, yes. 

Markdowns are determined by the valuation policy that the fund adopts. 

Markdowns are determined by the valuation policy that the fund adopts. 

Preferred stock rounds are typically raised via pre-money valuations. 

Preferred stock rounds are typically raised via pre-money valuations. 

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.

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.

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 ...

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 fund, while the paid-in capital by the investors is the total of all contributed capital up to that time. By itself, RVPI is a useful measure for investors in gauging the current value of a fund’s assets relative to the initial investment. RVPI also provides a perspective on how much value remains in the fund vs distributions the investor may already have received. RVPI can also be combined with the Distributed Value to Paid-in Capital (DPI) to assess the Total Value to Paid-in Capital (TVPI) of the fund. RVPI will change as the residual assets in the fund are valued each quarter. RVPI is also reduced as assets are realised through exits and capital is distributed to investors. A fund’s RVPI will therefore reduce to zero at the end of the fund’s life.

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. 

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. 

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...

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 discount rate which provides investors with a lower price per share upon conversion.

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

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

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...

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 Confidence • Prolific Startup Ecosystem • Tax Appeal For more details, please review this article: https://govclab.com/2023/06/10/delaware-is-the-vc-domicile-of-choice/

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

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

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...

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 publications and data. In addition, check the blog on govclab.com for VC related trends. 

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...

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 with service providers or lawyers until you have at least $1m in hard circled commitments via signed PACTs from LPs. Speaking with vendors before having signed PACTs is one of the biggest mistakes we see new managers make.