All Questions

No. Managers should only call the amount of capital that they need for current investments, fund expenses, and management fees. Excess capital sitting in a bank account without being deployed reduces the IRR of the fund. As a rule, manag...

No. Managers should only call the amount of capital that they need for current investments, fund expenses, and management fees. Excess capital sitting in a bank account without being deployed reduces the IRR of the fund. As a rule, managers should keep fund bank account balances low and call capital as needed.

• Standard practice is to keep money in the fund account and deploy quickly to invest into companies.  • Investment instruments are not covered by the FDIC nor the CDIC. • First time fund managers for Fund I or Fund II should not have co...

• Standard practice is to keep money in the fund account and deploy quickly to invest into companies.  • Investment instruments are not covered by the FDIC nor the CDIC. • First time fund managers for Fund I or Fund II should not have consistent material funding amounts sitting idle in their accounts. Fund III and Fund IV are more aligned with a consideration for a "Sweep Repo" as this mechanism will require material cash minimums to maintain to actually benefit.   Deploying idle investment capital from LPs into investment instruments is NOT standard, so we don't recommend doing this until Fund III or Fund IV is being managed.

We have received feedback from the community that some managers increased conversion when they used the word form instead of PACT in their verbal conversations and in emails.

We have received feedback from the community that some managers increased conversion when they used the word form instead of PACT in their verbal conversations and in emails.

The table in this blog post is a good start: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/ There are no best practices here. Every fund is different. For example, a Deep Tech fund many need to spend a lo...

The table in this blog post is a good start: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/ There are no best practices here. Every fund is different. For example, a Deep Tech fund many need to spend a lot of money to perform heavy IP diligence on an investment and it may be justified as a fund expense. Another fund may be required by LPs to have an audit and that is also the justified as a fund expense. Finally, every fund expense has an opportunity cost because that is capital that could be deployed into a startup. Therefore, most new and emerging GPs with small fund-sizes that are optimized for the carry try to keep fund expenses to a minimum. 

Ontario is an internationally recognized domicile. Alberta, BC and Quebec may make sense if all LPs and investments are from that region. Otherwise, Ontario is the recommended domicile because it's a hub. This means that there is a good ...

Ontario is an internationally recognized domicile. Alberta, BC and Quebec may make sense if all LPs and investments are from that region. Otherwise, Ontario is the recommended domicile because it's a hub. This means that there is a good market of experienced and specialized service providers, unlike the other provinces. 

See the diagram below: [Canada Cornerstone Structure.png]

See the diagram below: [Canada Cornerstone Structure.png]

There are not really "pros and cons" for naming a Fund's entities - however there are conventions that make it easy to follow (see below). Generally speaking though, Firms/Funds do not have "series" like SPVs might - unless one is refer...

There are not really "pros and cons" for naming a Fund's entities - however there are conventions that make it easy to follow (see below). Generally speaking though, Firms/Funds do not have "series" like SPVs might - unless one is referring to a type of Fund of Funds structure (or potentially vehicles managed by AngelList). Whether a corporate suffix has periods or no periods is also generally immaterial.  With respect to a fund thesis, a Fund 1 and a Fund 2 can have different ones - or the Fund name can specify the name of a vertical, region, etc. Standard naming conventions: Management CompanyThe Venture Capital Firm’s “Brand”The Management Company is the entity that endures across Fund 1, Fund 2, Fund 3, etc. - it is owned by the fund managers and typically employs only those analysts and other professionals working across all of the firm’s funds.  Example Names and Conventions Example Capital, LLC Example Capital Management, LLC Example Ventures, LLC Example Ventures Management, LLC General Partner EntityThe Entity that Manages the FundThe General Partner entity (important to note this isn’t referring directly to the fund managers, as is commonplace) is owned (mostly) by the Management Company. It manages the activities of the Fund, in a general sense. Venture Partners and any other advisors who are working only on the specific Fund managed by the specific General Partner entity will sit on this entity’s cap table, in most cases.  *Note that a new General Partner Entity is set up for each Fund. The General Partner Entity for Fund I typically is not numbered, though General Partner Entities for subsequent funds are often denoted by arabic numerals starting with 2.  Example Names and Conventions Example Capital GP, LLC Example Ventures GP, LLC Limited Partnership (the actual Fund)The actual “Fund” where the Limited Partners sitThis is the Fund itself, where the Limited Partners invest into and portfolio investments are deployed from.  *Note that a new Limited Partnership  is set up for each Fund, usually denoted by a roman numeral.  Example Names and Conventions Example Capital Fund I, LP Example Ventures Fund I, LP

It's not common to see hurdle rates for funds less then $30m, even in the EU. Small funds are optimized for the carry, not for fees. So, when you insert a hurdle, you're going to have mis-aligned incentives and expectations with your LPs...

It's not common to see hurdle rates for funds less then $30m, even in the EU. Small funds are optimized for the carry, not for fees. So, when you insert a hurdle, you're going to have mis-aligned incentives and expectations with your LPs because they are reducing your carry with this approach AND forcing you to use a European Waterfall vs American which is much less advantageous for small funds. To answer your question: There is no bench mark for VC. It's super uncommon for VCs to have hurdles. For the Private Equity asset class, hurdles are usually in the 5% - 10% range. But again, these are typically applied to funds in the $100m+ range. IMPORTANT: Avoid hurdles at all costs. Read into the intent of the LP rather then the 'ask'. Most LPs that are asking for this will be bad LPs because they are not aligned with your goals and expectations. You will need to mange these bad LPs for 10+ years. 

The platform currently integrates with Gmail, Microsoft Office 365 and SendGrid. We also recently released a Zapier integration for deal-flow and we have a number of additional integrations on the roadmap. 

The platform currently integrates with Gmail, Microsoft Office 365 and SendGrid. We also recently released a Zapier integration for deal-flow and we have a number of additional integrations on the roadmap. 

In most cases, your suggested approach is the right one. There are some exceptions such as when the founders did something bad or unethical, but in general, your approach is sound. With insider rounds, the CEO needs to drive this proce...

In most cases, your suggested approach is the right one. There are some exceptions such as when the founders did something bad or unethical, but in general, your approach is sound. With insider rounds, the CEO needs to drive this process. They should have an idea of the construction of the round and terms. Then, they should speak 1:1 with trusted investors like yourself for feedback on the round. Then, they can go to all other insiders with the proposal. Consider proactively reaching out to the CEO to help them navigate this.

It's difficult to answer this question without more context on the fund strategy, however  HSBC could be an option here. 

It's difficult to answer this question without more context on the fund strategy, however  HSBC could be an option here. 

There are lots of ways to go about this, but one good way is to start with the focus of the thesis. Then, segment the network around this focus. Next, try to identify founders within the network and people that can help those founders. F...

There are lots of ways to go about this, but one good way is to start with the focus of the thesis. Then, segment the network around this focus. Next, try to identify founders within the network and people that can help those founders. Finally, from the bottoms up try to calculate the value that those individuals can create together. 

Here are the main considerations: 1. Venture funds can't receive advisory shares. So, if the founder makes you an advisor, you can't transfer that ownership to the fund. 2. If you are an advisor or consultant, that will be a conflict of...

Here are the main considerations: 1. Venture funds can't receive advisory shares. So, if the founder makes you an advisor, you can't transfer that ownership to the fund. 2. If you are an advisor or consultant, that will be a conflict of interest with your fund. 

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.