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While we can't speak specifically as to an FCA regulated fund or being the nominee thereof - there are general principles to keep in mind.   Typically, vehicles may not be considered as being helpful for a "first fund" if:  • the fund m...

While we can't speak specifically as to an FCA regulated fund or being the nominee thereof - there are general principles to keep in mind.   Typically, vehicles may not be considered as being helpful for a "first fund" if:  • the fund managers are not in complete control (and also own) of all of the fund's entities; • there is no management company (firm/brand) that will be carried over; • the fund is part of (or connected to) a larger structure (or regulatory regime) where there are entities involved that the fund managers do not control or own; AngelList is one example - as investors do not own or operate the vehicles and are considered "consultants", AngelList vehicles are not considered helpful as a track record for a "first fund" (though they may be helpful for an angel investing track record, potentially). 

General Partner Entity Background Information The General Partner Entity is governed by the Stewardship agreement. The agreement authorizes and issues two types of Shares: Class A and Class V. Class A Shares are issued to the Management...

General Partner Entity Background Information The General Partner Entity is governed by the Stewardship agreement. The agreement authorizes and issues two types of Shares: Class A and Class V. Class A Shares are issued to the Management Company  (“ManCo”) and to any Venture Partners who may come on board.  The Stewardship Agreement provides for a reserved Share Pool for this purpose.  Class V Shares are designed for investors in the GP entity. The Stewardship Agreement provides that the sale of Class A shares will result in the automatic conversion of the shares to Class V shares. This provides a mechanism for the Management Company to sell its shares to fund the operations of the Management Company. What are the differences between Class A and Class V Shares?  Generally speaking, Class A Shares are issued to: • ManCo (with no vesting) • Venture Partners (with vesting) • General Partners who are not part of the Management Company Class A Shares have voting privileges and are generally designed for those active in the management of the fund.  Class V Shares are non-voting and are designed for passive investors.  Why do Class V Shares have Preference? The “Preference” given to Class V Shares has a  different purpose from a liquidation preference that you may see in startup term-sheets. Class V Shares simply provide that upon distributions, its holders have their percentages carved out separately before Class A holders. Given that the GP controls all distributions, in practice, distributions happen at the same time.  So then why do Class V Shares need to have “Preference”? The “Preference” has two purposes: 1. ensures that investors in the GP receive distributions at the same time as the principals given that Class V Shares do not have any voting rights or other protections; and 2. establishes a different class of shares which may be helpful for tax purposes. If there is a sale of Class A shares that convert to Class V, this can mitigate the effect of the transaction on the value of the Class A shares.  This may be important if the GP needs to issue Class A shares to venture partners at a later date. Why do Class V shares have a fixed percentage?  In general, investors in the GP are expecting a return based on the carried interest from the fund and not the operations of ManCo. This protects the investors in the GP from having their interests diluted.   How do distributions to Class A Shares and Class V Shares work?  All distributions are at the discretion and determined by the ManCo. A typical cap table would include the following: • 850,000 Class A Shares issued to ManCo. • 100,000 Class A Shares reserved for the Share Pool. • 50,000 Class V Shares issued to Decile Group. Distribution Examples: Example 1: If ManCo determines that $1 million will be distributed and there are no shares issued from the Share Pool, then the distributions would be as follows: • $950,000 to ManCo (all the proceeds after deducting the Class V distribution)($1.11765 per share). • $50,000 to Decile Group ($1.00 per share). • Share Pool does not receive any distribution because there are no shares issued. Example 2: If ManCo determines that $1 million will be distributed and there are 50,000 vested shares issued from the Share Pool to Venture Partners, then the distributions would be as follows: • $897,222.22 to ManCo (850,000 divided by 900,000 times $950,000)($1.0555 per share). • $52,777.78 to Venture Partners (50,000 divided by 900,000 times $950,000)($1.0555 per share). • $50,000 to Decile Group (remains fixed at 5%; $1.00 per share). Why does Decile Group get Class V Shares?  First, re-review this: https://decilegroup.com/decile-launch.  For small funds set up by emerging managers, most institutional grade providers will charge at minimum $50k/year+ and they are just doing fund administration which consists of accounting and government filings. Though this is a very fair price for a complicated financial product, these offerings typically do not include business advice, deal review, treasury, etc. - and no one is there to tell you if you’re doing something sub-optimal. With Decile Group, you’re getting institutional grade operations at a significantly lower cost than the market, and you own your fund. For our model to work, we need your fund to achieve Decile performance to recoup our significant time and cost investment. We are unlikely to recoup the delta if your fund has average performance - we don’t want you to be average! This model aligns all of us around your success and we have been very thoughtful in these agreements to create the conditions to give you the best chance to achieve top decile performance (i.e. Class V being non-voting etc…).

A deal memo can help formalize your investment decision process. It provides an artifact to reference years later when you go back to look at your portfolio outcomes, exemplifies your process and values as a VC, and provides a vehicle fo...

A deal memo can help formalize your investment decision process. It provides an artifact to reference years later when you go back to look at your portfolio outcomes, exemplifies your process and values as a VC, and provides a vehicle for bringing on co-investors (or offering the deal to your LPs if there is room in the round). Hub provides a deal memo framework with template questions, ratings and attachments and links - this can be used for collaboration across your investment team, exported as PDF and shared as desired. Check out the VC Lab article: Venture Capital Deal Memo

For your liquidity scenarios, it's not necessary to distinguish between M&A and IPO. Build your liquidity scenario based on the exit value. In other words, if a high exit is $1b in your model, just put a footnote that it could be derived...

For your liquidity scenarios, it's not necessary to distinguish between M&A and IPO. Build your liquidity scenario based on the exit value. In other words, if a high exit is $1b in your model, just put a footnote that it could be derived via an M&A or an IPO.

It is recommended that managers continue to source and assist Rockstar CEOs to invest in while working to close a fund. The ideal situation is to help startups aligned with your Thesis for four to six months before they need capital, and...

It is recommended that managers continue to source and assist Rockstar CEOs to invest in while working to close a fund. The ideal situation is to help startups aligned with your Thesis for four to six months before they need capital, and then, when they need capital, your fund is closed and ready to invest. Since closing a fund is time consuming with a lot of uncertainty, it is recommended that you do not make any promises about funding or the timing of funding to any startups that you are helping, especially before your fund is closed.

A capital call is a request made by a venture capital fund to its investors to contribute capital to the fund. This is typically done when the fund needs additional funds to make investments or to cover its ongoing expenses. Capital Call...

A capital call is a request made by a venture capital fund to its investors to contribute capital to the fund. This is typically done when the fund needs additional funds to make investments or to cover its ongoing expenses. Capital Calls are commonly paid by the Limited Partners as defined by the Limited Partner Agreement (LPA). • Step 1 – Assess Capital Requirements: Fund managers must first determine the need for additional capital, which may arise due to new investment opportunities or ongoing fund expenses, such as management fees, legal and accounting fees, and other operational costs. • Step 2 – Issue Capital Call Notice: Upon assessing capital requirements, fund managers issue a capital call notice, typically through email or other electronic means. This notice informs investors of the capital call amount, payment deadline, and consequences of non-compliance with payment terms. • Step 3 – Monitor Investor Responses: Fund managers closely monitor investor responses to ensure timely capital contributions. If an investor fails to make the required payment, the management team follows up to determine the reason for the delay and may seek alternative funding sources if necessary. • Step 4 – Limited Partners Contribute Capital: Investors, primarily Limited Partners, contribute their pro-rata share of the capital call amount by the specified payment deadline. Fund managers reconcile the received capital against bank records to confirm accurate and complete funding. For more information, read the following: https://govclab.com/2023/05/07/vc-capital-calls/

Generally speaking, investing in non-voting shares of a pre-seed company is not recommended nor best practice.  Notwithstanding the traction and founder, if a Delaware domiciled startup is raising funding in a typical pattern, it typica...

Generally speaking, investing in non-voting shares of a pre-seed company is not recommended nor best practice.  Notwithstanding the traction and founder, if a Delaware domiciled startup is raising funding in a typical pattern, it typically raises on a SAFE (or similarly structured convertible instrument) - these will convert into Preferred Equity upon the company raising a priced round (Series Seed or Series A). Preferred Equity will most definitely have voting rights (in fact most of the time there is a separate lengthy legal agreement spelling these rights out). If such a startup is offering common stock to venture capital firms, with the added stipulation that these shares do not have voting rights, it warrants caution. 

On the quantitative side, cash on cash returns is the number one metric that emerging managers working on Fund II or Fund III are evaluated on, followed by unrealized markups. On the qualitative side, operating drama in previous funds, s...

On the quantitative side, cash on cash returns is the number one metric that emerging managers working on Fund II or Fund III are evaluated on, followed by unrealized markups. On the qualitative side, operating drama in previous funds, such as partner disagreements or firm turnover, affect the decisions by prospective LPs. The Thesis-alignment of portfolio investments, as well as any notable portfolio companies, are factored in. The overall quality of operations, including Deal Memos and reports, also matter. It is safe to assume that larger limited partners in Fund II or Fund III will do extensive due diligence on any previous funds.

Generally speaking, venture funds do not structure themselves as LLCs - we typically see the following multi-entity structure for Delaware domiciled funds: • Management Company - LLC • General Partner entity - LLC • Fund - Limited Partne...

Generally speaking, venture funds do not structure themselves as LLCs - we typically see the following multi-entity structure for Delaware domiciled funds: • Management Company - LLC • General Partner entity - LLC • Fund - Limited Partnership Please read this for more information: https://govclab.com/2022/02/09/the-ideal-number-of-lps-in-a-vc-fund/

You can take a look at Sydecar. Some folks in the VC Lab community had a good experience with them. We also offer Decile SPV to  Decile Partners customers. 

You can take a look at Sydecar. Some folks in the VC Lab community had a good experience with them. We also offer Decile SPV to  Decile Partners customers. 

Please go here to see the open source Venture Partner Share Agreement Template we published: https://govclab.com/2022/03/10/venture-share/

Please go here to see the open source Venture Partner Share Agreement Template we published: https://govclab.com/2022/03/10/venture-share/

Sydecar is not an option for VC firms. So don't waste any time on this matter until at least $1m US is hard circled via PACTs. This is one of the last decisions that a fund manager should make.  That being said, since you seem to be a C...

Sydecar is not an option for VC firms. So don't waste any time on this matter until at least $1m US is hard circled via PACTs. This is one of the last decisions that a fund manager should make.  That being said, since you seem to be a Canadian citizen, it will be much more beneficial for you to be domiciled in Ontario. 

The ownership target is dependent on the manager's thesis and their model. For example, at the pre-seed stage, it's very common to see a higher volume of investments to compensate for the risk. However, the average valuations of the inve...

The ownership target is dependent on the manager's thesis and their model. For example, at the pre-seed stage, it's very common to see a higher volume of investments to compensate for the risk. However, the average valuations of the investments will vary widley by the sector and region. For example, valuations are lower in emerging eco-systems vs established ones. I recommend you work backwards here. Start with understanding the average valuation in your eco-system. Then, review the exit values of previous startups that are on thesis. Next do some back of the napkin math to figure out what type of exit you would need for your average ticket to return 1-2x the entire fund size. Finally, use all of this information to figure out your ownership target. This approach will give you a good start. Then, you can take this to the next level by plugging into a more robust fund model like this one: https://foresight.is/vclab/model 

Sovereign wealth funds are commonly prohibited from investing in new managers or emerging managers, and they typically have long and complicated investment approval processes that can take months or years. In addition, they are known to ...

Sovereign wealth funds are commonly prohibited from investing in new managers or emerging managers, and they typically have long and complicated investment approval processes that can take months or years. In addition, they are known to ask for side letters on investment focus and special economics. As a general rule, it is recommended to avoid pitching them until the fund have a proven track record and can negotiate from a position of strength. 

Start with fund models from Foresight https://foresight.is/venture-fund-model-annual/ Exit potential from pre-seed and seed is more art than science. You're looking for team and product potential to scale dramatically to dominate (or cre...

Start with fund models from Foresight https://foresight.is/venture-fund-model-annual/ Exit potential from pre-seed and seed is more art than science. You're looking for team and product potential to scale dramatically to dominate (or create and dominate) a large market segment, with all the steps along the way including likely raising substantial additional capital. CrunchBase, PitchBook and CBInsights can provide data on successful exits, though M&A data can be sparse. Can you discern potential from a deck - maybe, though most likely not. 75-90% of seed startups fail. As a VC, your job is to spot and nurture the true potential of companies, sometimes the deck sucks and you need to look deeper. Emerging managers outperform as they can look deeper and apply domain expertise to find the rockstars, rather than delegating filtering to associates.

You need to follow the general solicitation laws of the countries where you and your various counterparties are located. Here are two guides to help you navigate these matters. https://govclab.com/2022/06/28/general-solicitation/ https:...

You need to follow the general solicitation laws of the countries where you and your various counterparties are located. Here are two guides to help you navigate these matters. https://govclab.com/2022/06/28/general-solicitation/ https://govclab.com/2023/05/13/leveraging-connectors/

No. This is a bad idea. Avoid placement agents at all costs. First - the reputable placement agents rarely work with new and emerging managers.  Second - the vast majority of placement agents don't have your best interest in mind. Third ...

No. This is a bad idea. Avoid placement agents at all costs. First - the reputable placement agents rarely work with new and emerging managers.  Second - the vast majority of placement agents don't have your best interest in mind. Third - there are major broker dealer issues with this type of arrangement in many jurisdictions.  There are no shortcuts to fundraising. It's very rare that random LPs that are not 1st or 2nd degree connection will invest in first closes or even Fund 1s. If you don't have the network, you're not ready to start a fund. VC is a network business. You need an extensive network to be succesful in VC both for fundraising and for deal-flow.  

Value Add - Describe your value add in more detail, possibly with some examples on how you have executed in the past.  Thesis - Add your 1 sentence thesis here and nothing else. Track Record - Demonstrable stats to show your previous ...

Value Add - Describe your value add in more detail, possibly with some examples on how you have executed in the past.  Thesis - Add your 1 sentence thesis here and nothing else. Track Record - Demonstrable stats to show your previous investment track record only with investments that are on thesis. 

There have been some studies in the past on this topic like this one in from MIT. That being said, there has bee very little research on this topic and the number of participants in any of these studies are limited. So, in other-words, t...

There have been some studies in the past on this topic like this one in from MIT. That being said, there has bee very little research on this topic and the number of participants in any of these studies are limited. So, in other-words, there is no much information out there that is credible.