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1,434
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PACT Domicile & Management Company

Since at this stage, legal hasn't been engaged, the management company and the fund have not been established. What format of names should be used in the PACT for the management company and fund?  What if the domicile hasn't been decided. Might be US, might be Israel. How do we appropriately amend the PACT where the inserts [ ] are to make sure it is all encompassing?

Top answer:

The PACT is a non-binding letter of intent. You can use your proposed names for your fund in the PACT until your form your entities on first close. With regards to the domicile, given that likely will domicile in Delaware and because it'...

1

LP fundraising

Are there any repercussions in approaching LPs (who invest in many other funds ) with whom relationships were developed while working at a prior fund? 

Top answer:

In general, no. However, if the LP(s) invested your prior fund, it's usually good practice to let the managing partners know that you are planning to reach out to them. 

 -  Mike Suprovici
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1

Why does the GP commit not count towards the first close target amount?

Top answer:

The GP commit is not part of the first close because it is the General Partner's contribution to the fund, which typically amounts to 1% of the target fund size. This commitment is separate from the investments made by Limited Partners d...

2

What are the best free VC fund models out there?

Specifically for showing return expectations per individual startup.

Top answer:

Here is a great model that we recommend which is part of the VC Lab curriculum: https://foresight.is

 -  Mike Suprovici
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If you're planning to transfer an angel investment as a warehouse deal, what should be the minimum size?

Good evening VC Lab team! The GPs of Plaintext have made recent angel investments that are in the $10-25k range each. We're hoping to raise a $10m fund so  these would typically be too small given we plan on making 30-40 investments.  Nonetheless, can/should we use them to fund our 1% GP commitment or as warehouse deals?  Thank you,  Fran

Top answer:

As a general rule of thumb, the minimum transfer of a previous angel investment into a VC fund should be a $25K position at cost. Transfers should resemble, as much as possible, what an actual investment looks like in terms of stage of e...

1

What will LPs audit before they commit?

what is a normal process that LPs do due diligence before they commit?

Top answer:

Various LP Archetypes have significantly different diligence requirements. Here are some high-level requirements: High Net Worth Individuals (HNWIs): Many HNWIs sign PACTs shortly after the initial pitch meeting and don't require a lot ...

1

Deal Warehouse

I invested in a company as a fund employee (SAFT investment) deploying fund capital, but was also given an opportunity to invest my personal capital directly into the company's SAFT offering. Do I need to ask for permission from my prior fund to use my investment portion in the company to warehouse the deal? I think, not, b/c the purchase agreement is between me and the company, but would like to confirm.

Top answer:

If the agreement is between you and the company, then so will the warehouse transaction. 

 -  Mike Suprovici
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1

What should I include in my data room for individuals like HNWI?

Top answer:

With high net worth individuals, the best approach is to not over inform. The more information, the more reasons for the LPs to say no. It's usually sub optimal to present this LP archetype with a data-room as a result. Rather consider u...

1

Attribution Letter Options

Coming out of a CVC that invested on a balance sheet basis not a fund basis, what is a good example on getting an attribution letter? Some options I was thinking: • Letter stating that the investments on my deal sheet were led and executed by me • I have some news clips that quote me on some of the investments

Top answer:

Attribution answers the question of how critical you were in making that specific investment that happen at the fund. For example - did you source the deal from external channels or were given the deal internally due to your particular d...

3

What is the difference between pre seed and seed phase

Top answer:

Below are some high-level definitions with ranges. Please note that the metrics vary by region and sector. Pre-Seed Traction: Idea -> Early Signal of Product-Market Fit Product: Prototype -> Customer Product usage Team: Founders -> Cor...

4

Attribution Letter

Which track record metrics being reported to LPs would require attribution letter and which metrics do not?

Top answer:

All of your previous work at a venture capital fund, including the performance of the portfolio, is normally the intellectual property of that venture capital firm and can not be used without explicit consent. Consent is granted by secur...

1

What is the best term to include in an LPA on the subject of succession of GP's in a 2-person GP fund?

What should the succession term in the LPA read, be stated?

Top answer:

It's not necessary to have one. This is typically handled at the ManCo level, not the fund. Also, see the Limited Operations Mode in the cornerstone LPA, downloadable here, which states:   “Limited Operations Mode. In the event the Limi...

1

Compensation for MBA Interns

Are MBA interns at venture capital funds typically compensated or do they volunteer their time?

Top answer:

This depends on local regulations. In many jurisdictions, unpaid internships are not legal.

 -  Mike Suprovici
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2

How to calculate amount under management

Is the management fee based strictly on the commit amounts, or does it need to factor in reductions in the amount under management resulting from payouts of management fees?

Top answer:

Management fees are typically paid on the basis of committed capital. Fees are normally drawn from the called capital, which will be defined in the LPA. You may find this article, this article and this article helpful. 

 -  Mike Suprovici
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Which region as fund jurisdiction?

Most Blockchain companies are domiciled in offshore jurisdictions. Do we choose jurisdiction, the place where the founders are living (digital nomads), or the country of origin as the place the fund is being launched for the thesis?

Top answer:

For the thesis, use the place where the fund is being launched in and where it plans to make investments. LPs generally do not like to invest in multiple countries, as funds are a pass through vehicle. Most LPs prefer to invest in a spec...

1

What factors should I take into account when deciding fund size?

Top answer:

For new managers with limited investing experience, the fund size should be $5 MM to $10 MM in the developed world and $2.5 to $5 MM in the developing world. If a new manager has extensive angel experience with strong returns or venture ...

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What do you think about onboarding a connection from a bigger fund as a Venture Partner?

Is it advisable / feasible to onboard a connection from a bigger fund operating in the same vertical as Venture Partner for a solo-GP, angel stage firm ?

Top answer:

It's unlikely that the large firm will agree to this arrangement with the VP due to conflicts of interest. It also works vice versa where it creates conflicts of interest for your fund and you will need to disclose it.

 -  Mike Suprovici
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