General VC Questions

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General VC Questions

How to solve for the CEO problem in venture studio?

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Apr 02, 2024

Had a meeting with a qualified LP - he was optimistic about the product side but he was unsure how to solve for the CEO problem in the venture studio. He said founders vastly underestimate founders and you wont be able to find a CEO who really dig...

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Recruiting CEOs is one of the biggest challenges for venture studios. An effective way to solve this is for the Venture Studio to be narrowly specialized in one vertical. This way, the studio can build the expertise, systems, and strateg...

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General VC Questions

What are the most common alterations to the traditional 2/20 compensation model seen in healthcare funds?

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Mar 29, 2024

I asked Decile Base the following question and it responded, "I can't confidently answer this question, please start a new Decile Base post to have this question answered." Below is my question.  What are the most common alterations to the tradit...

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LPs are most familiar with the 2/20 model. If you deviate from this, you will struggle to raise money, especially as an emerging manager. There are many areas to innovate as an emerging manager. Innovating on the standard fee model is no...

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General VC Questions

Should a VC firm avoid investing in public benefit corporations?

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Mar 23, 2024

What terms should we look out for that are particular to PBCs?  Does having PBCs in a portfolio cause concern for LPs?

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Not necessarily. Typically public benefit corporations (PBC) are taxed as a corporation like a C-Corp.  That being said, a PBC status may make it more difficult for the company to secure capital. This is because the founder has to expla...

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General VC Questions

What is the Monte Carlo Simulation and how does it help to model the probability of success during due diligence?

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Mar 21, 2024

I often see various Excel-generated models being included in data rooms.  These models are referred to as a "sensitivity analysis" of various sorts and typically display probability outputs.  I do not understand the significance and how the models...

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Fund managers often show various scenarios for how the fund may perform relative to the investment strategy. As an LP, it’s critical to understand the assumptions behind those projections, because models are rarely 100% accurate. For exa...

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When LPs request a reference, they typically want the name and email rather than a reference letter. However, if you do plan on having a formal reference letter, ideally you want a founder and a co-investor documenting how you helped a ...

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No. Instead, send LPs a PACT. The standard PACT has NDA language prebuilt into the legal template and it's designed for this purpose. Once they sign the PACT, you can disclose more information about the fund. 

 -  Mike Suprovici
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General VC Questions

Tax treatment for LPs

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Mar 08, 2024

I have some LPs asking me if there are potential tax benefits to their LP investment. My gues is that there aren´t, but want to make sure

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Always avoid giving tax advice to your LPs. If you do, you incur enormous liability. Your answer should always be: "Please speak with your tax advisor." For your info only, there are usually tax benefits. But these are different dependi...

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General VC Questions

Where can I find benchmarks for TVPI, MOIC, and IRR?

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Feb 27, 2024

Helping a friend prepare their LP focused investment deck. Their team has a significant historical track record for investment

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The Total Value to Paid-In (TVPI) ratio serves as a critical benchmark in assessing the performance of venture capital (VC) funds, offering insights into the return on investment for Limited Partners (LPs). This ratio is categorized into...

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General VC Questions

What is the importance of a PPM for a new VC firm during fundraising?

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Feb 19, 2024

Hi VC Lab, I'm in the process of establishing a new VC firm, New Light Ventures, focusing on innovative startups. I am considering the need for a Private Placement Memorandum (PPM) to facilitate our fundraising efforts and ensure compliance. Cou...

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PPMs are not common for small emerging manager funds. They are typically more common in very large funds >$50M. The legal cost is not often justified for small fund sizes. Small emerging firms typically do not manage enough money to wher...

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General VC Questions

Is reporting to CB Insights or PitchBook worthwhile for a VC fund?

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Feb 08, 2024

We get a stream of inquiries from these companies that want us to report on our investment activities. Presumably Signal will want this too. I would like to know what the pros and cons of participating in this busywork are. 

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It's not that valuable from a sourcing or fundraising perspective. There is little benefit from being featured in CB Insights & PitchBook. They need your data for reporting reasons. 

 -  Mike Suprovici
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Though there are "standard seed-stage valuation methods" (Comps, VC, Scorecard, Berkus) valuation at early stage (pre-revenue) is a bit more art than science, a balance between optimism and delusion and between strategy and tactics. Fact...

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That's by design. You first select your interest level, then you sign the document. Work through the PACT workflow yourself because it's pretty straight forward. They can't sign without reading the document, which is the 2nd step. So, ju...