General VC Questions

Your fund size should be the minimum target. So in this case $10mm is the minimum target and you can oversubscribe it to a hard cap of say $15 or $20m. The first thing that you should do is to see the conversation through with the LP and...

Your fund size should be the minimum target. So in this case $10mm is the minimum target and you can oversubscribe it to a hard cap of say $15 or $20m. The first thing that you should do is to see the conversation through with the LP and get them to a close. There is a long way to go between a verbal yes (10% chance of closing) and a wire.  Until then, it's not worth it for you to solve this issue. For example, it's possible that the LPs may want to invest under special unfavorable conditions that you should not entertain. For example, an LP may require that you invest their money in a certain geography or type of company. In this case you would need to refuse this LP because the ask it's not viable operationally and has major ethics issues.   Now let's say they do decide to sign and commit. In this case, let them in for a smaller ticket so that they don't own more then 25% of the fund. Then, as you oversubscribe the fund, they can increase their position.

The financial statement reports do not include a Cash Flow Statement. With that being said, a Cash Flow Statement can be produced within Hub and exported if needed.

The financial statement reports do not include a Cash Flow Statement. With that being said, a Cash Flow Statement can be produced within Hub and exported if needed.

Yes - cost and fair market value can differ. Cost in this context refers to the amount initially paid for an investment, while fair market value (commonly referred to as FMV) is the current market value of that investment. Changes in mar...

Yes - cost and fair market value can differ. Cost in this context refers to the amount initially paid for an investment, while fair market value (commonly referred to as FMV) is the current market value of that investment. Changes in market conditions, performance of the investment, financings, and other factors can cause the fair market value to be higher or lower than the initial cost paid. 

What an investor can ask in terms of a percentage of equity or an investment amount depends nearly entirely on variables, so it is impossible to generalize. Some factors to consider for startup: • Geography (US, LatAm, etc.) • Market (B...

What an investor can ask in terms of a percentage of equity or an investment amount depends nearly entirely on variables, so it is impossible to generalize. Some factors to consider for startup: • Geography (US, LatAm, etc.) • Market (B2B, B2C, Enterprise, etc.) • Sector (Deeptech, Agritech, AI, etc.) • Stage (seed, Series A, etc.) • Size and type of financing round • Runway (cash in bank) Some factors to consider for investor: • Name Brand • Investment strategy/stage • Typical check size • Value-add beyond $$$ Just to contrast, emerging managers of small venture capital funds (say $5M total) may be able to invest $100K into early pre-seed type deals, but may not have leverage to get anything in addition. If we're talking about Sequoia Capital, then they might invest millions at a later stage, get on the startup's board of directors, etc.  Regardless, it's important for founders to maintain control of the company as long as possible to avoid financing risk and optimize for the best outcome - so percentages are often highly negotiated. Founders should take care to model the capital journey, as there are a number of models available and many variables can affect them as the startup gets built. 

Generally speaking, an Advanced Subscription Agreement (commonly known as an ASA and designed for use in the United Kingdom), is conceptually similar to a SAFE (originally designed for use within the United States).  However, there are ...

Generally speaking, an Advanced Subscription Agreement (commonly known as an ASA and designed for use in the United Kingdom), is conceptually similar to a SAFE (originally designed for use within the United States).  However, there are a few fundamental differences to be aware of, though these may vary depending on how the ASA is drafted - here are a few notable ones: • The ASA was designed to be eligible for certain tax advantages under the Enterprise Investment Scheme (EIS and the Seed Enterprise Investment Schemes (SEIS); • The ASA has a "Long Stop" term, essentially a date before which a conversion event (as defined in the ASA) must happen - otherwise the ASA automatically converts to equity on a pre-agreed price (this is not a concept in standard SAFES); • In order to qualify for the aforementioned tax advantages, it appears that the Long Stop date must be no later than 6 months after the issuance of the ASA; • 6 months may not be sufficient time for a startup to reach a qualifying conversion event (i.e. a preferred equity financing) - so this is something to carefully consider. *Please consult UK tax advice and/or counsel should you have questions about a specific set of circumstances.   

The best article to read about distribution waterfall is this one: Venture Fund Economics 

The best article to read about distribution waterfall is this one: Venture Fund Economics 

Do not form your fund and send LPAs to limited partners prior to you having at least $1m in PACTs signed or 10% of the fund, whichever is greater. This is a major mistake with dire consequences.  Also, please note that the arrangement th...

Do not form your fund and send LPAs to limited partners prior to you having at least $1m in PACTs signed or 10% of the fund, whichever is greater. This is a major mistake with dire consequences.  Also, please note that the arrangement that is suggested above has a very low probability of success and will possibly trigger broker-dealer issues as well.  If you need working capital, you can take investors in the GP entity. You can determine the valuation on the GP entity by working backwards from a low or middle case scenario of the fund model. So, doing some back of the napkin math, if your model is projecting that you will do a 2x on $5m fund - the valuation of the GP entity (the carry) is $1m. So, an investor can purchase 10% of the GP entity for $100k. That $100k will flow through to the ManCo (you) as working capital.  That being said, just because you can do this, it doesn't mean that you should. It's very rare that outsiders (including LPs) can help you with fundraising in a Fund 1. The LPs that invest in Fund 1s are mission aligned and are investing in the Managing Partner because they know and trust them. 

Mercury Bank and Grasshopper Bank are good options. 

Mercury Bank and Grasshopper Bank are good options. 

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.

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.

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. 

It is generally not recommended for an LP to also be a Venture Partner - it could introduce conflicts of interest but the LP may also lose their "limited" status and corresponding protection from liability in the case an LP is involved i...

It is generally not recommended for an LP to also be a Venture Partner - it could introduce conflicts of interest but the LP may also lose their "limited" status and corresponding protection from liability in the case an LP is involved in decision-making for the Fund. 

Hi John, in that situation you can manually move them to the appropriate stage in the closing pipeline. This can be done by checking the box next to the LP's name and changing their stage or by simply clicking on the dropdown menu button...

Hi John, in that situation you can manually move them to the appropriate stage in the closing pipeline. This can be done by checking the box next to the LP's name and changing their stage or by simply clicking on the dropdown menu button underneath the column 'STAGE' and changing the stage.

Decile Hub manages the signature process for members of Decile Launch and Decile Partners.  Venture capital funds do not use a SHA. Limited partners sign a Limited Partner Agreement, or LPA. They normally also sign a Subscription Agreem...

Decile Hub manages the signature process for members of Decile Launch and Decile Partners.  Venture capital funds do not use a SHA. Limited partners sign a Limited Partner Agreement, or LPA. They normally also sign a Subscription Agreement, which is not required when using the Cornerstone LPA.  

In my view, it's your job as VC to help your company. If you have expertise in this area, just help them without charging them. It's part of your value add.  It is a bit of a conflict if you charge them and it may require some sort of d...

In my view, it's your job as VC to help your company. If you have expertise in this area, just help them without charging them. It's part of your value add.  It is a bit of a conflict if you charge them and it may require some sort of disclosure.