3

GP carry raise: How can one perform valuation of a percentage of GP carry prior to fund closure or returns from fund (when DCF can be applied)?

Asked by:
Community Member
1
0
0
Dec 01, 2023
An LP has already signed my LPA and is bringing others into my fund as investors. He shared that a condition of bringing others is that I be full-time over the fund since this is the only way one can really run a successful venture. I agree, however I require more than my management fee provides for living expenses since Fund 1 is small. Even if I oversubscribe, it wont get us to the amount I need. My question: Investor is willing to provide me cash now for a percentage of carry as a one time payment to help support my transition to VC full time. He suggested I valuate a percentage with rationale and he will help me raise the capital  for the GP carry (NOTE: this is not Management Company carry, ONLY fund 1 GP carry and has been clarified with investor. Greatly appreciate guidance on how to valuate this.
1 answer
Accepted Answer
Dec 01, 2023
As a precautionary warning, any legal agreements pertaining to a Fund (such as the LPA) should not and cannot be signed until, 1) the Fund's entities are officially filed and formed with the appropriate agencies in its domicile, and 2) the Fund's entities' operating agreements (aka governing agreements) are finalized and executed. Should things be done out of order when it comes to fund formation, it typically creates major issues that are expensive to fix - and in some cases these issues are practically unfixable. The same pertains to startup formation, though at a different scale.
Dec 02, 2023 4:43pm
Thanks both! Very helpful.
Community Member
Dec 04, 2023 10:21pm
Add a comment

Log In or Sign Up

Please Log In, or Sign Up to participate in the discussion.

Apply to VC Lab Cohort 15

Get full access to Decile Base and the Decile Hub venture platform for free by joining the VC Lab program.

Apply to VC Lab Cohort 15