Fund Economics

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The process to apply the Valuation Policy to a portfolio of 20 startups each quarter would involve several steps.  First, you would need to gather the latest financial and operational data from each startup. This could include recent fi...

 -  Haw Kuo
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Fund Economics

How often are portfolio companies revalued?

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Dec 05, 2023

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At a minimum, portfolio companies should be reevaluated on a quarterly cadence. This ensures the most up to date metrics are being reported to Limited Partners.

 -  Rob Del Prete
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Typically, VC Firms will determine a company's initial FMV as the cost in which it was purchase as the purchase price is usually done at the company's latest FMV.

 -  Rob Del Prete
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Fund Economics

Does investing via a SAFE mean that the investment won't have a set valuation until a priced round?

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Edited by:
Haw Kuo
on December 6, 2023
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Dec 05, 2023

On top of that, let's assume an investment in the seed round is made via SAFE and the share price at that stage is $0.15. In the Seed round, a priced investment comes in and the new share price is $3. In this case, is the investment from the Seed ...

Top answer:

Yes, investing via a SAFE (Simple Agreement for Future Equity) means that the investment won't have a set valuation until a future priced round - there is also no share price set during a seed round comprised of SAFEs.  The valuation (a...

 -  Haw Kuo
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Fund Economics

what is the difference between TVPI and RVPI?

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Nov 27, 2023

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TVPI - The amount of money distributed plus the fund’s unrealized value divided by the paid-in capital. RVPI - The amount of the fund’s unrealized value divided by the paid-in capital.

 -  Mike Suprovici
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Fund Economics

what is RVPI?

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Nov 27, 2023

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Residual Value to Paid-In Capital (RVPI) is a term used to measure the residual value of a private equity fund as a multiple of the capital paid in by the investors. The residual value is the current fair value of all assets held by the ...

 -  Community Member 1 Show more
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Fund Economics

Applying the Pareto Law for forecasting

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Nov 21, 2023

So with an understanding of the power law in its concept, does anyone know of an excel formula or model for figuring out what level of growth is needed by the 20% to break-even? the numbers to consider: I have written 50 checks for $100,000 Suppo...

Top answer:

Your model largely depends on your strategy. It's sub-optimal to create a strategy based on a model. Instead, a model needs to based on the strategy. You can find a good model template here: https://foresight.is

 -  Mike Suprovici
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• Standard practice is to keep money in the fund account and deploy quickly to invest into companies.  • Investment instruments are not covered by the FDIC nor the CDIC. • First time fund managers for Fund I or Fund II should not have co...

 -  Angela Hauke
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Fund Economics

Can a sample spreadsheet be produced for fund expenses paid yearly or over the term of the fund?

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Nov 10, 2023

Following the table here: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/ What are typical caps and best practices (which are limited and unlimited?) and for different size funds. Also a bit confusing that somethin...

Top answer:

The table in this blog post is a good start: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/ There are no best practices here. Every fund is different. For example, a Deep Tech fund many need to spend a lo...

 -  Mike Suprovici
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Fund Economics

How do you calculate your personal addressable reach (PAR)?

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Oct 17, 2023

When talking about fund return, Adeo mentions PAR (here is the post: https://www.linkedin.com/posts/adeoressi_kickstart-your-vc-success-activity-7119709217782992896-LeCv?utm_source=share&utm_medium=member_desktop). It is unclear how to calculate t...

Top answer:

There are lots of ways to go about this, but one good way is to start with the focus of the thesis. Then, segment the network around this focus. Next, try to identify founders within the network and people that can help those founders. F...

 -  Mike Suprovici
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Fund Economics

What percentage of my mgmt fee and carry should I give a new partner if I'm already a year into the fund?

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Oct 08, 2023

This new partner will help fundraise and close the 2nd half of the fund and potentially help me oversubscribe.

Top answer:

It's not uncommon to see 10 - 20% of the carry with vesting and a cliff for an additional partner at this stage. Sometimes more. Use the guidlines of the Venture Share agreement: https://govclab.com/venture-share-2/ However, don't put a...

 -  Mike Suprovici
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Fund Economics

How exactly is management fee taken from fund?

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Sep 24, 2023

Let's say we do 4 capital calls over 2 years, and the management fee structure is 3% for first five and then 1% for next five. SO once an LP has transferred money into the account during the initial two years -- part of that capital is left ther...

Top answer:

Correct - if you call 100% of their commitment over the 1st two years, then you would have money sitting in the fund's bank account for future management fee payments.

 -  Rob Del Prete
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Top answer:

This will be covered in the second half of the VC Lab program and we'll provide all the templates etc...

 -  Mike Suprovici
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Fund Economics

Accelerator upfront management fee

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Aug 18, 2023

How much is an acceptable fee (as a %) for an accelerator fund to take as an upfront fee instead of charging management fees, per year, as 2% of committed capital?

Top answer:

Typically, the fund and the accelerator are separate. The accelerator has it's own operational structure and generates revenue in a variety of ways, such as sponsorships etc... The fund is generally a classic 2 & 20 structure. The manage...

 -  Mike Suprovici
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Fund Economics

Success/failure rate of investments

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Aug 09, 2023

My assumption about portfolio results are the following: if we make 20 seed investments, 2 could be highly successful, 8 will be boring survivors (returning little) and 10 will totally fail. Is that ratio in line with typical seed results? If not,...

Top answer:

A typical return on a 20 company portfolio may have 1 to 3 venture style exits if the manager is strong. There may be another few portfolio companies that get a multiple, and the rest are either a wash or a loss.

 -  Adeo Ressi
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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...

 -  Mike Suprovici
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Fund Economics

Forecasting exit value of startup?

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Jul 24, 2023

Forecasting is obviously inaccurate, but how would you model a portfolio with "realistic" exit valuations?  Could startup's current deck provide any usable inputs for such model? E.g. market size, market CAGR, team experience etc? Obviously when ...

Top answer:

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...

 -  Neal Strickberger
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Fund Economics

Capital Call Frequency

Asked by:
Community Member
Edited by:
Haw Kuo
on August 1, 2023
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Jul 23, 2023

Is there a standard or 'rule of thumb' that GPs should follow for capital call frequency? What frequency would allow the fund to be liquid but respectful of the LPs?

Top answer:

There are a number of factors that affect capital call schedules, including if the fund is fully subscribed or not, that greatly affect one's capital call planing. As a result, there is no 'rule of thumb'. Please read this article for fu...

 -  Mike Suprovici
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