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Fund Operations

How does warehousing work?

Asked by:
Community Member
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May 03, 2023
How does warehousing work?
2 answers
Pablo Vidal Arean
May 03, 2023
Best practice for warehousing is: i) you invest in a company on behalf of your fund or you invest in a company through an entity that you wholly own on behalf of your fund; ii) when the fund holds its first close and receives LP contributions, you or your hold co transfers the warehoused investment to the fund at cost; iii) the fund either purchases the interest or you treat it as a contribution to the fund. In terms of timing of the transfer, best practice is to do it as soon as possible after the first close.
Neal Strickberger
Accepted Answer
Aug 02, 2023
Warehoused deals are a great way to have an immediate markup and provide incentive for LPs to invest.
You will need to set up a consistent rule for transferring warehoused deals - like "all seed deals in the fund thesis made in the last 12 months", you can't pick and choose deals to transfer in.

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