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Should IC Approval Be Required for Non-Binding Term Sheets or Only Definitive Investments in Funds?

For funds with an IC should a (non-binding) term sheet already be subject to IC approval or only the definitive investment?

Top answer:

I recommend that you don’t sign term sheets (binding or non-binding) unless you are confident that you are going to wire. It creates a very bad dynamic between you, and the entrepreneur (who may have an unrealistic expectation here also)...

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Is There a Standard NDA for Part-Time Advisors, Venture Partners, or Venture Fellows?

Is there a standard NDA to use for advisors venture partners or venture fellows we’d like to bring on for part-time work (sourcing diligence or other fund IP)?

Top answer:

No, you don’t want to sign stuff with advisors until you are closing.  There should be a confidentiality provision in the agreement you sign with an advisor.

 -  Mike Suprovici
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Can a fund manager (of a fund) be a venture partner for another fund without creating a conflict of interest?

Can we be the fund managers of our own fund and VPs of another (eg. portfolio VPs who simply refer in deals) or is this a conflict of interest?

Top answer:

The situation described is most likely a conflict of interest - but this doesn't guarantee it can't be done. Conflicts of interest are generally disclosed in a Fund's Limited Partner Agreement - and having any roles in other funds almost...

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Does Accelerator Program Experience Matter to LPs for Founders with 3X Growth in Startups?

Keeps coming up that founder experience doesn't matter investor experience does. My experience is in running accelerator programs generating applications picking startups to participate connecting them helping them grow. Of 1500+ applications generated picked 100 and they've gone 3X so far in <5 years. Does this matter to LPs?

Top answer:

If you can show that you helped the companies increase their value by 3x in a short period of time, that is valuable track record. However, it is not as valuable as any investing track record.

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Community Member
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If some of these are “qualified” status do they count as part of the 99 accredited investor limit?

If some of these are “qualified” status do they count as part of the 99 accredited investor limit?

Top answer:

There are "blue sky laws" in the US regarding the number of Accredited Investors in any private investment vehicle that is not registered with the SEC. SEC registration is not realistic for funds. So, you wil need to raise only from Accr...

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What Unique Strategies Do You Use to Generate High-Quality Deal Flow for Your VC Firm?

Any good examples any of you folks can share for generating high quality dealflow that are unique to you and to your VC firm?

Top answer:

You need to have your own Deal Pathways that generate high quality dealflow that are unique to you and to your VC firm. Then, you need to test and refine your Deal Pathways to help you find Rockstars. You need to be reviewing a couple v...

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How much ROI I suppose to promise or offer my LPs? As best practices?

How much ROI I suppose to promise or offer my LPs? As best practices?

Top answer:

Don’t promise anything. This is a high risk asset class. Instead, you should keep it super high level and say something like: ‘it’s not uncommon for venture funds to target a 3-4x return in a medium scenario and 8x+ in a high scenario’

 -  Mike Suprovici
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How to Address LPs' Questions About Adding a Venture Partner to Our Website and Fundraising Deck?

How should I address questions from my existing LPs if they get surprised about adding a venture partner to my website public presence and to my fundraising deck?

Top answer:

It doesn’t affect them at all, and shouldn’t be a problem. LPs are in the LP entity, VPs are in the GP. You should mention this as positive news in your updates and that it will help them get a better return.

 -  Mike Suprovici
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Do G.P.s Need to be American or SEC-Registered for Funds Incorporated Outside the U.S.?

If our fund will raise from U.S. LPs and the fund will be incorporated in Canada Cayman or other jurisdiction does the G.P. needs to be American or to be registered with the SEC? The plan is for the Management LLP to be a Delaware entity. Any legal advisors we can contact? Thanks

Top answer:

Any funds selling to U.S. investors are required to comply with U.S. securities laws including requirements to register with the SEC and the applicable exemptions.  You can request an intro to a legal advisor directly from your VC lab re...

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How Will LPs React to Onboarding an Ex-Minister Facing Prosecution for Unlawful Enrichment, Despite Likely Acquittal?

Hello we need your help. How the LP's may react to onboarding as an advisor a former Minister who may face prosecution for unlawful enrichment ? He will be at 999% acquited from those charges but do we agree that it is a No-Go ?

Top answer:

They will likely react negatively. It’s not worth it.

 -  Mike Suprovici
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Do We Need to Disclose Fund Advisors' Carry Percentage in Pitch Decks for Prospective LPs?

*-Disclose the carry percentage of Advisors-* Hello I have three web3 entrepreneurs who are about to say OK to join my fund advisory board. Do we need to disclose in the fund pitchdeck we send to prospective LPs the fund advisors' carry percentage?

Top answer:

You can put advisors in your deck but not their carry percentage

 -  Mike Suprovici
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Is This the Right Process for Closing a Seed Fund Deal: Selection Committee, DD, and IC with Independent Members?

On steps to close a deal in a seed fund: yes or no for the below? Step 1: selection committee Step 2: DD Step 3: IC with independent members.

Top answer:

This depends on whatever process you want and whatever your LPA says. Most new managers make all of the investment decisions unless there is a conflict of interest, and then an LPAC (Limited Partner Advisor Committee) needs to approve. A...

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On the Fund Overview what is meant by 'Fund Rules'

On the Fund Overview what is meant by 'Fund Rules'

Top answer:

It's where you disclose certain rules related to conflicts or other matters. Here are some example fund rules:  • GPs must exclusively invest from the fund and are not allowed to Angel invest  • All investments go to IC etc…

 -  Mike Suprovici
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Should I Include Fund Name and Investment Amount in SAFE Template Before Fund Formation and Final Evaluation?

Guys I noticed the SAFE template has the 1) *Fund* [Name of Fund] a [Delaware Limited Partnership] as well as the investment amount. My questions are: 1 - as I don't have the fund yet shall I add it to my personal information at this stage? 2 - on the investment amount do I need to mention *now* the committed capital once fund is closed or I can just have the option to invest X amount upon final evaluation? (given the fact I won't have enough time for Due Diligence etc etc). 3 - Is it always better for the fund and for the LPs to sign a SAFE agreement at a post-money valuation? As I have been researching here looks like the conversion is higher on equity to investors at post-money.

Top answer:

If you are going to make a personal investment, you can use it. If your plan is to invest from the fund, you can't because you don't have a fund.

 -  Mike Suprovici
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How to Build a Track Record for Fundraising by Offering Advisory and Access in Exchange for Equity?

Hi guys! As I am building my track record to strengthen my ability to fundraise I need advice on offering advisory and access in exchange for equity in the business.... I know a few startups that I could approach but that doesn't mean they would be suitable for the fund as I didn't access their financials etc. How should I move forward to build the track record given the limited time I have to build it before the fundraising?

Top answer:

Just start helping amazing companies without any expectations of equity. Help them get to new rounds of financing. Then, you will build network effects, and maybe some of the founders will introduce you to other founders or offer you the...

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How Can I Manage Excess Great Deals and Accommodate LPs' Desire to Invest More?

My first close is coming up and I have more great deals than I can realistically make with my existing LP base. My LPs asked why they can not chip in more than the usual 25-30% earlier. What do you recommend?

Top answer:

Reverse it and say you’re going to be selective with your investments to ensure the fund succeeds. If you call higher than the recommended, all future LPs will have to be on the higher capital call schedule. This will make it harder for...

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Do Fund 1 Teams Remain Consistent for Future Funds or Do New GPs/VPs Join Subsequent Funds?

Does the Fund 1 team typically remain substantially the same for future Funds with the same thesis? Or is there usually a reset and new GPs/VPs can be brought aboard each time a subsequent Fund is launched?

Top answer:

Managing Partners tend to remain constant in over 90% of firms, and the General Partner team, which includes Partners and Venture Partners, frequently changes beatween funds. When there are changes, a new General Partner entity is formed...

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