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with tageconomics
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1

How to charge deal legal fees to a portfolio company - for a standard equity investment

Hi There, Could someone walk me through the mechanics of how funds typically pay for deal legal fees out of the investment amount? Specifically, if I want to invest 100K in a startup, and the legal fees will be 5K: * does the term sheet and equity agreement state 95K? * does the fund pay the 5K to the lawyers directly? and transfers 95K to the company once the deal is closed? * in the deal memo and other investment documents, is this recorded as a 100K deal or a 95K deal? * are the deal metrics (DVPI, MOIC) calculated based on 95K or 100K? Am closing a warehouse deal in the next few weeks so would be great to get some guidance on how others have done this in the past. 

Top answer:

Legal fees are sometimes reimbursed to lead investors in priced rounds with a cap, such as $25K for a Series A investment. Follow-on and other participating investors do not normally get expenses reimbursed. Angel, pre-seed, and seed rou...

3

Forecasting exit value of startup?

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 founders say their ambition is just 100-500M$ exit, that tells something. But what else and how to factor in the assumptions?

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...