Fund Terms

Fred Wilson on Reserves

Fred Wilson has a spectacular post up on how VC funds should think about reserves. It’s even more valuable to entrepreneurs so they can understand how the best VCs think about reserves, giving the entrepreneurs ammunition to ask their investors how they are thinking about reserves. I only noticed one thing missing from Fred’s post…

One Of Our Investors Just Closed Shop. What Should We Do?

Q: What is the best path to take if a VC which has invested in my company closes down, but we have not exited and are still operating profitably ? What happens to the LLC entity that was formed at the time of investment?  Do we ask the VC for our shares back or buy…

Model Seed Documents – Direct From Techstars

Today, our friends at Techstars posted their model forms of seed financing documents. Techstars worked with Brad, myself and very closely with Cooley Godward Kronish, LLP (and specifically Mike Platt) to put together a set of “Model Seed Funding Documents” that anyone can use. There are five primary documents in the set: Term Sheet Articles…

Do Venture Capitalists Fund A Company With An Intent To Steal It?

Q: My client is looking for a 5 million dollar investment from a VC firm. What can he do to protect himself if he is worried that the VCs will acquire the rights to his product and then try to fire him and keep those rights? Does this happen often? In addition, he anticipates that…

Why Don’t Venture Capitalists Invest In Real Estate?

Q: Why don’t VCs invest in real estate? I have a great idea but I can’t get past the sentence where I mention it’s a real estate deal. A: (Jason). We don’t invest in real estate because we don’t know what we are doing in that market. Okay, that was a little glib, but it’s…

What Are Standard General Partner Terms in Fund Agreements?

Question:  I’ve always been curious, what are standard GP terms for venture funds?  What carry percentages are there?  How much do GPs actually put into funds? Our Take:  There is a range, but in terms of general economic terms: –  Management Fees: 1-3% of capital commitment.  Smaller funds usually have a higher percentage.  The norm…

What Is The Relevance of Life Terms of VC Funds?

Question:  I understand that each fund has a time limit (5 to 10 years). What are the dynamics of the funds? Does a fund nearing the end of its term tend to try getting as many exits as possible (at any price)? What happens with portfolio companies after the end of the fund’s term? Is…