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Insights NextGen VC

The Female Venture 50

To promote more women in the field of venture capital, VC Lab is hosting the first Female VC Forum on May 25th, 2022. Register here.

Loretta

As a Female VC with a tech edge, I wanted to become the kind of investor that I would have liked to see in front of me. Representation matters.

Loretta Tioiela, Founder & Managing Partner, Next Sequence

VC Lab is introducing a set of industry benchmarks and incentives to change the face of venture capital. Our first initiative is Female Venture 50. 

As the name implies, this program is focused on ensuring that there is an equal number of women working as peers to men in the global venture capital market. In 2022, less than 5% of leadership positions at venture capital firms worldwide are held by women.

I’ve met countless, experienced women General Partners who echo stories of belittlement and doubt, regardless of their stellar track record and exemplary experience.

Diane Yoo, FilKor Capital

By the end of 2023, we would like to see the following annual objectives hit within the 200+ venture capital firms that VC Lab accelerates per year:

2023 Objectives: New Manager VC Firms 
45%1+ female team members in at least a venture partner capacity
35%1+ female investment decision maker
25%1+ female Managing Partner
15%All Female Managing Partner(s)
VC Lab Targets for New Manager VC Firms accelerated through the end of 2023

In addition, six female lead venture capital firms will receive complimentary access to the Decile Track each year. The program offers hands-on coaching from fund formation leaders, exclusively available to the 10% of the best new managers worldwide.

Join the Female VC Forum

Interested in the topic? Join our first Female VC Forum on Wednesday, May 25th.

The current VC Lab stats for female participation in venture capital funds are:

2022 Actuals: New Manager VC Firms 
27%1+ female team members in at least a venture partner capacity
18%1+ female investment decision maker
16%1+ female Managing Partner
9%All Female Managing Partner(s)
VC Lab Actuals for New Manager VC Firms accelerated to date in May, 2022

Beyond female participation in the workforce of venture capital, it is our goal to ensure equal leadership in the management of VC firms and in the VC industry. We are here to help.

The time has come to change the face of venture capital. The industry has a poor reputation among many talented entrepreneurs, deservedly so. We are going to change it.

Adeo Ressi, CEO of VC Lab
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Insights Resources

Venture Capital Fund Pitch Decks

Specialized pitch decks are required for venture capital funds that are in process of raising and closing on capital from limited partners.

The pitch decks have certain requirements, like proper legal disclaimers, and they also must comply with standards that limited partners have come to expect. Today, limited partners look at slides for less than a minute on average, so the purpose of each slide needs to be clear and the main points per slide need to tell a narrative.

Here are five hacks to help your venture capital fund presentation stand out with limited partners.

1. Reinforce Your Thesis

Write a one sentence Thesis, and then ensure that every point and every graphic on every slide reinforces that Thesis.

The point of the presentation is to explain how the fund is uniquely qualified to execute your fund Thesis. Tangential information can dilute or confuse the message. As a tactic, paste your one sentence Thesis in a small font at the top of every slide in your presentation, and then read or review everything on each slide to ensure that it matches the Thesis. For example, if your Thesis is for a deep tech fund, it does not make sense to put your high school lacrosse experience as a bullet on the Team slide.

2. Use Simple Slide Titles

Use common one, two or three word titles for every slide, and avoid being funny or creative with slide titles. 

Limited partners often look for specific information to confirm interest in a fund, since most LPs have investment criteria that they are looking to fulfill. By keeping the slide titles simple, it allows limited partners to find and focus on the information that they need. Common slide titles include Thesis, Team, Track Record, Portfolio, Market and Economics. Avoid slide titles that resemble phrases or sentences like, “how we have the best portfolio” or “our unique market knowledge,” since this can be confusing to limited partners about what is contained on the slide. For a full list of common slide titles and content, read on.

3. Keep the Slides Short

Avoid using more than 50 words per slide, using diagrams, pictures, charts or numbers to replace words.

The average limited partner spends less than one minute per slide, and our data shows that limited partners spend less time on slides with more words. Overwhelming a limited partner with a lot of information can cause them to skip the slide. Our experience shows that there should be one major takeaway point per slide that is reinforced with the content. For example, on a Team slide, if you have three Partners and you want to make the point about deep tech expertise, use bullets under the team members that show they are leaders in deep tech. For example, “Ph.D. Physics, Carnegie Mellon” is a good bullet, or “12 Patents in Robotics” is another good bullet. See how they are short?

4. Include Disclaimers

Add a legal disclaimer for the whole presentation in the front or the back, and disclaim and forecasting slides about forward-looking statements.

Short and appropriate legal disclaimers are normally required and help the general partner look more professional as a money manager to limited partners. The absence of disclaimers may make a credible limited partner suspicious. Most venture capital decks have one overall legal disclaimer for the jurisdiction that you are in, often placed in the back, and the forecasting slides normally have a footnoted disclaimer about forward-looking statements. These are usually secured by your attorneys to comply with local and regional fundraising laws. You can read some sample disclaimers below.

5. Test the Narrative

Read the whole presentation out loud in less than two minutes by stating the main point of each slide to refine the narrative flow.

Venture capital fundraising decks have a narrative flow that emphasizes why the fund is uniquely qualified to execute on the Thesis. This story can be told in many different ways depending on the strengths (and weaknesses) of the team and strategy. For example, a moderately talented team launching a fund in a market with little funding will likely find the best deals, so they can focus on describing how the “Market” is strong and growing. Quickly say out loud the main point of each slide to evaluate the narrative effectiveness of your presentation. Try moving the order of slides around to see if you can build a stronger narrative and create a better presentation flow.

These five tips will help to make a much more effective presentation for a venture capital fund. Remember that many limited partners still print out presentations, so avoid having color backdrops and avoid a lot of photos. Put your contact information on the title slide, version each release and include page numbers.

It is not uncommon for general partners to edit the fund presentation multiple times per week during the fundraising process. As the versions improve, the closing rate increases. Good luck!


Bonus: VC Slide Titles & Content

Below is a list of the most common slide titles and content in venture capital fund pitch decks.

  • Title has a tag line, versioning and contact information for the key people pitching.
  • Thesis just has your one-sentence Thesis.
  • Team has up to three Partners per slide, plus additional slides for Venture Partners, Advisors or other key individuals involved in fund decision making.
  • Track Record highlights one, two or three relevant deals that you and your Partners have invested in or helped to grow, including a logo of the company
  • Value Add describes the value your fund will provide portfolio companies or investments, possibly with a diagram
  • Warehouse highlights any deals that you have done or are planning to do with a logo of the company
  • Allocation shows in a table the number of deals that you will do organized by stage with the estimated investment, valuation and ownership.
  • Returns shows the type of returns that you anticipate from hypothetical portfolio companies organized by small, medium or large exits across three columns.
  • Liquidity shows up to three projected fund outcome scenarios as a multiple or as IRR,
  • Market provides a simple chart or table to demonstrate the attractiveness of currently investing in your target market segment
  • Economics has the fund size and stage at the top and that provides a table with the fund economic terms, such as the Minimum Investment Amount, Management Fees and Carried Interest, with the name of the term on the left and the economic term on the right
  • Disclaimer has acceptable legal language for your home country to avoid liability for any statements
  • Thank You has the tagline of the fund, the target closing date, and the contact information for all of the General Partners,
Optional VC Slides
  • Strategy – what deals that you target
  • Operations – how you close and service deals
  • Competition – notable funds doing similar things
  • Partners – any strategic corporate or funding partners
  • Advantages – key selling points to target investments
Bonus: Sample VC Disclaimer Language

Below are a couple sample disclaimers for reference purposes. Please consult with an attorney before using.

Standard Fund Disclaimer

“The information herein is strictly confidential and is intended for authorized recipients only. The content of this presentation is shown for information purposes only and is not intended as investment advice, or an offer or solicitation with respect to the purchase or sale of any security. The strategy presented herein represents the strategy of the General Partner of the Fund as of the aforementioned date and may vary at the discretion of the General Partner. There is no guarantee that any investment objective will be achieved. Past performance is not indicative of future results. Actual results may differ materially from those expressed or implied. Recipients should not assume that any companies identified in this presentation, are or will be, investments held by the Fund. Any projected returns presented herein are shown for illustrative purposes only. There can be no guarantee the Fund will achieve these results. Venture investing is risky and you could lose some or all of your investment.”

Forward Looking Statement Disclaimer

“The information contained herein constitutes forward-looking statements. We assume no obligation to update, and you should not unduly rely on such statements.”


Categories
Resources Insights Legal Templates Venture Share

New Venture Partner Template

Overview

Venture Share is a template agreement for venture capital firms to quickly engage top Venture Partners worldwide. The following is an outline of the topics covered:

Venture Partners
  • Venture Partners are part-time members of a venture capital team.
Model
  • Venture Partners are compensated with carried interest in a fund.
Activities
  • Venture Partners help with 5 types of activities at a fund: executive functions, fundraising, strategic, operating and portfolio assistance.
Compensation
  • Venture Partner compensation ranges based on the type of activity and the seniority of the individual.
Venture Partner Compensation 1
Venture Partner Compensation Ranges
Negotiation
  • There are 4 steps to negotiate a Venture Partner engagement using Venture Share.
Agreement
  • Download the Venture Share Agreement to engage and compensate Venture Partners.

Thousands of new Venture Partners are needed to fill the ranks of emerging venture capital firms worldwide.

Adeo Ressi, CEO of VC Lab

A Venture Partner is a part-time team member of a venture capital firm, providing strategic, operating and portfolio support. Venture Partners are experts in a field, and they are compensated with a share in the upside from venture capital firms, called carried interest.

VC Lab has developed a free Venture Share Agreement (see below) that is designed to be used by venture capital firms and Venture Partners alike to quickly start working together. The template agreement is designed to specify the duties and compensation of a Venture Partner by checking boxes.

Venture Partners can apply for roles at hundreds of funds worldwide with one application at a new VC Lab job portal. Candidates submit a resume and cover letter (apply here), and the next batch of placements will begin in April of 2022.

Venture Partner Model

Venture Partners are normally compensated with carried interest, versus receiving a salary. Carried interest or carry is generated from the fund performance, and it aligns incentives well, since Venture Partners only get compensated when the fund has positive returns. Here is an example to explain how it works.

In this hypothetical situation, there is a Venture Partner with 5% carry in a $10 MM fund. The fund has 20% carry from the limited partners, which are the investors. The fund returns $30 MM, and all returns over $10 MM have the carry of 20% deducted. So, we take 20% of the $20 MM, which is $4 MM, and we then take 5% of $4 MM for the Venture Partner, which is $200,000. In this hypothetical, a 5% Venture Partner position will earn $200,000. 

Fund models commonly project between 5x and 7x, which is greater than the 3x above. A Venture Partner will normally put in a few hours per week over a couple of years, and then get paid over ten years as portfolio companies exit in the fund.

Venture Partner Activities

There are five major types of activities for Venture Partners defined in the Venture Share Agreement:

EXECUTIVE

Executive Venture Partner assists with the management of General Partner:

  • Complete due diligence on potential investment opportunities.
  • Expand branding on social media and help with the overall exposure of the fund.
  • Help complete investments into target portfolio companies.
  • Serve as a director or advisor to target portfolio companies.
  • Source deals from pre-agreed networks and channels.
FUNDRAISING

Fundraising Venture Partner assists General Partner with fundraising activities:

  • Coordinate follow-up between interested investors and General Partner.
  • Create awareness of the Fund among desired target audiences.
  • Identify contacts that are suitable for the Fund’s fundraising pipeline.
STRATEGIC 

Strategic Venture Partner provides General Partner with credibility by providing their knowledge and expertise in an industry or subject matter:

  • Advise General Partner on strategic matters in the Venture Partner’s area of expertise.
  • Identify publicly they work with General Partner.
  • Share news and information with their relevant networks to help General Partner.
OPERATING

Operating Venture Partner provides day-to-day assistance with activities related to the management and operations of the Fund, which may include marketing, accounting, finance, legal, diligence or other back office support:

  • Assisting General Partner to increase the value of the Fund and support any stakeholders.
  • Provide back office support.
  • Respond to inquiries from General Partner.
PORTFOLIO

A Portfolio Venture Partner works on one or more deals where they are actively involved in the management of the investment. 

  • Support the onboarding and growth of a portfolio company in the Fund.
Venture Partner Compensation

Venture capital firms have a range of compensation for the different types of activities performed by Venture Partners. VC Lab surveyed a few hundred venture capitalists to identify the generally accepted ranges, which is used in the Venture Share Agreement:

Venture Partner Compensation with the Venture Share Agreement

Base CarryMiddle CarryAdvanced Carry
Help MonthlyHelp WeeklyHelp Daily
Executive3%5%10%
Fundraising2%4%6%
Strategic1%2%4%
Operating1%2%4%
Portfolio 0.1%0.5%1%

The base, middle and advanced carry levels relate to the time commitment of the Venture Partner, as well as their seniority. 

Venture Partner Negotiation

The Venture Capital Firm and the Venture Partner can quickly agree on core economic terms using the Venture Share Agreement. There are four steps.

  • First, select the relevant activities that a Venture Partner will perform (like above). 
  • Next,  look at the “Venture Partner Compensation Guidelines” table for the highest category of any activity, such as Operating or Executive. 
  • Then, determine if the Venture Partner is helping monthly (Base Carry), weekly (Middle Carry) or daily (Advanced Carry).
  • Lastly, decide on the years of vesting for the carry, the duration of the vesting cliff and whether expenses will be reimbursed.
Venture Share Agreement

The Venture Share Agreement is a free template to quickly structure a Venture Partner relationship. It can not be signed until all of the entities are formed. It can be used for negotiation before forming the entities.

Version 1 of the template focused on a United States domiciled fund in Delaware is available below: 

NOTE: In the Venture Share Agreement, Venture Partners are shareholders in the General Partner entity for compliance with U.S. 409a tax regulations

Post questions on the Venture Share Agreement in the comments.

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Insights Resources

Venture Trends Update

2022 has been an intense year.

Venture capital continues to outperform other asset classes. VC Lab wants to hear what you think are the biggest trends in venture capital for Q2 of 2022.

First, choose 3 trends in the survey below.

Then, discuss the trends on March 17th, 2022.

VC Lab is hosting an exclusive online forum for General Partners and Limited Partners on March 17th, 2022. Each of the top voted topics will have a table at this event, where peers from around the world share their views for a global perspective in the topics.

What do you think?

Results are completely anonymous with no registration.


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Insights

VC Lab Cohort 7

Applications are officially open for Cohort 7 of the venture capital accelerator by VC Lab.

The goal is to have all participating managers close funds during or before Q4 of 2022.

The full schedule is available here, and the link to apply is below:

VC Lab is the premiere free program to launch and grow a top decile venture capital fund or venture studio. Thousands of new and emerging managers from around the world have applied to previous Cohorts, making the application process competitive. 

For the best chances of admission to Cohort 7, applicants will be asked to have:

(1) a strong application video

(2) a well-constructed investment thesis

(3) a referral from alumni, if possible

Applications are processed in the order that they are received, giving early applicants an edge.

VC Lab Outpacing
Actual and projected venture capital firm launches from the VC Lab accelerator.

VC Lab will double the number of venture capital firms launched worldwide in 2022. Portfolio venture capital firms have already completed hundreds of investments, achieving early fund multiples by funding leading startups worldwide.

VC Lab Stats
VC Lab accelerator statistics through Cohort 4. Cohort 5 and Cohort 6 are currently operating.

VC Lab is working to help as many managers as possible launch and grow enduring venture capital firms. To this end, we are hosting a series of free events:

Inside VC
6 Insights to Build a World-Class VC Anywhere

Venture Trends
Discuss Venture Trends with GPs and LPs (Online)

The Early Admissions Deadline Cohort 7 is set for April 10th, 2022, and the Final Deadline is May 15th, 2022.

Note that the venture capital accelerator is a closing program, not a learning program. If you are not in a position to close a fund within 2022, then you may want to consider a job at VC Lab. Job openings at VC Lab are listed here.

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Insights Resources

Venture Trends for 2022

VC Lab is working with hundreds of venture capitalists to share insights on the defining trends in venture capital for 2022. For the last three years, venture capital has been the top-performing asset class, and the industry is continuing to experience momentous change. These developments are set to induce further major transformations in 2022 and consequently impact venture capital as a whole.

  • Will there be more limited partners entering the asset class?
  • Will valuations rise further beyond the historically high levels?
  • Will more Solo GPs launch funds to compete with the heavyweights?

On December 23rd, 2021 we are hosting Inside VC, discussing the investment trends that will define 2022. General partners and limited partners worldwide will partake in this forum to share their insights into the trends that are defining the industry.

If you are working in venture capital or are involved in the venture capital ecosystem, take a few moments to choose three trends that you feel are inevitable in 2022. VC Lab will make the poll results public and provide analysis on the results. Get started by sharing your insights below:


Inside VC

December 23rd, 2021, at 10:00 AM Pacific

An exclusive online forum for fund managers and limited partners to discuss the top VC trends in 2022.

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Insights

VC Lab Cohort 6 Admissions are Open

VC Lab Cohort 6 admissions are officially open. Our intention is to help the largest group of general partners succeed in changing the world for the better.

The final deadline to apply is February 13th, 2022 and Cohort 6 starts on February 23rd, 2022.

You can see the schedule here. This timing is designed to help general partners launch their funds by Q4 of 2022.

For some guidance on submitting a strong application, you can read our tips here. If you want to build an ethical venture capital firm, VC Lab is here to help.

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Insights

Venture Capital Accountant Jobs

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Venture Capital Accountant Jobs 13

Venture Capital is driving technological innovation throughout the world and the asset class is continuing to see increased growth in job opportunities, particularly in accounting. With the value of exited U.S venture-backed companies reaching all-time highs in 2021 ($595bn) and nearly doubling from the previous years, the asset class is thriving, and both the number of startups and funds are sharply on the rise.  As a result, great opportunities are presented to enter the venture capital asset class, which has particularly been challenging to break into in the past.

Why Venture Capital?

Venture capital and private equity funds rank as one of the top sectors in compensation for accountants. To some estimates accountants in venture capital can earn around 35% more than their contemporaries in other sectors. This places venture capital in the top quartile of sectors for accountants alongside adjacent investment vehicles such as hedge funds. Additionally, the industry is expected to continue growing well beyond 2030 and the combination of VC and PE is expected to make up more than 50% of the ‘alternative asset’ category by 2050. This continued growth presents quite a compelling opportunity for accountants looking to enter a rewarding and thriving industry

The fact that venture capital is the single biggest instrument of change and progress is a further added reason as to why it is so appealing and why it is ranked as one of the most rewarding and fulfilling industries to work in. Though the industry makes up for less than 5% of all investments in the economy, it’s responsible for a considerable amount of the new jobs created. Venture-backed startups are leading the vanguard of companies that are changing the world; from literally shooting for the stars to tackling recycling,  the asset class is a remarkable medium for positive change in the world. 

The Opportunity

VC Lab is on track to launching 1,000 enduring venture capital firms by 2025 and as such, we too are looking for a fund accountant to join our growing team. This exciting opportunity will enable you to contribute to our mission of changing the venture capital industry worldwide and consequently the world. 

The ideal person will share our core purpose, beliefs, and determination to positively impact the venture capital industry and create positive change in the world. You should have an avid interest in startup and venture capital finance. Additionally, you will be familiar with the nuances of venture capital accounting as this role will entail working with multiple venture capital firms across the globe. In this role, you will help set up and manage multiple accounts in a fast-paced start-up environment. With this comes boundless opportunities for personal growth and development as well as the opportunity to work with a global team of experts and fund managers.

If you are this person or know a suitable candidate, find below the full job description and the application within.

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Accelerator Alumni Insights

Launching a Venture Firm with VC Lab, by Adil Jafry

About the Author

This article was written by Adil Jafry, who is participating in the 4th cohort of VC Lab. Adil is an experienced entrepreneur, who is passionate about space exploration, and he has further expertise in energy, investment banking and general management. Notably, after interning at NASA, he co-founded Chandah Space Technologies.

VC Lab allowed me to pull together all the necessary documents, resources, and systems required to start my venture firm

In Spring 2021, I found myself in the process of exploring the next leg of my professional career.

A couple of friends recommended I consider the VC Lab program, a highly engaging and rigorous hands-on program for aspiring venture capitalists headed by Adeo Ressi and Mike Suprovici, both experienced entrepreneurs and venture capitalists.

The last ten weeks have enabled me to develop a strong, focused fund thesis

So far it has been a commitment of +50 hours each week. The primary focus of the effort has been to get the presentation and the model right so that I can clearly articulate my unique approach and portfolio construction design to potential investors and the companies in which we plan to invest.

I plan to focus on investing in early stage companies in the cleantech and sustainability sectors in the US, and my mission is to support visionary entrepreneurs looking to transform how we harness and use energy in all walks of life.

Distilling an investment thesis and the sub-sectors within sustainability has been the central task

Combining that with a geographical focus and the value-add that my team brings (by investing in the portfolio companies and providing them support) has created a strong foundation for estimating a fund’s returns over its life — across various investment scenarios and fund outcomes.

Building an analytical framework that is specific to our thesis has been an important exercise, since venture investing follows a power curve law, where 1 or 2 investments within a successful firm’s portfolio generally return the entire fund and the requisite upside, while the rest of the companies in the portfolio barely break even.

This analytical framework serves as a guidepost for iterative future reflection, as each investment gains momentum to begin its journey towards growth and value accretion— or vanishes, as entrepreneurs pivot to spend their energies on other ideas.

It has been quite an eye-opening and an exciting experience for me

Also inextricably tied to this process has been the ever present guidance from VC Lab. Through weekly AMA (“Ask Me Anything”) sessions, I have learned about the optimal number of capital calls a fund should consider making, the fund’s expected life (and potential future extensions), the optimal investment period, the merits of making follow-on investments, and the intricacies of recycling management fees.

One topic that has universally been of concern to the international members of my cohort is the fund domicile and formation process — which varies by the country in which the fund is operating. Thankfully, I am domiciled in the US — where the regulatory framework is mature and well understood by the investor community.

While most of the members of my cohort are first-time fund managers, there are more than a handful who are already successfully managing VC funds and have joined the program to simply learn the “VC Lab way” of building and managing their future funds.

The weekly VC Lab webinars and AMAs have provided important cues on team development, deal warehousing, and trends in valuation and deal structuring

I am also planning to leverage VC Lab’s new “Fund In A Box” (FAB) offering, which can serve as a scalable mid- and back-office platform for my fund, supporting future capital calls and closings. FAB will also integrate with my LP and portfolio management systems.

With eight weeks left until my firm’s formal launch, I am now in the process of rounding out a strong team of qualified venture partners and advisors who share my passion for supporting visionary companies bringing transformative products and services to life that will help drive a sustainable future for our planet.

The free 16 week VC Lab program provides guidance, structure and a network to complete a fund closing in 6 months or less. Since mid 2020, VC Lab has helped launch 75 venture capital funds around the world.

Disclaimer: This post is not directed to any investors or potential investors, and does not constitute an offer to sell or a solicitation of an offer to buy any securities.

Read more from Adil Jafry on his Medium

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Cornerstone LPA Insights

Cornerstone is Step 1 of Fixing the VC Legal Stack

The time has come for change in venture capital

Adeo Ressi

“The insane levels of complexity in the venture capital legal stack are excluding talent and wealth from entering the asset class,” says Adeo Ressi, CEO of VC Lab and the Founder Institute, who is also the Founding Member of TheFunded. “The documents are unreadable. Unless you are a high-paid lawyer, few understand what they are signing.”

VC Lab has re-written the main agreement used in fund formation, the Limited Partner Agreement (LPA). The new template, called Cornerstone, is a lightweight and easy-to-use template that can get fund managers started negotiating terms with Limited Partners, ahead of engaging high-priced fund formation attorneys. In a matter of minutes, fund managers can customize the Agreement and then immediately start negotiating terms with Limited Partners.  Cornerstone is authored to be read and understood by all professionals, not just those with specialized knowledge of the venture capital industry.

An LPA is the operating agreement of venture capital, describing how the fund operates, what the fund invests in and how money is made and shared between the various signatories.  The General Parters, who make the investments, sign the LPA with their Limited Partners, the investors in the Fund.  This agreement is part of a series of documents and a series of entities needed to form a venture capital fund.  To date, fund managers have needed to engage specialized fund formation attorneys to start their firm.

“Fund formation legal is out of control,” says Rich Gora, founder of Gora LLC and one of the authors of Cornerstone. “It is not uncommon to see fund formations cost in excess of $150,000 with big law, and it can cost $10,000 just to review these documents as an investor. The reality is that everyone wants to see this change. It’s no fun for anyone, not the lawyer, not the client nor the investor.”

To provide a sense of just how dense the average LPA language is, below is one paragraph from the over 100 page LPA recommended by the International Limited Partner Association  (https://go.ilpa.org/WOFLPA), a trade group working to simplify the agreements for limited partners.

Sample LPA Language from the International Limited Partner Association

18.2.1.1 an event of withdrawal (as defined in the Act) with respect to a General Partner, other than an event of withdrawal set forth in Section 17-402(a)(4) or (5) of the Act; provided, that the Fund shall not be dissolved and required to be wound up in connection with any of the events specified in this Section 18.2.1.1 if (i) at the time of the occurrence of such event there is at least one remaining General Partner of the Fund who is hereby authorized to and shall carry on the business of the Fund or (ii) at such time there is no remaining General Partner, if within one hundred and twenty (120) days after such event of withdrawal, the Limited Partners agree in writing or vote to continue the business of the Fund and to appoint, effective as the day of withdrawal, one or more additional General Partners, or (iii) the Fund is continued without dissolution in a manner permitted by the Act or this Agreement; 

The effect of this legal complexity is that the venture capital asset class is exclusionary. New managers have to work with these specialized lawyers, and the best ones have massive backlogs and $1,000+ USD hourly rates. New investors, the Limited Partners, have the same problem on the other side of the table.

Cornerstone works to fix this. The whole agreement is 33 pages. All of the economic terms are clearly outlined in the front, versus buried in the document. Complex regulatory and tax language are in an appendix. The document merges a term sheet, a subscription agreement and an LPA into one, eliminating hundreds of pages of legal. The resulting work is much more readable. Below is sample language from Cornerstone.

Sample LPA Language from Cornerstone

2.2. Default. If a Limited Partner fails to make all or any portion of any Capital Contribution or any other amount required to be funded by such Limited Partner, General Partner shall have the right to take any of the following actions in its sole discretion: (a) notify the defaulting Limited Partner and provide for a period for the Limited Partner to cure the default; (b) if the Limited Partner has not made any Capital Contributions, deem the Limited Partner’s Interest in the Fund to be forfeited; or (c) if the Limited Partner has made a Capital Contribution, General Partner may sell the defaulting Limited Partner’s Interest for a purchase price equal to 50% of the lesser of (i) the defaulting Limited Partner’s aggregate Capital Contributions, or (ii) the Fair Value of the defaulting Limited Partner’s Interest at the time of default.

“We spent months taking overly complicated legal language and working to make it readable by business people,” says Hans Kim, another author of Cornerstone. “The team would simplify the language, send it to fund formation attorneys for review, and then simplify the language again. In the end, we have something legally solid and easy to understand.”

VC Lab has released Cornerstone for free. This offering is part of the vision to remove barriers to entry in the high cost and low transparency venture capital world, allowing next generation firms and investors to enter and grow the asset class. Cornerstone is currently localized to work with funds domiciled in Delaware, the most popular to launch funds worldwide. Additional domiciles are coming in the next few months.

You can download Cornerstone here, and read about how to customize Cornerstone here.

Questions?