Cornerstone LPA

Cornerstone LPA Update v1.1

The Updated Cornerstone LPA further improves on key terms to give fund managers more flexibility. VC Lab has additionally consolidated essential sections while enhancing the overall readability of the document.

Key Updates:


  • No major updates have been made to previous key definitions in this section.
  • Newly added definitions are:
    • Fund Thesis
      • Sector
      • Stage
      • Geography
    • Management Fee
      • As requested by fund managers, we’ve added a flexible ‘cascading management fee structure’ while improving readability


  • 2.2.2a – Capital Contributions
    • Removed post investment capital contribution limitations giving fund managers the option and flexibility to call capital post-investment period
  • 2.3 – Default
    • Updated to enable GPs to take more actions regarding defaulting LPs
  • 2.5 – Additional Limited Partners
    • Updated to enable GPs to bring in additional LPs after the close
      • Requiring said LPs to be on the same capital call schedules as other LPs and partners


  • 4.1 – Investment Objectives
    • Improved follow-on investment language
  • 4.3 – Authority of GP; Key Individuals; Conflicts of Interest; Advisory Committee
    • Tightened up conflicts of interest language
    • Flexibility to follow on investments with Special Purpose Vehicles (SPV)
  • 4.92 – Management Fee
    • Update to payable management fees 


  • Added new Cornerstone subscription section
    • Conjoined from multiple sections to clearly define here 


  • Consolidated key terms: 
    • 8.2 Power of Attorney
    • 8.3 Side Letters
    • 8.4 AML and Combating the Financing of Terrorism
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  (, a trade group working to simplify the agreements for limited partners.

Sample LPA Language from the International Limited Partner Association 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 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.


Cornerstone LPA Insights Resources

How to Use Cornerstone to Form a Fund

Cornerstone by VC Lab is a lightweight and easy-to-use Limited Partnership Agreement (LPA) designed to simplify investing in the venture capital asset class by reducing the use of high-priced fund formation attorneys. Venture capitalists starting a new fund can customize and negotiate investment terms without engaging a law firm. 

The Cornerstone Agreement is short, easy to read and easy to customize. The economic terms of the fund are clearly laid out in the beginning of the Cornerstone Agreement, and General Partners can customize certain terms to fit their fund’s needs. On a high level the process is as follows:

  1. A General Partner takes the Cornerstone Agreement and customizes plug variables in the Key Economic Terms for a new fund offering.
  2. The General Partner shares the customized Cornerstone Agreement with potential Limited Partners for feedback on the terms.
  3. Once the terms are agreed, the General Partner engages with a law firm to form the fund entities using the pre negotiated Cornerstone Agreement.

In this article, we are going to explain the process to customize the Key Economic Terms for the needs of a specific fund. There are 24 terms to customize in the Cornerstone, listed alphabetically. For the purpose of explaining the terms, they are re-grouped by purpose.

Each key term is bolded and in parenthesis and is followed by the term’s definition. If there are options for the term, General Partners can choose from the bracketed pre-filled options. The commonly used options are underlined to help see what most next generation General Partners choose.

To prepare the Cornerstone Agreement, simply choose the item in brackets or fill in blank spaces, and remove any other unused options. Then, save the agreement, preferably as a PDF, and you are ready to share with potential investors. Let’s look at the specific terms.

The Team Terms

The Cornerstone provides an easy access way for General Partners to define the various roles within a venture fund. 

First and foremost, there are the Key Individuals who are primarily responsible for running the fund and should devote most of their time to the affairs of the fund . Next are the Advisory Committee members, which often include Limited Partners, who adjudicate conflicts of interest or making investments outside of the fund thesis. Lastly, there is the Partnership Representative, who is the main contact person for US tax purposes.

The Key Individuals and the Partnership Representative are specified by the General Partner before sending out the Cornerstone to Limited Partners. It is recommended that the Advisory Committee members are elected once you are close to closing and have a sense of any Limited Partners that you want on the Committee. Being on the Committee can be offered as a perk to potential investors.

Key Individuals” means the following individuals identified as signatories of General Partner:
[First_Name Last_Name]
[First_Name Last_Name]

Advisory Committee”initially means the individuals listed below. If no individuals are listed, then an Advisory Committee may be formed at the discretion of General Partner. 
[First_Name Last_Name, Phone Number, Email, Address]
[First_Name Last_Name, Phone Number, Email, Address]
[First_Name Last_Name, Phone Number, Email, Address]

Partnership Representative” initially means:
[First_Name Last_Name].

The Strategy Terms

The Cornerstone Agreement encourages General Partners to have a defined focus and strategy for their fund. The General Partner can input the Sector, Stage and Territory for the fund thesis, which gives Limited Partners comfort that the fund will focus resources on mutually agreed areas.

Like most LPAs, the Cornerstone Agreement also defines a series of Prohibited Sectors that the fund will not invest in, and there is a common list of sectors that you can choose from. As an example, Limited Partners often do not want venture capital firms to invest in real estate, gambling, or alcohol. It is recommended to choose as many of these as possible given your industry and expected investments, and it is possible that some Limited Partners may ask for more.

Sector” means the following Sector or Sectors in which the Fund expects to invest: 

Stage” means the anticipated stage of Portfolio Investments: 
[Accelerator] [Angel] [Pre-seed] [Series Seed] [Series A]

Territory” means:
[Worldwide] [United States]

Prohibited Sectors” means securities traded publicly on a securities exchange and the following sectors or industries:
[Alcohol] [Gambling] [Weapons] [Real Estate] [Cryptocurrency] [Blockchain] [Controlled Substances banned under U.S. Federal Law] [________]

The Timing Terms

The Cornerstone Agreement includes a number of timing related terms, and many of these are important. The most important is the Fund Duration, which is the amount of time that the fund has to make primary investments, make follow-on investments and secure exits. Most Limited Partners expect the Fund Duration to be set at 10 years, and there is normally a Fund Duration Extension of 2 one year periods, since exits are taking longer and longer to occur. For early stage funds, rather than extending the Fund Duration, it is more common to have a Fund Duration Extension for three or four years, as the extension years do not have fees.

Some other important timing settings are the Investment Period, which is the amount of time that a fund has to make primary investments, and the Fundraising Period, which is the amount of time after the first close that the General Partner has to complete fundraising for the fund. The standard Investment Period is 4 years, and a recommended Fundraising Period is 18 months. The shorter the Investment Period, the shorter the Fundraising Period should be, logically.

The last two timing terms are the Fiscal Year, which most funds set as the calendar year to align with tax filings, and the Capital Call Notice Period, which is the amount of time Limited partners have to wire funds. For new managers that do not know their Limited Partners well, it may make sense to set the Capital Call Notice Period to either 15 or 30 days.

Fund Duration” means the following anniversary from the Initial Closing Date:
[10th year] [12th year] [8th year]

Fund Duration Extension” means:
[2 one-year periods] [1 year] [0 years (no extension)]

Investment Period” means the period from the Initial Closing Date up through the date that is the following number of years after the Initial Closing Date, during which the Fund can make its initial Portfolio Investments:
[4] [3] [5]

Fundraising Period” means the period commencing the Initial Closing Date and ending on the date that is the following number of months from such date:
[18 months] [12 months] [9 months]

Post-Investment Period” means the period after the last day of the Investment Period.

Fiscal Year” means, unless otherwise required under the Code, each year ending on the date below. In the case of the first and last Fiscal Years of the Fund, Fiscal Year shall mean the fraction thereof commencing on the Initial Closing Date or ending on the date on which the winding-up of the Fund is completed, in each case unless otherwise determined by General Partner and permitted under the Code.
[December 31] [September 30] [June 30]

Capital Call Notice Period” means the following number of days after a Capital Call Notice allowed for a Limited Partner to deliver cash to the Fund in the amount requested:
[10 days] [15 days] [30 days]

The Economic Terms

The economic terms in the Cornerstone Agreement are the backbone of the agreement, and all of these are important. The Carried Interest Percentage sets the carry for the fund, and, with most new managers, this will be 20% for the classic “2 and 20” model.

The Management Fee is split in the Cornerstone between an Investment Period Management Fee and a Post-Investment Period Management Fee. If you wanted a straight 2% for the ten years of the Fund Duration, then you could set both periods to 2%

However, most funds require more effort during the Investment Period, so the Management Fee might be higher, such as 3.5%. With a 3.5% management fee for 4 years of the Investment Period, then a 1% management fee for the remaining 6 years of the fund, the average management fee is 2%.

The next term is the GP Commitment Percentage, which is the amount of money that the GP agrees to invest in the fund. Most Limited Partners in funds over $5 MM will ask for this to be set at 1%, but this is negotiable. The GP capital contribution to cover the GP Commitment Percentage is paid at the same ratio and same time as capital calls are made, so this is a smaller commitment than it may seem.

The Maximum Portfolio Investment Percentage defines how much of the fund can be invested in any one single portfolio company as a percentage of the fund. This is an important economic term for fund strategy, as it affects the number of portfolio companies that a fund can invest in. Most funds set this at 10%, which means that they will have at least 10 portfolio companies, since no one company can get more than 10% of the fund. For smaller funds that have a more focused investment strategy, this amount may be higher, such as 25%.

The Organizational Expenses Cap refers to a spending limit on the various setup expenses for a fund. Normally, the fund pays for the expenses to get established separate from the management fees, and Limited Partners want these expenses to be capped. Any overages are normally paid for from the management fees. The Organizational Expenses include legal, registration and other filing fees, which tend to scale with the size of the fund. A typical amount for a smaller fund is $50,000.

The Recycled Amount refers to the amount of money as a percentage of the total fund size that a fund can claim back from distributions to invest in additional deals. Recycling is a good way to reduce the effect of management fees and increase portfolio diversity, but it can also be complicated to manage from a fund administration standpoint. As a result, most new managers avoid recycling and set this to 0%.

The last economic term, Successor Fund Threshold, is important because it defines how much of the first fund must be invested before the General Partner is permitted to raise an additional fund. The lower the threshold, such as 50%, the faster the General Partner can start building the firm value. Most Limited Partners want 70%, and most new managers will want 50%

Carried Interest Percentage” means, for purposes of calculating the Carried Interest of General Partner, the following percentage:
[20%] [25%] [15%] [10%] [__%]

Investment Period Management Fee” means the annual management fee during the Investment Period determined by multiplying the following percentage by the aggregate amount of Capital Commitments of all Limited Partners:
[3.5%] [2.0%] [3.0%]

Post-Investment Period Management Fee” means the annual management fee during the Post-Investment Period determined by multiplying the following percentage by the aggregate amount of Capital Commitments of all Limited Partners:
[1.0%] [2.0%] [1.5%]

GP Commitment Percentage” means, for the purpose of calculating General Partner’s commitment to contribute to the Fund, the following percentage:
[1.0%] [0.0%] [0.5%] [__%]

Maximum Portfolio Investment Percentage” means the following maximum percentage of the aggregate Capital Commitments made by all Partners to the Fund that may be invested in any single Portfolio Company:
[10%] [5%] [25%]

Organizational Expenses Cap” means the following cap on fees, costs and expenses, including that of counsel to General Partner, incurred in connection with the organization of the Fund and the offering of Partnership Interests:
[$50,000] [$100,000] [$75,000]

Recycled Amount” means, for the purpose of allowing the Fund to make additional  investments from distributions provided to the Limited Partners, the product equal to such Limited Partner’s Capital Commitment times the following percentage:
[0%] [10%] [20%]

Successor Fund Threshold” means when the following percentage of Total Capital Commitments has been invested into or committed for Portfolio Investments  and Fund Expenses: 
[50%] [70%] [0%]

The Reporting Terms

The Cornerstone Agreement has a key reporting term, Financial Statements, that defines how the General Partner prepares the fund’s financial statements. Most new managers and small funds will choose “Certified by General Partner,” since Reviewed or Audited financial statements can cost in excess of $10,000 per year to complete, and require extensive time and effort to accomplish.

Financial Statements” means the following type of balance sheet, income statement and cash flow statement for the Fund:
[Certified by General Partner] 
[Reviewed by a Certified Public Accountant] 
[Audited by a Certified Public Accountant]

The Control Terms

The Cornerstone Agreement control terms focus on defining what percentage of Limited Partners by ownership can take action within the fund, which is the Majority in Interest of the Limited Partner. The two primary actions are choosing an Advisory Committee member and entering Limited Operations Mode, where fund operations are put on hold. This is commonly set at a supermajority, 66 ⅔%. A lower percentage favors control by the Limited Partners, and a higher percentage favors the General Partner.

Majority in Interest of the Limited Partners” means Limited Partners holding more than the following aggregate Commitment Percentages held by all Limited Partners:
[66 2/3%] [75%] [50%]

The Final Agreement

Once a General Partner sets all of the terms in the Key Terms section of the Cornerstone Agreement, the document will look like the example below. It is recommended that you create a PDF of the Cornerstone Agreement, and email it to potential investors for feedback.

Cornerstone LPA Insights Legal Templates

Cornerstone LPA – the easy Fund Formation docs

Cornerstone is a lightweight and easy-to-use Limited Partnership Agreement for next-generation venture capital funds. It was released by VC Lab in October of 2021. Cornerstone is designed to reduce mundane and expensive fund formation activities, removing barriers of entry for new managers and new limited partners to enter and grow the venture capital asset class.

A Limited Partnership Agreement (LPA) is the document that forms and governs a venture capital fund. It specifies the rules between the general partners, who make portfolio investments, and their investors, the limited partners. It serves as the operating manual for the venture business.

Traditionally, the LPA is accompanied by a Term Sheet and a Subscription Agreement, and this set of documents normally runs over a couple hundred pages in length. Cornerstone unifies a Term Sheet, a Limited Partnership Agreement and a Subscription Agreement into one document, and Cornerstone is just 36 pages long.


Cornerstone is currently localized for fund formations in Delaware, United States. In surveying 73 next generation venture capital firms from around the world, 52% have chosen Delaware for their domicile. Additional localizations for Cornerstone are being planned for other popular fund formation domiciles. You can learn more about fund domiciles in this Venture Capital Domicile Report

How to Use Cornerstone

Cornerstone Carry
A sample Key Economic Term from the Cornerstone template agreement
with plug values for the general partner to customize.

Cornerstone is designed for a General Partner and Limited Partner to start discussing terms for a new venture capital fund without needing an expensive fund formation lawyer on either side. Here are the three steps to use Cornerstone:

  1. A General Partner takes the Cornerstone template agreement and customizes plug variables in the Key Economic Terms for a new fund offering.
  2. The General Partner shares the customized Cornerstone with engaged limited partners for feedback on the terms.
  3. Once the terms are agreed, the general partner engages with a law firm to form the fund entities using pre negotiated agreement.

The simplified process eliminates billable hours with fund formation attorneys, who often charge an hourly rate in excess of $1,000 USD. VC Lab is making Cornerstone available for free.

Four venture capital firms have used Cornerstone and this three step process to close on capital, and more have started subsequently. More funds are in process to use Cornerstone now, and a few of their experiences are quoted below:

I decided to create my fund in Delaware as a general partner in Latin America, and we selected Cornerstone for our LPA. My investors loved it because it is easy to understand, despite being from outside of the United States, and, for many of them, it was their first investment as an LP. It helped with my closing.

David Alvo Verdugo, Impacta VC

I’ve been in fund management for more than a decade before launching my own Fund. Compared to the massive and complex LPAs I have seen in the past, the Cornerstone LPA is dead simple to use.  This will enable more high net worth individuals to understand and enter VC as LPs.

Kevin Brockland, Indelible Ventures

I was able to edit Cornerstone and send it to my Limited Partners without the help of attorneys. The negotiation was very efficient, and I was able to manage the process in the way that I wanted to.

Bade Aluko, White Hibiscus Capital

If you have suggestions, questions or comments, please add them under “Leave a Reply” below. Cornerstone will be updated with new versions semi-annually, and you can download the most up-to-date agreement here.

Cornerstone was written by lawyers for business people, whereas most Limited Partnership Agreements are written by lawyers for lawyers. A number of legal innovations are introduced with the agreement, including:

  • Cornerstone consolidates all of the key economic terms into the front of the agreement, saving readers the ability to scan through dozens of pages to find critical information.
  • Cornerstone moves complex tax and regulatory language to the back of the agreement, allowing the document to read more clearly and be localized more easily. 
  • Cornerstone simplifies the operational components of the fund to 13 pages by eliminating definitions of numerous eventualities, leaving multiple decisions at the description of general partners and limited partners.
  • Cornerstone introduces concepts of fairness and ethics, adding an optional affirmation for all signatories to pledge support for the Mensarius Oath.
  • Cornerstone removes references to specific laws that already govern the agreement and reduces cross referencing, allowing the agreement to be read without needing to refer to other documents.

Special Thanks

VC Lab would like to thank everyone for their contributions to this groundbreaking legal agreement. Cornerstone was drafted over five months by VC Lab in conjunction with Rich Gora and Hans Kim. A number of U.S. and global law firms have reviewed and provided feedback on the drafting. Dozens of limited partners and general partners have also contributed feedback and ideas.