VC Basics Flashcards
What is a VC Fund
Legal entity that pools capital in order to invest in assests.
Third party investors put in funds with the expectation that thier investment will grow.
What is a VC Firm
The management company that runs the office space, employs a staff.
May have multiple VC Funds running at the same time.
What kind of entity is a VC Fund
Limited Partnership
What kind of entity is a GP or General Partner
LLC
Seperate Legal Entity that manages the fund.
Why do firms need to have an additional GP per unique Fund?
By Legally seperating each fund, you are limiting the legal liability for each fund do the GP associated with that fund.
5 core distinguishers of a VC fund from other types of funds?
- Can’t invest more than 20% of its total capital in non-qualified investments
- Can only barrow or take on other leverage up to 15% of its total capital and repay any depts within 120 days
- A VC fund cannot allow LPs to redeam their interest in the fund
- Must present an investment strategy to investors
- A VC fund cannot register as a investment company under the investment company act of 1940
What are examples of Non-Qualifying Venture Capital Investments?
- Debt
- Secondaries
- Public Equities
- Fund of Fund Investments
- Digital Assets
What makes up a Limited Partnership
At least one GP and at least one LP that agree to do business together.
Unlimited Liability
GPs assume the legal liability. However, since GPs are set up as LLCs, the managing members and VC Firm have limited liability.
Investment Company Act of 1940
Exemptions of the fund from regestering with the SEC
3(c)1 and 3(c)7
What is an opportunity vehicle?
Specialized investment structures established by VC firms to pursue unique investment opportunities outside the scope of their main fund’s strategy. These vehicles provide flexibility and diversification, targeting higher-risk, potentially high-return opportunities that deviate from the core focus of the main fund.
What is a Side Car in VC?
Refers to a separate investment vehicle that is created alongside a primary fund to provide additional capital specifically for co-investment opportunities. The sidecar fund operates in parallel with the main fund and allows investors to participate in specific investments made by the primary fund on a deal-by-deal basis.
