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LIFT10: Workshop on Hacking Venture Capital - Fred Destin , May 7, 2010 This morning at the excellent LIFT Conference I gave a two hour workshop on " Hacking Venture Capital " designed to give entrepreneurs a hands-on experience of (a) pitching and (b) negotiating with detailed debrief and tricks of the trade.
LPs investing in venture hold a subset of all the funds in the VC universe by design (see #4 & 5). It’s true that FoFs provide LPs a way to purchase VC funds in a basket, but by design these are comparatively narrow actively-managed investment funds rather than broad-based passive vehicles.
A corporation, by contrast, is a permanent organization designed to execute a repeatable, scalable business model. Worse, Robert Adams and his two partners got 20% of the carriedinterest in the fund, resulting in payouts of $30 million to the partnership. First, let me recap a key insight for me from Steve’s post.
In addition, there is a performance incentive — the CarriedInterest or Carry. The carry is typically around 20% of any gains on the fund. The design of K9 Ventures takes these issues into consideration. In return for the operational role the GPs play, their firm receives a Management Fee.
But the biggest innovation was the “carriedinterest” (called the “carry”.) Aligning their interests with their limited investors and the entrepreneurs they were investing in. Theme: Digg 3 Column by WP Designer. In a typical venture fund, the partners receive a 2% management fee. Blog at WordPress.com.
I can have my immigration reform and my carriedinterestdesignation? Taxes are a real issue for sure – much of their work is on the company-formation side (how stock options are treated, etc) and that matters to founders and teams. But quite simply we’ve reached the point where priorities deserve to be flipped.
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