Hosted by Jay Adelson.
Entrepreneur, CEO, and business owner Jay Adelson (Equinix, Digg, Revision3, SimpleGeo) demystifies the start-up process by providing advice, tips, and answering questions. Ask Jay how to turn any business idea into reality: firstname.lastname@example.org, @jayadelson, or http://youtube.com/askjayadelson Read More
Special guest Jeff Clavier of SoftTech VC discusses the logistics surrounding starting a venture capital firm from legal complexities to payouts and percentages. Watch to learn more about this tough, risky but potentially very lucrative field!
Successful entrepreneur and CEO Jay Adelson demystifies the start-up process by providing advice, tips, and answering questions. In this episode, the question is about the logistics surrounding how one goes about starting a VC firm. Special guest Jeff Clavier from SoftTech VC explains the legal complexities, raising money, limited partners, fund managers, payouts and percentages, plus all the expertise required to both find talent and invest in talent in this tough but potentially lucrative field of work.
- Hire an experienced lawyer in fund formations
- Create an LP - limited partnership
- LPs receive investments from limited partners
- A lengthy LP agreement is put in place with your investors
- Larger investors typically get custom Side Letter contracts
- Contracts define how you will invest, manage, and distribute funds
- Investors typically expect at least 3x returns over 10 years
- Although VC can yield high returns, it is typically very risky
- VCs typically must demonstrate great skill to raise $ from LPs
- Most VC firms budget about 2% annually to manage their fund
- Carried interest (carry) is the percent net profit the fund generates that goes to the VC, or the general partner(s)
- The carry for most VC firms is between about 20-30 percent