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Investing in Venture Capital

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January 1, 2024
Corporate Transparency Act
Understand the impact of CTA and how to file Beneficial Ownership Info
March 20, 2022
What is a Pay-to-Play Provision?
Pay-to-play provisions incentivize investors to participate in a new fundraising round either by negatively impacting investors who opt not to participate or rewarding investors who choose to participate.
January 20, 2022
The Basics of Venture Capital Portfolio Construction and Management
Portfolio construction is the process of designing a quantitative investing strategy for your fund, while portfolio management refers to tracking how your actual investments are pacing against that strategy.
April 2, 2022
What is a Delaware C-Corp?
C-Corporations are the preferred legal entity structure of many new technology startups.
March 21, 2022
What are Advisory Shares?
Advisory shares refer to equity compensation offered to a startup’s advisors.
February 7, 2022
What is a Side Letter?
Side letters are used in venture capital deals to grant certain investors specific rights or privileges that are outside the parameters of the standard investment documents’ terms.
March 22, 2022
What is a Down Round?
A down round is when a startup raises money at a pre-money valuation that is lower than the post-money valuation of its previous round.
January 19, 2022
What is Form ADV?
Form ADV is the standard disclosure document investment advisers must file with the SEC and state regulators. But for venture capital fund advisers—which generally qualify as Exempt Reporting Advisers—the requirements can differ.
April 1, 2022
What Are Employee Stock Options?
Employee stock options give their holder the right to purchase company equity and thus share in the company’s upside.
January 21, 2022
506(b) vs. 506(c) Funds
Rule 506 under Regulation D allows fund managers to offer fund interests (i.e., raise capital for their fund) without registering the offering with the SEC.
April 3, 2022
What is Stock Option Repricing?
Companies can reprice stock options to lower the exercise price of existing employee options when the company's share value drops.
April 5, 2022
What is an Employee Option Pool?
Employee option pools are shares of a startup specifically reserved for the company’s employees.
April 4, 2022
What is a Cap Table?
Cap tables present a detailed breakdown of a startup’s ownership.
April 6, 2022
What is a 409A Valuation?
A 409A valuation is an independent third-party valuation of a startup's common stock that informs the price of employee stock options.
April 2, 2022
Schedule K-1 for VCs
The Schedule K-1 helps an investor in a venture fund understand their share of taxable earnings for the given year.
April 1, 2022
What is Qualified Small Business Stock?
The use of qualified small business stock in venture investing can save investors millions in capital gains taxes.
January 26, 2022
What is an Exempt Reporting Advisor?
Qualifying venture capital fund advisers are exempt from registering with the SEC and from many provisions of the Advisers Act via Exempt Reporting Adviser (ERA) status.
January 22, 2022
What Are Blue Sky Laws?
Blue sky laws protect investors against securities fraud. Most venture fund offerings are exempt from blue sky law registration requirements, but fund managers often need to make notice filings with the state.
March 7, 2022
What is ASC 820?
ASC 820 sets out how venture funds should determine and report the fair values of their portfolio companies.
March 8, 2022
What to Know About TVPI
Investors use TVPI to analyze the return on their investment in a venture fund.
March 11, 2022
What is a Pre-Money Valuation?
A pre-money valuation is what a startup is believed to be worth prior to raising a round of funding.
March 10, 2022
What is a Post-Money Valuation?
A post-money valuation is what a company is deemed to be worth after having raised a new round of financing.
March 12, 2022
Venture Capital Fee Economics
Venture is a service industry. And just like any service, it costs money. Here are the fees you can expect when investing in venture.
March 7, 2022
Internal Rate of Return: What You Need to Know
Internal rate of return is a common metric used in venture to compare a fund’s performance across vintage years.
March 9, 2022
Carried Interest in Venture Capital
Carried interest is the primary way general partners get paid for managing a venture fund.
March 31, 2022
What is an SPV?
SPVs allow investors to pool their money together to invest in a single company.
March 30, 2022
What is a SAFE?
SAFEs give an investor the right to convert their SAFE into equity at the company’s next equity financing round or liquidation event.
March 23, 2022
What is a Right of First Refusal?
A right of first refusal gives its holders “first dibs” on any share sale in a startup.
March 25, 2022
What Are Protective Provisions?
Protective provisions give preferred shareholders the right to veto specific corporate actions that could impact their investment.
March 27, 2022
What are Pro Rata Rights?
Pro rata rights can help investors maintain their ownership stake in a startup as it grows.
March 28, 2022
What is a Liquidation Preference?
Liquidation preferences dictate the order and amount investors get paid when there's an exit.
March 24, 2022
What are Drag Along Rights?
Drag along rights give the majority shareholder(s) the power to compel minority shareholders to participate in an acquisition.
March 29, 2022
What is a Convertible Note?
Convertible notes are a type of loan that gives investors the right to convert their debt into equity at a predetermined event.
March 26, 2022
What is Anti-Dilution Protection?
Anti-dilution provisions help protect investors’ shares from losing value in a ‘down round.’
February 11, 2022
Venture vs. Stocks & Real Estate
Venture differs from other major asset classes in several key ways, including access, return profile, and risk profile.
February 12, 2022
What Does a Limited Partner Do?
LPs provide the capital for funds to invest. In return, they hope for profits and, in some cases, access to information and future deals.
February 10, 2022
The Basics of Venture Capital Fund Distributions
A distribution is the process by which a fund returns capital to its investors.
February 8, 2022
How Do Capital Calls Work?
Capital calls give fund managers the legal right to demand capital from the fund’s investors.
February 9, 2022
Accredited Investors vs. Qualified Purchasers: What You Need to Know
The accredited investor and qualified purchaser standards determine which investment opportunities an investor can participate in.
January 26, 2022
The Basics of Venture Capital Management Companies
Management company structure has an important impact on a venture capital fund’s activities.
January 31, 2022
What is a Venture Capital Fund?
Venture capital funds are pooled investment vehicles that provide capital to startups in exchange for equity.
January 29, 2022
Venture Capital Equity Financing Documents
The venture capital equity financing documents dictate the economics and control offered to investors and founders of a startup.
January 24, 2022
Venture Capital Fund Recycling
Venture capital fund recycling—when GPs reinvest returns from early exits back into the portfolio—increases investable capital and can potentially increase fund returns.
January 28, 2022
Preferred Shares vs. Common Shares
Venture investors typically negotiate for preferred shares because preferred shares grant certain rights, privileges, and preferences that common shareholders do not receive.
January 27, 2022
What is a Liquidity Event?
Liquidity events can be viewed as the “end game” for venture investors, giving them the opportunity to convert their illiquid stake in a startup into liquid assets.
January 30, 2022
What Does a General Partner Do?
The general partner of a venture fund raises and allocates investor capital and supports the founders of the companies they invest in.
January 25, 2022
What is a Fund of Funds?
A venture fund of funds is a fund that invests in other venture funds. Investing in a fund of funds offers portfolio diversification.
January 23, 2022
What is a Bridge Round?
Bridge rounds help startups “bridge” the gap between larger funding rounds. While not always ideal, they can be necessary to keep the company afloat.
February 12, 2022
What Does a Limited Partner Do?
LPs provide the capital for funds to invest. In return, they hope for profits and, in some cases, access to information and future deals.
February 11, 2022
Venture vs. Stocks & Real Estate
Venture differs from other major asset classes in several key ways, including access, return profile, and risk profile.
February 10, 2022
The Basics of Venture Capital Fund Distributions
A distribution is the process by which a fund returns capital to its investors.
February 9, 2022
Accredited Investors vs. Qualified Purchasers: What You Need to Know
The accredited investor and qualified purchaser standards determine which investment opportunities an investor can participate in.
February 8, 2022
How Do Capital Calls Work?
Capital calls give fund managers the legal right to demand capital from the fund’s investors.
February 7, 2022
What is a Side Letter?
Side letters are used in venture capital deals to grant certain investors specific rights or privileges that are outside the parameters of the standard investment documents’ terms.
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