Is There A Template Or Sample Contract For Venture Partners For A VC Fund?

The questioner continues: “Understanding there are various terms (small or no compensation, varying percentage of carry on deals), is there a template or sample agreement for a small micro VC fund to offer to venture partners?”

My answer:

You probably mean to refer to a template for a private placement memorandum (PPM), in essence, the business plan of a VC firm, which precedes the contract drawn up by attorneys.

As an advisor to limited partners (the investor in VC), I have sat in on meetings where VCs pitched their PPM. No real magic here.

Yes, the vast majority of VCs in Silicon Valley work off a PPM from a single VC firm in the valley (when I last checked) or copied one from a well-performing firm they admire or mimic best after. They are all in cahoots, and their plans are more or less the same. The source of much of my writing about how the arbitrage of innovation remains so miserably broken, and so responsible for innovations make-believe valuations sold to “greater-fools” without meaningful renewable value to society, with many false-positives and false-negatives emerging after the dust has settled.

I have a few PPM’s that I agreed not to share, but a google search should yield snippets you can borrow from. They are not too distinct from PPM’s in private equity (considered by limited partners the same asset-class), albeit the risk-profiles could not be more different. A key reason why many limited partners fail to yield consistent returns from venture capital, to begin with. A fundamental dislocation between risk-in and risk-out.

A micro-VC fund to me is an oxymoron because venture capital is high-risk/high-yield investing (before the chasm) and thus does not lend itself to the spoon-feeding of money capable of changing the world. Micro-VC today carries micro private equity risk profiles that have nothing to do with what venture is designed to tap into and yield.

So, it is best to inform yourself about what separates the wheat from the chaff in venture. Not in the least to realize why 99.4% of venture firms fail, and for some of the fundamental reasons I laid out above. The first-ever State of Venture Capital reveals a lot more.

 

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