Nov 08
adminPrivate Equity, Startup, Valuation, Venture Capital Conflict of Interest, Inside, Investment Round, Outside, Rule of Thumb, Valuation
As a general rule, firms will only raise an inside investmetn round if they cannot raise an outside round. An inside round means that the entreprenuer only raises capital from the investors in the previous round. This situation raises a serious conflict of interest around the valuation of the round since there is not any objective 3rd party to set the new valuation.
Nov 08
adminPrivate Equity, Venture Capital Capital, Carried Interest, Carry, Fund of Funds, Management Fee, Rule of Thumb
Fund of Funds typically receive a 1% management fee and 5% carry (or carried interest). Since funds of funds are much more scalable than a direct investment fund, they can charge a lower management fee and carry and make up the difference by quickly deploying the committed capital and raising another fund. This allows them to quickly amass a large amount of capital under management and thus earn significant management fees.
Nov 06
adminPrivate Equity, Venture Capital Carried Interest, claw-back, Fees, Management Fee, Rule of Thumb
The General Partnership (GP) of a venture capital fund typically receive to types of fees for their investment services:
- A 20% carried interest. This means they receive 20% of all of the capital gains on the funds they invest. Typically they must repay all of the contributed capital or they may be forced to pay this carried interest back to the Limited Partners (LP), this is known as a “claw-back”
- A 2.5% management fee. This fee is charged on all COMMITTED capital, regardless of whether or not it has been invested yet.
Nov 06
adminStartup, Venture Capital Acquisition, IPO, Liquidity, Rule of Thumb
In recent years (following the bubble of the late 90′s) it has taken new ventures an average of 6.5 years to reach a profitable exit via a liquidity event (acquisition or IPO)
Nov 06
adminLegal, Private Equity, Venture Capital Fund, Life, Rule of Thumb, Structure
Private equity funds (including venture captial funds) are typically structured to be “self-liquidating”. This means that they dissolve at a pre-determined time, which is typically 10-12 years after its founding. However, if the fund is not fully invested and/or liquidated by the pre-determined time, the Limited Partners generally grant an extension to the General Partners.
Nov 06
adminStartup, Venture Capital Capital, Cash Flow Positive, Financing, Rule of Thumb
On average start-up new ventures will require $68 million in financing to reach cash flow positive. This capital is typically raised over 4 rounds. Once the new venture reaches cash flow positive, in theory, it should be self-sufficient thus not requiring any further investment.
Nov 04
adminLegal, Startup, Venture Capital Legal, New Venture, Rule of Thumb, schedule, Shares, Start-up, Startup, Venture Capital, vesting
Nov 04
adminPersonal Finance Retirement, Rule of Thumb
A rule of thumb for how much you should have when you retire is to have 20 times your expected expenses in retirement.
Nov 04
adminPersonal Finance Nest Egg, Rule of Thumb, Savings
A rule of thumb for how much you should save is about 10% of your take-home pay…if you start early enough. If you are over 40 and haven’t accumulated a sizeable nest egg, you should try and increase this amount to 30%. This rule of thumb should help you build an emergency fund, save for a house, etc.
Nov 04
adminPersonal Finance mortgage, payment, Rule of Thumb
A rule of thumb for how much house you can afford is that you should try and keep the purchase price of the house less than 2.5 times your GROSS annual income. (Good luck in San Francisco, New York, or basically anywhere you’d want to live 
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