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Exploring Evergreen Funds with a VC Investor Who Raised One

This post was written by Alex Graham, Finance Expert for Toptal.

Submitted by Michelle Young at Toptal

Edited by Lynn Patra

Executive Summary

What Are Open-ended and Evergreen Funds?
How Are These Funds Different from “Traditional” Funds?
What Is Some Advice from Someone Who Has Raised and Operated an Open-ended VC Fund?

 

Earlier in 2018, through Toptal, I worked with Rodrigo Sanchez Servitje from B37 Ventures on a project related to its open-ended VC fund. Such funds are still a relatively unknown and misunderstood type of funding vehicle, with a dearth of “in the trenches” information out there about how they operate. With this article, I am looking to correct that.

As someone who has raised and operated an open-ended VC fund, throughout the piece, I will refer to Rodrigo for invaluable insight regarding B37 Ventures’ experiences.

What Are Open-ended and Evergreen Funds?

In venture capital fundraising, as the adage goes, “If it ain’t broke, don’t fix it.” For years, funds have toed this line by raising capital through closed-ended vehicles. This refers to a management company raising a set amount from external investors via a limited partnership legal structure for a fixed number of years (typically ten). After this process, the doors close, money is put to work and, at the end date, the fund is wound up and repaid.

Despite investing in disruptive and innovative industries, the landscape of VC fund structures has largely remained unchanged.

The most obvious alternative would be the inverse of a closed-ended fund: an open-ended one. In these such funds, capital is invested directly into an LLC on an ongoing basis with no termination date. It is essentially investing preferred equity into a company. Investors buy units of a fund with a yield attached (the hurdle rate) and they can buy more, or sell, whenever they wish.

This type of fund is also liberally referred to as a permanent capital vehicle or evergreen fund. The ethos between the names is largely the same, in that it’s referring to structures with no end date or fixed capital quotas. A core distinction is that an evergreen fund can recycle returned capital while open-ended funds (like B37 Ventures) distribute to investors. Read more of this post

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Family Office Investment Guide: An Alternative to Venture Capital

This post was written by Vidur G. Gupta, Finance Expert for Toptal.

Submitted by Michelle Young at Toptal

Edited by Lynn Patra

Executive Summary

What Is a Family Office?
How Does Family Office Investing Differ from Venture Capital?
A Family Office Investment Could Be Right for You If…
How Can an Expert Prepare Your Company to Receive an Investment?

15th Century Florence…

Family offices began investing in early-stage ventures centuries ago. In 15th century Florence, the Medici family actively supported young artists by investing in their works (venture capital of its day), patronage which provided the start for some of the greatest masters of all time from Leonardo Da Vinci and Michelangelo to Galileo and Botticelli. Amazingly, this was 500 years before the first formal venture capital firm (ARDC) was founded.

…to Present Day

Read more of this post

Considerations for Raising Your Own Private Equity Fund

Submitted by Michelle Young at Toptal

Authored by Martin Kemeny, Finance Expert for Toptal

Edited by Lynn Patra

Executive Summary

Raising a private equity fund is a natural progression for ambitious investment managers.
The strategy and operations of a fund should be thoroughly planned in advance.
Be well aware in advance of the securities laws that must be adhered to.

There’s a time in many investment managers’ careers when the next logical step is starting a private investment fund on their own. Either the manager has been working for others as an employee and now wants to go solo, has been investing their own money and wants to raise outside capital, or has been investing with others’ capital on a one-off basis and wants to scale. Whatever the reason, in many cases, the right answer is to set up a fund. A fund can stabilize an investment business and help the manager grow assets under management and create a valuable investment platform.

Whether co-mingled or from a single investor, a fund has many distinct advantages over one-off capital raising: Read more of this post

4 Investment Strategies to Grow Wealth [Infographic]

Investing and retirement are important topics some of us, myself included, don’t think about enough. Hunting down an informative infographic was a fun way to focus my attention on this for a time. I hope the following infographic will be helpful to some of you as well.

Have a look and let me know your thoughts. Do you have anything to add to this? Read more of this post

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