Episode 35: Venture Capital Funds

Tokens of Wisdom

Like I mentioned back in Episode 2, there are some down sides to relying on the private fund exemption – at the SEC level, the only “down” side is an AUM ceiling after which you have register (150mm…see ep 32). But many states require extra stuff if you’re managing any 3c1 funds: this varies by state, but many impose annual audit requirements and either increased investor accreditation thresholds, restrictions on who can pay performance-based comp, or both. EXCEPT those restrictions don’t apply to managers whose only clients are “venture capital funds”.

So what is a “venture capital fund”? Tune it to today’s episode to find out!

Key Points From This Episode:

• The “venture capital fund” definition. Quick summary:
  
• It’s a “private fund”;
• it represents to investors that it’s is pursuing a venture capital strategy;
• it severely limits any borrowing;
• it provides no redemption rights to investors except in extraordinary circumstances;
• it’s not registered under the Investment Company Act; and
• Immediately after acquiring any asset, it must hold no more than 20% of its aggregate capital contributions and uncalled commitments in assets that are not “qualifying investments”.

• What is a “qualifying investment”?
• Why do people hate Congress?

Disclaimer:

This show is for informational purposes only. Nothing presented here constitutes legal advice. Tokens of Wisdom is produced by Dave Rothschild, partner at Cole-Frieman & Mallon LLP headquartered in San Francisco, California. For more information, visit https://colefrieman.com/

Links Mentioned in Today’s Episode:

Dave Rothschild - https://www.linkedin.com/in/davidcrothschild/

Cole-Frieman & Mallon LLP - https://colefrieman.com/

Music by Joe Ginsberg - https://www.instagram.com/thejoeginsberg

For any questions or comments, email: [e-mail]