Startup Funding Espresso – How a VC Fund May Shut Down Early

How a VC Fund May Shut Down Early

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Venture Capital funds typically run on ten-year cycles.

There are some conditions in which the VC fund may shut down early.

Here’s a list of reasons:

Key persons -- the Limited Partners invested in a fund that has a certain number of key persons. 

If the number falls off, then the fund may suspend activities until a replacement is found.

The fund managers are found to be liable for fraud or gross negligence.

In this case, the fund may shut down and return the funds to the Limited Partners.

In other cases, the fund may replace the managers and continue on.

Limited Partners want to shut down the fund -- the market may have changed, or the investment thesis may no longer be viable.

In this case, the Limited Partners could demand their funds returned.

Alternatively, the Limited Partners could vote to fund a new investment thesis.

The VC fund managers may be found to have a conflict of interest.

The Limited Partners could demand the return of their uninvested capital.

Consider these points in running or investing in a VC fund.

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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