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Forget Returning The Fund. What Investment Can Return The Firm?

Hunter Walker

There’s an expression in venture capital called “returning the fund.” ” It simply means that an outcome in the fund (out of say 20-30 investments in that specific fund) makes enough money to return 100% of the principal. ” $200m would be “2x the fund.” ” And so on.

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A New Era of Fundraising for Start-Ups, Crowdfunding now Legal and Web-enabled

Gregg Fraley, Author of Jack's Notebook

Call it democratization of the fund raising market, call it free enterprise, call it access to capital, call it what you will, but it is a trend. Really, this means that average people now have the freedom to invest in what they wish.

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Now Any Accredited Investor Can Invest in Texas Startups with Capital Factory and AngelList

Austin Startup

Capital Factory has partnered with AngelList Rolling Funds to better meet the needs of today’s investors.

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How to Do Research on VCs (Written by a VC)

View from Seed

For example, when an entrepreneur asks about capital calls, what they really care about is, “Are you guys still actively making new investments at present?” If that’s what you want to know, just ask that.

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What Makes a Great Independent Board Member?

Both Sides of the Table

While it’s true that they are investing LP money from a fund, it’s also true that the VCs are required to write large checks into their funds so every time they do a “capital call” (request money from an LP to fund you) they are also having to wire their own money into the deal. VCs most certainly do have skin in the game.

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Rolling Closes Versus Synchronous Closes

Haystack

For any investor raising their own funds, you may have to chase down capital calls for each investment. For any startup selling an annual license, the deal may not get signed right away. Payment may be delayed. People will say one thing, and then do another, or drag their feet. That is what happens to everyone. It is not fair.

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How VCs Make Money….Hopefully

ithacaVC

And it literally has to pay in $$ when VC1 makes a capital call. Now, there are interesting ways for the GP to fulfill its portion of a capital call using “fee waiver”, but I am not going to address that here. It literally has an investment share in the fund just like any other limited partner.