First, VCs get capital commitments from limited partners (i.e., That means that it has capital commitments from investors of $100mm. Capital is called when needed for investment, fund expenses or management fee. And, VC1 does not reinvest capital returned (with very few limited exceptions) – VCs are not hedge funds! All capital returned from investment gets paid out. Importantly, GP1 will have also committed investment capital to VC1. MORE

Some VCs will have trouble when they make capital calls (asking their investors to send the next tranche of the investment money that they are contractually bound to send). Those commitments are drawn down in the form of the capital calls I mention above.) Sequoia Capital, one of the most respected and well known VC firms in Silicon Valley very recently called a summit of all their company CEOs and ran through a doom-and-gloom presentation, now available online. MORE

I personally believe that one of the major drawbacks to venture capital in Europe is chronic under-financing and people skirt around this issue. Even if they enter with a low 2 or 3 million round, they are easily able to scale the business quickly with additional capital. You could of course argue that the lean start-up method doesn't call for much money but this is misleading. MORE

One area where some GPs will feel that ILPA is being too prescriptive is in the standard form capital call and distribution notice - the first of five templates that ILPA intends to create. By SJ Berwin LLP. January 21, 2011. Introduction. Few fund managers have been able to ignore the Institutional Limited Partners Association's Private Equity Principles. MORE

In the world of startups and venture capital all the money is concentrated in a small number of winners and average returns are probably below zero. Forward Partners Venture CapitalIt follows that the average investor will make average returns. MORE

This is part of my ongoing series of posts and I need to file this one under both Raising Venture Capital and Startup Advice. Many of these businesses were what First Round Capital called FNACs (features, not companies – this acronym has always stuck with me). MORE

The Most Important Venture Capital Statistic. million for the year, which is the first time it has been below $5 million since 2001, a sign that capital efficiency will be even more important than it has. Of course, the most important funding statistic to an entrepreneur relates to one specific company, and whether there is sufficient capital available to build and scale his business. Labels: bootstrapping , CFO , Fliqz , venture capital , venture financing. MORE

It was only a year ago that many in the Venture Capital industry were predicting that “winter was coming” and to be fair the author of this post was chief amongst them. billion in venture capital funds with one A-round fund and one late-stage fund. startup venture-capital MORE

The venture capital business is in the middle of a shakeout. LPs missing capital calls (a very big deal). I don’t wish ill-will on any of my venture friends, but I think this is good for everyone in the long run: we’re flushing out a broken, over-capitalized, me-too industry. MORE

Can the right please refrain now from calling him a socialist? 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. MORE

Typically capital calls are made to limited partners when an investment happens. If there are a lot of capital calls, making and collecting a huge volume of capital calls can be a lot of work on the fund personnel and limited partners. Capital calls may work differently for these early stage funds. Can 50-100 quality startups be found in one area even if it is in the Bay area, the startup capital of the world? MORE

I like to think of the venture capital business like parenting. That care and feeding includes the decision to call it quits and give up on the project sometimes, but honestly that doesn't happen that much in our portfolios. We invested about a half a million of seed capital into a company last year and it is already profitable and there is a good chance that company isn't going to need any more capital from us. I see the capital calls. MORE

This is the eighth in our series of ten frequently asked questions from investors in venture capital partnerships. Answer: The options here are limited, and they are (1) the LP can try to sell their interest, including the obligation to fund future capital calls, to a fund that acquires secondary interests. The good news is that a robust market exists for such interests in venture capital partnerships today; or (2) default. MORE

This is the last in our series of 10 frequently asked questions from investors in venture capital partnerships. Susan Mangiero , CEO of Investment Governance’s Fiduciary X , asked me the following: Question: I’ve read that some GPs are suing LPs for not making capital calls. MORE

Warren Hogarth from Sequoia Capital called him the “most persistent founder he ever met.” “Entrepreneurs are often given two pieces of contradictory advice: persistence and flexibility. Have a vision and pursue it through years of people telling you you’re out of your mind. Or, be flexible: look at data, iterate, and change based on the signals you’re getting. There isn’t an actual algorithm. MORE

Throughout my years in the venture capital business I was witness to some questionable behaviors and tactics, which in reality is par for the course in any business, but nothing could have prepared me for what I have seen in the last 2 years. I do want to devote some of this post to defending the VC business on one important point, there are times when a company is not deserving of continued funding and/or should be shut down to preserve investor capital. MORE

GigaOm reports that Sequoia Capital called an all-hands, emergency meeting with its portfolio CEOs to walk through a recommended plan of action. Cut costs, cut projects, raise incremental capital, be proactive and plan for the worst. Every start-up board is having the same conversation these last few weeks: how will this economic crisis affect us and what should we do in our own business? MORE

The bottomline is that this is the worst time in history for the venture capital industry. Here are just a couple that I’ve come across recently: TechCrunch: The End of Venture Capital As We Know It? WSJ: Venture Capital Hits a Cash-Call Crunch. BusinessWeek: What Will the Crisis Mean for Venture Capital? PrivateEquityOnline: Bankrupt WaMu Parent Defaults on Capital Call. The venture capital industry is getting beaten from all sides. MORE

But I wanted to call out specific attention to the loneliness of success because it has its own unique flavor. He suffered publicly as the press called his wife fat and begged people at concerts to be kinder to his wife. MORE

Their portfolio firms will be able to cut back on headcount and other spending and additional capital from investors will allow the companies to survive for the 2-5 years it will take the market to begin to recover. MORE

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But I did come across a super post today by Michael Greeley at Flybridge who reported on the just announced Q3 2012 VC fundraising data released by the National Venture Capital Association (NVCA) and Thomson Reuters. Here it is as a link and in full text: “The National Venture Capital Association (NVCA) and Thomson Reuters released today the 3Q12 VC fundraising data, which is a report I eagerly await as it is a barometer of the health of the VC industry. MORE

For example, occasionally entrepreneurs will ask things like, “How much capital have you called from your current fund?” 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?” MORE

And, finally, finally, finally, we saw overwhelming bipartisan support from the House of Representatives in support of a bill that will help small businesses raise capital, called the JOBS Act, which passed 390-23 last week and is now being debated in the Senate. MORE