Accounting and Governance

There are specific rules for the governance of a VC Fund.

The limited partners must be accredited investors.

There can be no more than 99 investors in the fund.

There can be no “bad actors” in the fund. 

Venture funds are different from companies in that they are partnerships.

For accounting, fund managers need to keep accurate records and track the ownership of each Limited Partner.

The funds are illiquid with long holding periods.

Management fees need to be calculated and drawn from the fund at the appropriate time.

The fund manager must calculate the carry and make clear what has been paid.

The manager should seek tax efficiency by matching the taxes to the income.

Finally, the manager should provide financial reports quarterly and annually.

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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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.