Understanding Transparency in Venture Capital

The fastest way to lose my interest? Hide the Cap Table details. Transparency in ownership structure tells me about leadership character: ✓ Open books = Trustworthy management ✓ Clear convertible terms = Professional approach ✓ Realistic option pricing = Fair employee treatment ✓ Proper legal compliance = Reduced future risks I've seen deals collapse during due diligence because founders weren't upfront about their equity structure. Pro tip for entrepreneurs: Share your Cap Table early in investor conversations. It builds trust and saves everyone time. The companies that succeed long-term? They treat their Cap Table like their financial constitution. Transparency isn't just good business - it's the only business worth doing. #Startups #VentureCapital #angelinvesting #Entrepreneurship

𝗧𝗵𝗲 𝗜𝗻𝘀𝘁𝗶𝘁𝘂𝘁𝗶𝗼𝗻𝗮𝗹 𝗣𝗹𝗮𝘆𝗯𝗼𝗼𝗸: 𝗣𝗿𝗲𝗽𝗮𝗿𝗶𝗻𝗴 𝗩𝗖 𝗙𝘂𝗻𝗱𝘀 𝗳𝗼𝗿 𝗠𝗮𝗷𝗼𝗿 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 Last week, AngelList hosted a panel with Elizabeth Ferry (StepStone Group) and Graham Pingree (Cendana Capital) on what makes emerging VC managers stand out to institutional investors. Here are the key insights: 1️⃣ 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗖𝗼𝗻𝘁𝗿𝗼𝗹𝘀 𝗔𝗿𝗲 𝗡𝗼𝗻-𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝗯𝗹𝗲 • The basics: Dual bank signatures, D&O insurance & clear separation of front/back office • Solo GPs: First hire should be a 3rd party fund admin/outsourced CFO + add robust key person provisions in LPA • Long-term view: "Build an institutional platform from day one" –Liz Ferry 💡 "Bad performance can usually be explained away (e.g., a down market environment), but operational failures erode trust and your LPs won't reup." –Liz Ferry 2️⃣ 𝗟𝗲𝗴𝗮𝗹 𝗦𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 𝗗𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲𝘀 𝗬𝗼𝘂𝗿 𝗙𝘂𝗻𝗱𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝗦𝘂𝗰𝗰𝗲𝘀𝘀 • Counsel matters: Experienced fund formation attorneys pay for themselves by keeping LPA terms market, shortening negotiations & protecting your brand with institutional LPs (Cost for top law firms: "$400K-$1M") 👀 • Market terms: Different expectations for emerging managers vs. established managers with proven track records (premium carry is earned not given) • SPV strategy: Useful for co-investments & aggregation, but watch for conflicts of interests and economics when offering overflow deals • Secondary sales: Selling 10-20% of positions can provide early DPI while preserving upside 💡 LPAs are becoming more GP-friendly, particularly in VC, but institutional investors still need core protections. 3️⃣ 𝗧𝗿𝗮𝗻𝘀𝗽𝗮𝗿𝗲𝗻𝗰𝘆, 𝗗𝗮𝘁𝗮 & 𝗦𝘁𝗼𝗿𝘆𝘁𝗲𝗹𝗹𝗶𝗻𝗴 𝗖𝗹𝗼𝘀𝗲 𝗟𝗣𝘀 • Transparency: Proactively disclose major issues (e.g., SEC exams, significant team changes, challenging portfolio developments). • Data Flow: Institutional LPs value frequent, detailed updates (Cendana expects monthly calls with fund managers to build trust over time) • Unique edge: Articulate what makes your fund strategy different from 1000s of others (storytelling is key) 💡 "Fundraising is fundamentally a sales motion and listening to the person you're pitching to and reacting to what they're telling you they look for ... [is the most effective] fundraising technique." –Graham Pingree 𝗞𝗲𝘆 𝗟𝗲𝘀𝘀𝗼𝗻𝘀: • Hire an institutional-ready team including admin, back office and legal • The best fundraisers actively listen, adapt to LP feedback, and clearly demonstrate why their fund stands out from the pack. • Transparency is non-negotiable—Graham noted that anything that hints at "deception or dishonesty is an immediate deal breaker for us" (and by extension, all institutional LPs). What are your biggest questions in setting up a VC fund to meet institutional LP expectations? (Source: AngelList, link to presentation in comments)

Typically, when a VC says they’re being transparent, it’s right before they admit they’re investing in your competitor. “Just to be honest…” TBPN asked me what it means to run the “most transparent venture fund”, and it comes back to who our customers are. (Founders, of course.) So, to us, transparency means a few things: - Putting out an uncomfortable amount of detail, like what questions we might ask in a first meeting - Hosting our website on GitHub (last commit was just a few days ago!) - Explaining how we approach valuation, diligence, and basically everything else we do… if it’s not there, submit a pull request Founders are our customers — we don’t want to waste their time.