Some startups may have access to a lot of funding these days. Many companies will lie to you. VC Lab is an accelerator for venture capital companies that aims to attract investors who will support the rest of the globe.
The standard paperwork required to establish a new fund is a major obstacle to reaching this goal. It requires the services of specialized lawyers, whose time can run to more than $100,000 for a fund formation.
Today, VC Lab provides a collection of boilerplate documents that are free and openly available. These documents will streamline the process, save time, and make it easier to manage fund governance structures.
Adeo Ressi, co-founder of the company, explains that we have general partners who launch funds from all over the globe. Venture investors came from all over the world, including Central Asia and Africa.
They don't need legal costs.
Venture managers are passionate about change. Funds often have a narrow thesis and are smaller in size. They want to see the businesses they work with succeed. They don't need to have 200-400 pages of legal agreements that govern every decision they make. They require simple, lightweight agreements that are easy to use.
Cornerstone is VC Lab's 33-page package. It includes a term sheet and a subscription agreement. Similar documents for fund formation often run into the hundreds.
Hans Kim, a Silicon Valley-based startup lawyer who co-authored this new package, said that there is widespread acceptance of the fact that fund formation documents are too complicated and need to be simplified. I have had many clients who are founders and want to invest their money. If they are serious about investing in fund formation, I can refer them to a lawyer. They will then see the cost and need to reconsider.
Rich Gora, co-author of Gora LLC, said that the improvements include a simplified list of definitions and sections on management fees, as well as triggers for limited operator mode. This document contains details about domiciling the company in the United States. Plans are being made for other popular locations such as Canada, the Netherlands, and Singapore.
He is a lawyer for fund formation and has worked with many investors. His goal is to help businesses solve their business problems in simple terms. After the parties have discussed what they want, they can go to an expert to finalize the product.
He says that the writing process took 10 months. We looked through every industry LP agreement that we could find. We took 20-line concepts and reduced them to three. Although the concepts are still there, the lawyer language is gone.
Ressi believes that new documents could cut legal costs by half to more depending on how many LPs are brought in. He also notes that there is a shortage in fund formation experts. Standard documents will help speed up the process and allow for a more robust global venture capital ecosystem.
VC Lab was established within the Founder Institute. This global startup accelerator has made similar contributions to the start-up ecosystem. It was nearly nine years ago that it developed the concept of convertible equity. This is a precursor for the SAFE Note, which eliminates debt from convertible notes.
Ressi states that startup investing needs to be free from all bottlenecks. There will then be a surge in new VCs, and new LPs from all over the globe who enter the asset class. This will bring about a significant positive change in humanity. No matter where you live, you can have an idea and get the resources to make it happen. This is unfortunately not the case today.