Today, we officially kicked off our venture fund formation with our law firm. How exciting!
We’re still weeks away from getting the paperwork done, but we’ll do it right.
Right now, we have a bunch of entrepreneurs on deck and we need to select the method of collecting money now while investing it while it comes in. It is a slightly different way of operating than other funds, which seek to raise money first and then go out and look for investment opportunities.
It’s an interesting way to work.
The pros are:
1. We deploy money as soon as possible.
2. We collect management fees sooner.
The cons are:
1. Early investors carry more risk, as the fund is not diversified yet.
2. More paperwork for us, and thus more time and money spent on that.
3. Management fees come in, but we won’t get enough to support ourselves. Full budget is achieved when we raise the entire amount.
I think the most important part is that we get our entrepreneurs off and running. They need cash now and we shouldn’t hold them up….