The document outlines key terms in both a Private Placement Memorandum (PPM) and Limited Partnership Agreement (LPA) for a generic venture capital fund. The PPM would describe the fund's investment strategy, market opportunity, management team experience, and targeted returns. The LPA establishes the fund's legal structure, investment period, management fees, carry allocation, and other standard terms like an expected 10-year term with the ability for extensions. It provides commentary on what language might be used for common terms and industry norms.

1. Terms of a GP-LP Fund
by Robert Carroll

2. All ideas are stolen from:
"If you read only one guide to
becoming a successful VC, this is
the one"
–Paul Maeder, Former Chairman,
National Venture Capital
Association (NVCA)
“When we formed Kleiner Perkins
Caufield and Byers (KPCB) in the
’70s, the golden age of VC had
just begun. For VC 2.0, this book
packs the insights and wisdom of
those who have done it, not once
but multiple times.”
–Frank Caufield, cofounder,
Kleiner Perkins Caufield and
Byers
(2011)

3. Two Documents
• The Fund is governed by two important
documents:
1. The PPM (Private Placement Memorandum)
2. LPA (Limited Partnership Agreement)

4. PPM
• A typical PPM will include
– The fund’s investment strategy
– The GP’s background and expertise
– The market opportunity

5. Fund Investment Strategy
• Market opportunity, drivers of growth
• Competitive advantage in this market
opportunity
• Fund managers’ background and relevant
expertise
• Capital efficiency, investment cycle, and target
fund returns (able to generate 25% IRR?)
• Competition from other venture funds
• Risks…and plan for mitigating these risks

6. How LPs Evaluate GPs

7. LPA
• An LPA is a legal document that contains legal
terms that describe the control, management,
financial investments, and distribution of
returns

8. Terms of the Limited Partnership
Agreement (LPA)

9. General Partner
• Language: Oasis Ventures 2, a Cayman Islands
limited partnership (the “General Partner”),
whose General Partner will be ABC
Management, LLC.
• Comments: Delaware is a standard choice for
domestic funds. For funds investing outside
the United States, the Cayman Islands,
Channel Islands, and Luxembourg are popular
jurisdictions of formation.

10. Investment Objective
• Language: To achieve superior investment
returns from investments in equity and
equity-related securities in companies in the
[sector] and [sector]-related companies.
• Comments: Typical language

11. The Offering
• Language: The partnership is seeking $100
million of capital commitments from limited
partners (“Capital Commitments”), with a
maximum of $150 million in Capital
Commitments. The General Partner will invest an
amount equal to at least 5 percent of the total
Capital Commitments of all partners on the same
schedule as the limited partners of the Fund (the
“Limited Partners”).
• Comments: Industry norm has been 1%, but LPs
are expecting more these days

12. Minimum Investment
• Language: The minimum investment is
$3,000,000 from institutions and $500,000
from individuals, provided that the General
Partner may accept subscriptions for smaller
amounts at its sole discretion.
• Comments: GPs usually like to cap any one LP
at 10-15% to ensure LP diversity

13. Initial Closing
• Language: An initial closing will be held as soon
as practicable. Thereafter, the Fund may accept
additional subscriptions until the one-year
anniversary of the initial closing date (the “Final
Closing Date”).
• Comments: A one-year fund-raising period is
typical, although recently many GPs have gone
back to the LPs seeking extension of this period in
any challenging fund-raising environment.

14. Drawdowns
• Language: Drawdowns may occur on an as-
needed basis with a minimum of 10 days’ notice,
provided that the initial drawdown may be
required upon five business days’ notice. No
more than 35 percent of the capital may be called
in any 12-month period.
• Comments: On average, a GP projects to invest
about 15 to 20 percent of the total committed
capital each year over an investment period that
lasts for three to five years.

15. Management Fees
• Language: An annual Management Fee will be
paid quarterly in advance by the Fund and
shall equal 2.5% of Capital Commitments
commencing upon the initial closing.
Beginning on its sixth anniversary, the
Management Fee shall be reduced in each
future year of the Fund by 10 percent. The
Management Fees are reduced by the cost
basis of the securities sold, distributed, or
written off.

16. Management Fees

17. Investment Period
• Language: The Fund may call capital to fund new
investments from the Initial Closing Date until the
fifth anniversary of the Final Closing Date (the
“Investment Period”).
• Comments: LPs expect that investments will be
made during a reasonable investment period
(typically five to six years), after which follow-on
investments are typically permitted. After the
investment period, GPs are expected to harvest
investments and work toward liquidity exits.

18. Term of the Fund
• Language: Ten years from the Final Closing
Date, subject to up to two one-year
extensions at the General Partner's discretion
to effect an orderly liquidation of the Fund's
investments.
• Comments: Ten years is the standard for a VC
fund. Most funds are extended if investments
are still in the portfolio.

20. Allocations
• Language: The cumulative net income and
gains of the partnership will be allocated 80
percent to all partners in proportion to their
contributed capital and 20 percent to the
General Partner.
• Comments: Industry standards have
established that 80 percent of profits will be
paid to LPs and 20 percent to GPs.

21. How to calculate carry