After 12 years of practicing law each year I learn something new that surprises me—but shouldn't.

2021

• VC fund advisers who file with FINRA qualify as accredited investors, regardless if they themselves are accredited or not.

New Rule: All VC funds = accredited investors.🤯
Now, this is a "new" rule, but it has been on the books since Aug 2020. How did I miss it?

I was researching on a website that hadn't been updated since mid-2020 (Cornell Law).

Eventually someone would have probably called me out.

But how I found out was answering an email.
I generally brush up on my research when someone asks me a question. I try not to take for granted that I know a lot. The reason is laws get constantly updated, and the more enmeshed in the law as an "expert," the less flexible you are when things change.

Things always change.
So, now I have to go back and debunk a few years of telling people that the SEC hasn't granted a waiver for VCs as accredited investors. That's BS. They have, since at least August 2020.

Frameworks and articles I have written have to be updated, but the good news is I found it
Here's the part I missed on the new law—taken directly from the eCFR page:

ecfr.gov/current/title-…
So, in conclusion, never assume you know everything about your subject matter area, even if you are a "subject matter expert."

There will always be things that surprise you when you teach other people and—in doing so—maybe you learn a few things yourself.

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More from @ChrisHarveyEsq

2 Mar
Law of VC Episode #18 - Simplifying the Safe

• Remove Valuation Caps & Discounts

• Replace with Conversion Percentage

Instead of teaching founders the nuances of discounts, valuation caps and MFNs, why not simplify the Safe and treat it like a cap table with fixed ownership? This is an image of the red...
2/ After five years of testing pre-money Safes, YC made two major changes to the Original Safe:

1) Pro rata rights removed by default
2) Valuation Cap is now "Post-Money"

What does that mean?

Here's a chart explaining the differences and how to count the other pre-money stuff. Image
3/ To see the differences between pre-money and post-money Safes we need to do a little math.

Key Assumptions:

• $100K pre-money Note
• $100K Post-Money Safe
• 20% option plan expansion.

This is a cap table showing very little difference (0.78%).

docs.google.com/spreadsheets/d… Image
Read 6 tweets
24 Nov 20
Five Reasons Why Raising a VC Fund is So Difficult:
1. Lack of Transparency & Trad Biases
2. Reliance on Two Types of LPs—FOs and HNWs
3. Risk Aversion
4. Strong Competition
5. Covid-19

Original Source: Samir Kaji (First Republic)
Image Credit: SVB (c) 2020
Market Terms for Emerging Venture Funds:

• Management Fees, Performance Fees, Distributions
• Fund Expenses
• GP Commitments
• Hurdle Rates (Preferred Return)
• Key Person Clauses & GP Removal
• Reporting

Two most important reference points:

• *Different’s 2018 VC Survey (December 2018)
• Carta’s definitive guide to the LPA (September 2020)



Read 11 tweets
3 Mar 20
1/ A quick primer on #SPVs

First an #SPV in the VC context simply means an entity setup to provide financing to startups or to acquire secondary shares in pre-IPO companies.

SPV #structures:
-LLC (common)
-LP
-Series LLC: Alumni Ventures Group
-Series LP: Assure/AngelList/etc
2/ Traditionally, #SPVs (special purpose vehicles) were used for structured financing transactions. These entities blew up in the 2009 financial crisis.

Today, it's very common to see SPVs on a Silicon Valley startup cap table. For example, in @Uber's #IPO there were 100+ SPVs.
3/ Founders & employees are more active as operator angel investors. The broad swath of Silicon Valley CEOs invest. As a bridge between solo angel investor & full time GP, SPVs close that gap. They offer a chance for future GPs to test the waters. See @jmj @briannekimmel, et al.
Read 7 tweets

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