The startup ecosystem needs more investors to throw funds for the creation of more innovative solutions. thus VC Lab, an accelerator for venture capital firms looks to building more investors who support startups across the world.
However, a fundamental challenge to achieving this goal is the standard paperwork needed to create a new fund as this process requires specialized lawyers who can demand over $100,000 per fund formation.
VC Lab is offering free available boilerplate document called Cornerstone with the intention to simplify the process, thus saving everyone ample time and money, while also creating accessibility fund governance structures.
Cornerstone is a short 33 pages that contain an LPA (and this user guide), a term sheet and a subscription agreement.
Hans Kim, a startup lawyer in Silicon Valley who co-authored the new package, said:
“There’s been widespread recognition that fund formation docs are ridiculously complex and in need of an overhaul
I’ve had numerous founder clients who made money and want to put their capital to good use through investing.
But if they get more serious than personal angel investing, you refer them to a fund formation lawyer. Then they see the price and have to think twice.”
Rich Gora of Gora LLC who is also a co-author to the document added that improvements on the document includes easy to understand management fees and narrowed-down list of important definitions.
Presently, the document contains details such as startups getting domiciled in the United States with future plans for locations the Netherlands and Canada.
According to Rich, the aim of Cornerstone is to support businesses work out their plans in simplified processes such that if there is an agreement, the founders can take their products to lawyers like him to complete the process.
Co-founder Adeo Ressi explains, “We have general partners launching funds from all around the world. The last cohort enrolled venture investors from 62 different countries, including Central Asia, Africa, and every other place you can imagine.
The new managers who are getting into venture are coming in with a passion for change — the funds often have a very focused thesis, and they tend to be smaller in size.
They really want to help the companies they work with to succeed at any cost. They don’t need 200 to 400 pages of legal agreements governing every small decision that they make. They need lean and light, easy-to-use agreements.”
Ressi has estimated that the new Cornerstone document can decrease legal costs for startup founders.
“We believe that all the bottlenecks need to be done away with,” Ressi says about startup investing. “Then, there will be an explosion of new VCs and new LPs all around the world who are entering the asset class. That will create a real positive change for humanity because, no matter where you are in the world, you can pursue an idea to make the world a better place and find the resources you need to make it a reality. Unfortunately, this is not true today.”
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