First, it is important to note that the liquidation preference is not just a tool of venture capitalists. It shows up in growth capital private equity as well. There are a number of good resources that have described the liquidation preference, including a blog post by Brad Feld, a post on Venture Beat, and a blog post by Ryan Roberts at Startup Lawyer.…

Many private equity, real estate, and infrastructure fund sponsors offer co-investment opportunities to limited partners in their funds. The practice of offering co-investment opportunities to limited partners has been an accepted part of the industry since well before I joined it in 2008.1The appetite for co-investments among limited partners—particularly certain large and sophisticated institutional investors with the resources to build in-house direct investment expertise—has grown significantly since the 2008 global financial crisis.…

The article notes that large institutional investors often negotiate for preferential treatment in respect of management fees, carried interest splits, co-investment rights, and advisory committee seats; either due to the absence of a MFNclause or a tiered MFNclause, these preferential rights are not available to smaller investors. The article suggests that this trend is a negative development, with quotes from various participants—portfolio managers and lawyers—relating to transparency or unequal economic terms.…

More pertinent, why should a fund sponsor care? The short answer, is “because prospective limited partners care”. A fund’s tax structuring is often the subject of fairly extensive due diligence and negotiation by prospective limited partners, and in extreme situations where the fund sponsor cannot accommodate a prospective investor’s tax structuring requirements can result in that investor declining to make an investment.…

The starting point for the sale of securities—broadly defined to include equity and debt instruments, investment contracts, certificates of deposit, securities index, participation rights in a profit-sharing agreement, interests in mineral rights, derivatives, and interests in investment funds howsoever organized1—in the United States is the prohibition in the SAon offering or selling any security sold using the instruments of interstate commerce unless such security is registered with the SECor is exempted from registration.…

In light of a few conversations that I have had with various people who are interested in this space, I thought it would be good to write a brief overview of the categories of investors that a fund sponsor will typically seek to be LPs in their fund. It will serve as a primer to some of the considerations—including some legal considerations arising from the Investment Advisers Act of 1940(the “AA”) and the Investment Company Act of 1940(the “ICA”)—that anyone involved in the industry ought to consider when dealing with fundraising for a PE/VCfund that is subject to U.…

This post will begin with a brief history of Bitcoin, progress to a summary of my views on Bitcoin as money, and conclude with my views on the blockchain as an enabling protocol. This history does not aim to be a comprehensive chronology of Bitcoin. Rather, it is my intention to create something of a thematic overview of Bitcoin, covering its origins, some milestones in its development, its price history in U.…

In The Lions of Al-Rassan, Kay crafts a fictional world inspired by al-Andalus and the Spanish Reconquista, one poised on the brink of its own reconquest. When we begin the novel, the Asharite (Kay’s Muslim analogues) Khalifate of Al-Rassan, which had conquered the lands once known as Esperaña from the Jaddites (Kay’s Christian analogues) three hundred years ago, has fallen and splintered into a patchwork of city-states ruled by petty kings.…

I have learned a lot about thinking about the future through reading (and to a much lesser degree writing) science fiction. Science fiction, particularly “hard science fiction”, is principally about extrapolating the future from current scientific knowledge. It cultivates in its practitioners an awareness of potential avenues for future development. To write good hard science fiction one must be aware of the state of current science, and the ways in which such science could be expressed in technologies and how such technologies might affect individuals and societies.…

Mr. Kessler begins his op-ed with an uncompromising claim: Private equity is done. Stick a fork in it. With Kraft singles and Heinz ketchup as toppings, there are many signs that private equity has peaked as an asset class. He then moves on to give arguments for why private equity is dead as a doornail.…