Find anything about our product, search our documentation, and more. Enter a query in the search input above, and results will be displayed as you type.
Searching...
Data Room Component 7 of 9
Fund Model
A fund model is a forward-looking financial spreadsheet that translates the investment strategy you’ve set forth in your pitch deck into a hypothetical portfolio to display your fund’s performance potential.
Consider including the following in your fund model:
Also consider factoring in:
The ability to stress test your portfolio construction.
“The overall performance number that you put in the strawman doesn’t really matter as long as it sounds aspirational,” says Dan Clayton, an investment senior associate at SVB Capital. “LPs are trying to stress test your assumptions on their own in a number of different scenarios, so consider making the fund model dynamic.”
Understanding of fund management.
A fund model displays a GP’s familiarity with the business of investing capital. “I’m always surprised at how many portfolio models are incorrect or not well thought-through,” Dan Clayton says. “When a fund model is mathematically wrong, it can give an LP pause on a GP’s understanding of institutional fund management. When reviewing, I’m always asking myself, are the management fees set up correctly? Are they considering recycling correctly? Does this strategy make sense based on the reserve ratio?”
Appropriate risk management.
Given the understood risk in early-stage venture investments, LPs typically want to believe that you can return capital even in a base case. It’s important to run multiple scenarios before sharing a fund model with potential investors.
Consider including the following in your fund model:
- A list of hypothetical portfolio investments that matches your portfolio composition and total fund size (e.g., 50% Seed, 25% Series B, 25% Series C)
- Your ownership targets for each initial investment, with standard dilution expectations at each subsequent investment (e.g., 50% to 66% dilution from investment to exit, depending on entry stage, capital intensity of the business, and follow-on strategy)
- Your expected performance (Gross IRR, MOIC and Net IRR)
Also consider factoring in:
- Your management fee taken out of the investable capital
- Any capital recycling strategy
- Carried interest
- Your fund term
What matters most to LPs?
The ability to stress test your portfolio construction.
“The overall performance number that you put in the strawman doesn’t really matter as long as it sounds aspirational,” says Dan Clayton, an investment senior associate at SVB Capital. “LPs are trying to stress test your assumptions on their own in a number of different scenarios, so consider making the fund model dynamic.”
Understanding of fund management.
A fund model displays a GP’s familiarity with the business of investing capital. “I’m always surprised at how many portfolio models are incorrect or not well thought-through,” Dan Clayton says. “When a fund model is mathematically wrong, it can give an LP pause on a GP’s understanding of institutional fund management. When reviewing, I’m always asking myself, are the management fees set up correctly? Are they considering recycling correctly? Does this strategy make sense based on the reserve ratio?”
Appropriate risk management.
Given the understood risk in early-stage venture investments, LPs typically want to believe that you can return capital even in a base case. It’s important to run multiple scenarios before sharing a fund model with potential investors.
When a fund model is mathematically wrong, it can give an LP pause on a GP’s understanding of institutional fund management.
Dan Clayton
Investment senior associate at SVB Capital
Resources
Download a Fund Model Sample created by SVB
Read About the Next Component:
Reference List
A list of founders, venture capitalists and limited partners excited to share their positive experiences partnering with you.
Read Main Article
Building a Comprehensive Data Room
The nine key data room components LPs need from emerging managers
Learn more
The nine key data room components LPs need from emerging managers
Read the other Emerging Managers data room components
Read each of the following 8 components to help round out your data room:
Data Room Best Practices
Component 1 of 9
Overarching principles to keep in mind as you develop your data room. Learn more
Overarching principles to keep in mind as you develop your data room. Learn more
Fundraising Pitch Deck
Component 2 of 9
One of the main qualitative documents LPs may use to vet your fund. A compelling fundraising pitch deck entices an LP to review the rest of your data room. Learn more
One of the main qualitative documents LPs may use to vet your fund. A compelling fundraising pitch deck entices an LP to review the rest of your data room. Learn more
Investment Track Record
Component 3 of 9
A quantitative spreadsheet detailing the key financial metrics for your previous investments. Learn more
A quantitative spreadsheet detailing the key financial metrics for your previous investments. Learn more
Investment Memos & Market Map
Component 4 of 9
Investment memos allow LPs to see your thought process as an investor at the time you made an investment. Market maps show overviews of the market you serve, categorized by theme or sector. Learn more
Investment memos allow LPs to see your thought process as an investor at the time you made an investment. Market maps show overviews of the market you serve, categorized by theme or sector. Learn more
Due Diligence Questionnaire
Component 5 of 9
A living document that LPs may use to compare your fund with others and answer typical questions that arise during the due diligence process. Learn more
A living document that LPs may use to compare your fund with others and answer typical questions that arise during the due diligence process. Learn more
Limited Partnership Agreement
Component 6 of 9
A document covering legal terms that may govern your relationship with limited partners. Learn more
A document covering legal terms that may govern your relationship with limited partners. Learn more
Reference List
Component 8 of 9
A list of founders, venture capitalists and limited partners excited to share their positive experiences partnering with you. Learn more
A list of founders, venture capitalists and limited partners excited to share their positive experiences partnering with you. Learn more
Fund Contact List
Component 9 of 9
A comprehensive list of contacts for the partnership and the back-office support team. Learn more
A comprehensive list of contacts for the partnership and the back-office support team. Learn more