Chris Sacca is one of the most successful, most well-known angel investors of the last decade. His early bets list is impressive: Twitter, Uber, Instagram, Twilio, and Kickstarter, to name a few. The easy-going investor often spotted wearing a cowboy shirt is worth over $1 billion, according to Forbes, and landed at the #2 spot on their Midas List in 2017.
In a recent tweet, Sacca noted a trend among other VC firms he invests in as an LP through his investment vehicle Lowercase Capital: the terms of the Partnership Documents were becoming “increasingly ridiculous and aggressive.”
Sacca was talking about the contracts governing the LP/GP relationship. He seemed particularly upset with the way VC firms treat their expenses or account for the fees they charge to their funds’ investors.
In his view, the fact that these terms have become so GP-friendly was a sure sign of the VC bubble (the tweet dates from March 2020.)
Taking the analogy to the startup-VC relationship, one could argue that it has evolved similarly in recent years. Term sheets have become more and more Founder-friendly over the last decade or so, as VC-bankable entrepreneurs have gradually benefited from the sharp rise in liquidity into the asset class.
Whatever the case, you don’t get rich from the small print indeed. When parties find out unfair clauses that were not discussed transparently before, trust suffers, and the relationship sours quickly.
> You can learn about the main terms of VC funds thanks to our VC Investing Track module “How VC Funds Work”, a live 90-minute webinar to build the Excel model of a VC fund.
How do you think the LP/GP and startup/VC terms will evolve over the next 24 months?
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