Startup Funding Espresso -- Conflicts of Interest

Conflicts of Interest

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In setting up a VC fund, beware of conflicts of interest.

Funds associated with other groups such as universities, accelerators, or incubators may find a conflict with other funding activities in that group.

These groups are often focused on helping the startup launch.

This leads to funding startups that may not qualify for funding.

Make sure the fund is independent from the group and makes decisions based on the investors' best interest.

Set up the fund separate from the group with different leadership.

The fund could have first rights for any deals related to the group but is not obligated to invest.

Define the relationship between the group in the fund's documents, so it’s clear to the group, the fund managers, and the Limited Partners.

Also, review the fund manager's other commitments and relationships to make sure they are free and clear of other incentives.

If the fund manager runs other businesses, vet those businesses for any conflicts of interest as well. 

 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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