Independent sponsor model applied to VC

Hi everyone,

Could the independent/fundless sponsor model and fee structure be applied to VC? Have any of you done it, or have you seen it in the industry?

In independent sponsor PE deals there is typically a closing fee (e.g. 2% of EV, or 0.5%-2% of the purchase price), a management fee (fixed or small % of EBITDA), and the independent sponsor's upside participation, which is the largest component of the compensation package. Theoretically all these could be applied in VC deals, with the closing fee obviously being a much smaller component in relative terms.

Would be great to hear from people who know/understand more about this...

Thank you.

Comments (4)

Dec 30, 2019

There are some microfunds but the IS structure doesn't really work for VC. Even the microfund structure is extremely suspect. Their IRR is usually trash.

Dec 30, 2019

Thank you for the response m_1. I've come across your comments in many other threads and they are always valuable and insightful.

Perhaps you could explain in a bit more depth why the IS model doesn't work for VC?

    • 1
Feb 3, 2020

Care to expand why not?

Maybe i'm missing the mechanics here but I can picture it working well for someone syndicating on a part time basis?

Jan 1, 2020