#6 A #VC Fund is a Business. Use Efficiency Tools to Modernize Your Finances & Back Office

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Today’s Top 3:

• A #VC fund is a business itself! Build a modern finance and back office function with the right playbooks, checklists, and file organization.

• Create your own playbook. Write down every business process, step-by-step. We typically see Compliance, Companies, Investors, and Operations as key segments. Define ownership and measurable success criteria for each. We share our own examples below!

• Stay organized. Schedule time weekly with your finance lead (internal or external). Use checklists and file organization to drive outcomes. You’ll be glad you did when you avoid future pain from tax, audit, legal / compliance reviews!

Playbooks, Checklists, & File Organization

Every week, we’re asked the same question by multiple #VC funds (and other fund strategies). What’s your process for managing all the components of the fund finance & back office?

Our answer: playbooks, checklists, & file organization!

While not as exciting as investing in the next billion dollar company, setting up the right processes to maximize efficiency is super important. 

Being thoughtful and doing things correctly from day one helps fund managers avoid the pain of dealing with time-intensive problems at a later date. The funds that do it the right way are able to spend less time on finance / back office and more time driving value with great investments & meeting new investors!

Here’s a secret that almost nobody talks about:

While there are a number of great service providers and technology tools to manage your firm, the business owner (i.e. the #VC fund manager) is responsible for owning the outcomes, including successful completion and coordination!

The better your playbooks, checklists, and file organization, the more you will drive efficiency and successful outcomes across your finance and back office.

An Example: Our Own Fund Finance Playbook

We’ve developed “The Fund Finance Playbook” as a great place to start for anyone building a #VC fund and have included a snapshot of it below. We advise customizing for each firm and typically organize these in 4-5 segments:

1. Compliance: depending on your size (AUM) and registration status, what steps do you need to take each year to stay in compliance with the law and regulations? Your lawyer should be able to review but remember, you own it!

2. Companies (& Subsidiaries): what’s your internal process for new deals? How do you fund them and track relevant expenses? What metrics, budgets, and processes do you require from your companies after investing? This varies by strategy but defining upfront is key

3. Investors: how do you report performance to investors? What are you required to provide them quarterly or annually (i.e. audit, tax typically)? How do you receive investor money and send it back? You’ll work with your fund administration / accounting partners on most of these items

4. Operations: remember, your fund is a business itself! How do you pay bills, run payroll, and track expenses? How do you budget for future expenses / track last month’s performance? What controls are in place for spending money and moving cash? You’ll need to set the appropriate structure for your business!

A Great Resource: The Founder Handbook

While we’ve developed our own tools, we’ve also learned from the best from our time as investors, CFOs, and what successful firms have shared publicly!

Big shout out to Kent Goldman and his team @ Upside VC! They built a Founder Handbook and shared it with the world. It curates the tips, tools, and tactics from well-known VC’s like Sequoia & USV. It’s tailored for and applicable to early stage companies and funds.

In their own words, “we built Founder Handbook as a field guide for entrepreneurs and startups to help cut through the clutter. Here, you’ll find the top, most tactical, applicable, and operational information to help build and scale your business.”

Specifically, their Post Seed Funding Checklist is super tactical and applicable to anyone getting their business organized, including #VC fund managers. We highly recommend checking it out and using it as a starting point for your business.

That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”