Free Fund Formation Documents for Startups

Addressing the High Cost of Venture Fund Formation

While funding may be readily available for certain startups, many emerging companies report difficulties in securing investment. VC Lab, an accelerator specifically designed for venture capital firms, is dedicated to fostering a new generation of investors who will support ventures globally.

The Burden of Legal Paperwork

A significant obstacle to achieving this objective is the complex legal documentation required when establishing a new fund. Currently, specialized legal counsel is essential, and the associated costs can exceed $100,000 per fund formation.

Introducing Cornerstone: Streamlined Fund Documents

VC Lab is now offering a suite of freely accessible boilerplate documents designed to simplify this process. This initiative aims to reduce both time and financial expenditures, while simultaneously increasing the accessibility of fund governance structures.

A Global Investor Network

“We work with general partners launching funds from across the globe,” explains Adeo Ressi, co-founder of VC Lab. “Our most recent cohort included venture investors from 62 countries, spanning Central Asia, Africa, and numerous other regions.”

Reducing Financial Strain on New Funds

Legal expenses represent a substantial concern for these emerging investors.

A Focus on Agility and Efficiency

“New venture managers are driven by a desire for positive change—their funds often center around a specific investment thesis and tend to be smaller in scale. They prioritize supporting the success of their portfolio companies above all else. Extensive legal agreements, spanning hundreds of pages, are unnecessary for every minor decision. They require concise, user-friendly documentation.”

Cornerstone: A Compact Solution

The Cornerstone package, developed by VC Lab, comprises just 33 pages, including a term sheet, a subscription agreement, and an LPA, along with a user guide. Traditional fund formation documents often extend to several hundred pages.

Recognizing the Need for Simplification

“There is a growing consensus that fund formation documents are excessively complicated and require significant revision,” states Hans Kim, a Silicon Valley startup lawyer with extensive experience and co-author of the new package. “I’ve assisted numerous successful founders who wish to reinvest their capital. However, when they explore fund formation, the legal fees often give them pause.”

Key Improvements in the Cornerstone Package

According to Rich Gora of Gora LLC, a co-author, enhancements include a more concise list of definitions and simplified sections addressing management fees and limited operator mode triggers. The current iteration supports fund domiciliation in the United States, with plans to incorporate support for Canada, the Netherlands, and Singapore in the near future.

Facilitating Clear Business Agreements

As a fund formation attorney serving a diverse range of investors, he emphasizes the importance of enabling business professionals to address commercial matters in straightforward language. Parties can then engage a legal expert to finalize the agreement after reaching a consensus.

Distilling Complex Concepts

“Throughout the past 10 months,” he recounts regarding the development process, “we analyzed countless industry LP agreements. We condensed concepts that previously required 20 lines of text into just three, retaining the core ideas while eliminating legal jargon.”

Significant Cost Savings

Ressi projects that these new documents could reduce legal costs by 50% or more, depending on the number of limited partners involved. He also points out a shortage of lawyers specializing in fund formation, suggesting that standardized documents will expedite the process and accelerate the growth of the global venture capital ecosystem.

Building on a History of Innovation

VC Lab originated within the Founder Institute, a global startup accelerator known for its contributions to the startup landscape. Approximately nine years ago, it played a key role in developing the concept of convertible equity, a precursor to the SAFE note, which eliminates the debt component of convertible notes.

Removing Barriers to Investment

“We are committed to eliminating all obstacles to startup investing,” Ressi asserts. “This will unleash a wave of new VCs and LPs worldwide, entering this asset class. This expansion will drive positive change globally, enabling individuals everywhere to pursue innovative ideas and secure the resources needed to realize them. Unfortunately, this is not yet the reality.”