Who pays the deal setup costs?

Setup costs are distributed across all of the LPs who participate in a given deal. The amount is pro-rated, based on their investment amount, meaning LPs who invest more will also pay higher setup fees.

The standard setup fee for SPVs is $8k, which is reduced to $4k for follow-on SPVs or "sidecars" (ie/ investing in parallel to another SPV/Fund you lead). The fee is structured as a fund expense, ie. it is covered by the SPV as a whole. That means that each LP in the SPV will cover a piece of the fee in proportion to their investment. Someone contributing 50% of the total SPV will bear 50% of the setup fee.

Example:

  • SPV raises $108k from LPs
  • $8k is taken out as setup fee
  • $100k is wired to the Company as investment
  • An LP who contributed $54k to the SPV (=50%) will see $4k of their contribution go towards fees
  • An LP who contributed $10k to the SPV (=9.26%) will see $740.74 of their contribution go towards fees (=9.26% of $8k)

What LPs see

At the time of an LP investing, the fee is expressed as an estimate. This is because the actual fee that any LP will bear is dependent on the total raise which is unknown at this time.

This is what LPs see on the deal page prior to investing:

Screen_Shot_2021-05-13_at_5.46.14_PM.png Screen_Shot_2021-05-13_at_5.46.22_PM.png

 

For LPs, fees are always included in the investment amount. In other words, fees do not come on top of whatever amount they chose to invest.

In the below example, the LP invested $1k. Their ownership percentage in the SPV is based on $1k. However, only $967.21 went towards the portfolio company.

 

This is what LPs see in their portfolio dashboard after the investment has been finalized:

Screen_Shot_2021-05-13_at_5.47.48_PM.png

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