Most fund managers ask for two and twenty and assume the job is done. It isn't.

Yoni Tuchman, Fund Formation Partner at DLA Piper, is back on VC10x for his second appearance, and this time he goes clause by clause through the legal landmines hiding inside your fund documents.

⭐ Sponsored by Podcast10x - Podcasting agency for VCs - https://podcast10x.com

In this episode:

- Why a poorly drafted management fee clause can cost a GP millions over the life of a fund

- The three sections of your LPA you actually need to read — and why the waterfall is "the heart of the heart of the heart" of the document

- What happens when an LP defaults on a capital call — and why their commitment is essentially an option until they've funded

- The real story of a wire that cleared on time and turned out to be stolen money

- How to draft a key person clause that actually reflects your team

- The ERA exemption most VCs don't know they're already violating

If you're an emerging manager, a GP, or building your first fund — this one is not optional.

TIMESTAMPS:

(00:00) - Preview

(01:01) - Introduction to the episode and guest, Yoni Tuchman

(01:34) - Sponsor Message: Podcast 10x

(02:48) - The 2 and 20 model and management fee traps

(03:22) - How management fees work in VC funds

(04:42) - Investment vs. Post-Investment Periods and fee step-downs

(06:08) - The risks of PE-style management fees

(07:05) - Defining "invested capital" for fee calculation

(08:24) - The impact of transaction fee offsets on management fees

(10:25) - Are fees for services to portfolio companies considered transaction fees?

(11:45) - How venture partner compensation can affect management fees

(14:14) - Top 3 overlooked clauses in a Limited Partnership Agreement (LPA)

(14:45) - Should GPs read the entire 80-page LPA?

(16:01) - #1 Overlooked Clause: The Distribution Waterfall

(17:17) - #2 Overlooked Clause: The Management Fee

(17:45) - #3 Overlooked Clause: Time, Attention, and Conflicts of Interest

(19:21) - What happens when a Limited Partner (LP) defaults on a capital call?

(19:50) - Standard remedies for a defaulting LP

(20:55) - Why remedies are only as strong as the capital already contributed

(22:25) - The critical importance of verifying the source of an LP's capital

(25:13) - The negotiation dynamic between GPs and LPs on default clauses

(28:06) - How to negotiate the key person clause

(30:20) - Key questions for drafting a key person clause

(34:30) - Accounting for temporary absences (illness, vacation) in the key person clause

(35:58) - Triggers for registering as a Registered Investment Advisor (RIA)

(36:17) - The Venture Fund and Private Fund Adviser exemptions from registration

(37:35) - How a secondary strategy can accidentally disqualify you from the venture exemption

(39:55) - The downsides of registering as an RIA

(41:22) - The silver lining: Investor confidence in registered advisors

(42:19) - Outro and conclusion

LINKS:

Previous episode with Yoni - https://www.youtube.com/watch?v=6eLPeQDPjCo

DLA Piper - https://www.dlapiper.com/en

Connect with Yoni - https://www.linkedin.com/in/yoni-tuchman-58153b5/

Connect with Prashant:LinkedIn: https://linkedin.com/in/choubeysahab

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VC10X - The Legal Landmines Hiding Inside Your Fund Docs - Yoni Tuchman, Partner, DLA Piper

VC10X - Investing, Venture Capital, Asset Management, Private Equity, Family Office