PE and VC fund terms converge

Author: Ashley Lee | Published: 26 Aug 2015

Venture capital (VC) funds are getting bigger, and their limited partners (LPs) are demanding more protections. That has pushed VC terms closer to those of buyout funds

In the past few years investors have earned huge returns by investing in early-stage tech companies – some of which have become unicorns, or privately-held companies worth more than $1 billion. And it’s clear that there are still opportunities to disrupt traditional services, especially given widespread mobile internet access and increased willingness to participate in the so-called sharing economy.

Previously VC funds focussed on seed capital or early-stage investments which were smaller. They had fewer resources than private equity (PE) or buyout funds, and therefore included fewer investor protections for LPs.

However as VC funds grow, LPs are less willing to concede on these points.

"The trend is that larger institutions such as...