In the Room with Rachel Goddard
Welcome back to The Room!
Today’s conversation is the third episode of our second edition of Movers & Shakers mini-series, where we sit down with talent shaking up the tech & venture ecosystem. Madison and Claudia sit down today with Rachel Goddard, a Partner at Cooley Law Firm, in their fund formation practice. Rachel has been at Cooley for almost 23 years, helping venture capital funds get started. Today’s episode is particularly tactical and geared towards those who are thinking about founding a fund!
This episode’s key themes include the standard fund formation process, including talking through the limited partnership agreement and more critical pieces of the puzzle; best practices on management fees, GP commitments, and more; and advice for aspiring fund managers on establishing a lasting venture practice, from your first microfund and beyond.
Let’s open the door.
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Key Theme 1: Talking through the limited partnership agreement and more critical pieces of the puzzle
In early-day conversations with emerging managers, Rachel and her team will discuss the stage of fund formation, and when looking at the pitch deck and disclosure materials, they will give a summary of terms for the fund that will be used for fundraising. This summary is called the LPA, or limited partnership agreement. At Cooley, they try to keep these documents concise, easy-to-understand, and business-friendly.
“The investor signs the LPA, the sponsor signs the LPA, and that is the document that is the fund so we close on that and then you guys call down capital over a number of years and make awesome investments,” Rachel says.
Another big document is the subscription agreement, or the document where the investors tell Cooley about their qualifications, ensuring that all parties are complying with the necessary laws and exemptions.
Key Theme 2: Best practices on management fees, GP commitments, and more
When thinking about best practices on factors like management fees and GP commitments, Rachel gives the quintessential lawyer answer: it depends.
“It depends on whether you’re forming a first-time fund of $5 or $10 million dollars or you’re forming Fund 10 and that was a billion dollar fund.”
For the first-time manager, for example, Rachel and the Cooley team try to stay within the market. An analogy she provides is that means working between the 40 yard lines of a 100-yard football field in order to not waste time, money, and discussions. They are all about being business-minded and efficient.
Key Theme 3: Advice for aspiring fund managers on establishing a lasting venture practice
Rachel says the most important factor of creating a lasting venture practice are the relationships with your investors. At the end of the day, Rachel argues that “we’re always selling, we’re always fundraising, and we’re selling ourselves and our ability to create great companies, invest in great companies, grow great companies.” The people that you gather around your first table are so critical. They are your investors, your backers, and they are the people who believe in you. Having that foundation of trust will be essential once the network inevitably grows.
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Thank you so much for joining us in The Room! We have one more episode in the Movers & Shakers series before we launch our brand new season. This episode is now live on all podcast streaming platforms, including Apple Podcasts and Spotify.
We can’t wait for you to tune in!
