Does this seem unfair?
- Angel investor builds a track record with some strong investments.
- Angel investor decides they want to start a fund.
- Angel investor sells LPs on Fund I, based on how those angel investments are performing.
- LP writes check into Fund I.
- LP begins praying that the Fund I portfolio will end up as strong as the angel’s pre-fund portfolio 🤞
OK, maybe unfair was too strong a word.
But it IS kind of a bummer if you’re an LP in that Fund I.
Because you’d (of course) love a piece of that angel’s prior investments.
Instead of starting at zero.
But lucky for you:
There’s this thing called “warehousing”.
It’s when an angel-turned-GP will roll their best angel investments right into Fund I.
So you’re getting a portfolio with some traction …
… before the first “investment” from the fund is ever made.
▶️ If you’re thinking about jumping into a Fund I as an LP:
Ask the angel if they’re going to “warehouse” the deals they highlighted in their pitch deck.
▶️ And if you’re that angel gearing up to launch your debut fund?
Seriously consider this warehousing game.
It can align your incentives more closely with your LPs.
And give them another reason to get to “yes” on your Fund I.
But whether you’re looking at this from the GP side or the LP side …
… remember that the venture world’s full of legal and tax mazes and pitfalls.
So hit up your legal and tax pros to make sure all is 👍 before diving into any of this.
