Fund Strategy
Industry Standard Terms for Emerging Fund Managers
At a Glance
Most emerging fund managers operate funds under $30 million and raise primarily from high-net-worth individuals, entrepreneurs, and family offices.
Standard terms typically include a 2–2.5% management fee, 20% carried interest, a 10-year fund term, a 2–3 year investment period, and approximately 1% GP commitment.
Variations often focus on management fee structure, recycling, hurdle rates, co-investments, and warehousing.
Co-investments and co-investment SPVs help managers secure larger allocations, deepen LP relationships, and offer flexible exposure to high-conviction deals.
Warehousing allows early investments to be transferred into the fund post-formation, helping demonstrate traction and alignment to prospective LPs.
Sydecar’s Fund+ platform streamlines fund formation, supports co-investments, and automates banking, compliance, contracts, and reporting so emerging managers can focus on strategy and relationships.
Why Standard Terms Matter for Emerging Managers
There are endless nuances in how venture funds are structured, documented, and operated. While every fund can include custom provisions or side letters, most LPs expect a familiar baseline for key economic and governance terms.
For emerging fund managers who are typically raising Fund I, II, or III under $30 million from entrepreneurs, high-net-worth individuals, and family offices, understanding industry norms is critical. Aligning with standard terms helps:
Reduce friction in negotiation
Build credibility with sophisticated LPs
Shorten the time between first conversation and close
Once you understand the baseline, you can determine when and how to deviate in ways that reinforce your specific strategy.
Standard Terms for Emerging Funds
For the purpose of this article, “emerging managers” are managers running their first, second, or third venture fund with fund sizes generally under $30 million. Across this segment, certain terms show up consistently:
Management Fees: 2–2.5% per year
Carried Interest: 20%
Hurdle: None
Investment Period: 2–3 years
Fund Term: 10 years
GP Commitment: Approximately 1% of fund size
High-net-worth individuals and family offices are generally familiar with these parameters and will often expect to see them reflected in the limited partnership agreement (LPA) or limited liability company agreement (LLCA).
Institutional LPs such as pension funds, sovereign wealth funds, or foundations may request bespoke terms, such as different fee schedules, carry structures, or reporting requirements, documented through side letters or customized provisions.
Where Emerging Managers Commonly Deviate
Standard terms provide a starting point, but they are not a straightjacket. Emerging managers often adjust certain levers to better align incentives, manage their own economics, and maximize deployable capital.
The most common areas of variation include:
Management fee structure and pacing
Management fee recycling
Hurdle rate design
Co-investment rights and structures
Warehousing of pre-fund investments
Front-Loading Management Fees
A typical venture fund charges a 2% annual management fee on committed capital during the investment period and then steps down over time. These fees cover operating expenses such as salaries, office costs, and service providers.
For emerging managers, especially those running smaller funds, a standard fee on a modest fund size may not provide enough runway to build the platform. As a result, many first-time managers use front-loaded management fees, for example:
3–4% per year during the 2–3 year investment period
0.5–1% per year during the later years
This model helps managers:
Fund operations and pay themselves a reasonable salary while they build the portfolio
Avoid overreliance on personal savings or outside income
Continue to align long-term upside to carry, rather than excessive ongoing fees
Front-loading fees can make the economics of a smaller fund workable, particularly for managers who do not come from generational wealth. LPs will expect a clear explanation of how the fee structure supports the strategy and long-term alignment.
Recycling Management Fees
Management fees reduce the capital available for investment. To offset this, some managers employ management fee recycling, in which a portion of realized proceeds is reinvested into new or follow-on opportunities rather than immediately distributed.
Recycling can:
Increase total capital deployed into portfolio companies
Improve the fund’s ability to follow-on in winners
Potentially enhance net returns to LPs over the life of the fund
Recycling provisions must be clearly documented in fund governing documents so that both GPs and LPs understand how proceeds may be reused and under what conditions.
Rethinking the Hurdle Rate
In venture capital, the hurdle rate is the minimum return threshold that the fund must achieve before the manager begins to receive carried interest.
Most early-stage venture funds operate with:
20% carried interest
No hurdle rate
For some emerging managers, particularly those eager to demonstrate discipline and confidence in their strategy, a hurdle rate can become a negotiation tool. For example:
A $10 million fund sets a 2x net hurdle.
The fund must return at least $20 million net to LPs before the GP participates in carry.
Above that threshold, the GP might receive a higher carry (for example, 25%) as an incentive for outsized performance.
This type of structure can be appealing to certain LPs, but it also adds complexity. Managers should ensure any hurdle designs reinforce, rather than distort, their decision-making.
Co-Investments: Extending Capital and Building Relationships
Access to top deals often requires flexibility on check size. Emerging managers with smaller funds may occasionally need additional capital to:
Meet minimum check thresholds
Maintain desired ownership in follow-on rounds
Participate meaningfully in competitive or later-stage rounds
Co-investments allow managers to raise additional capital alongside the fund, usually through a dedicated SPV. Investors in these co-investment vehicles may include:
Existing fund LPs who want increased exposure to specific companies
New investors who want deal-by-deal access before committing to the fund
Co-investments can benefit all parties:
Fund LPs can lean further into their favorite companies.
New investors can build familiarity with the manager’s style and track record.
Managers can secure allocations they would otherwise miss and signal conviction to founders.
Sydecar’s Fund+ platform makes co-investments seamless by supporting co-investment SPVs alongside the main fund, giving managers a single operational foundation for both.
Warehousing Pre-Fund Investments
Many emerging managers start by investing as angels or running syndicates before launching a committed fund. When those early investments perform well, they become a powerful proof point for future LPs.
Warehousing allows managers to transfer certain pre-fund investments into the fund after it has been formed. The fund then acquires an interest in those investments, often at an agreed valuation and structure that reflects the original terms.
Thoughtfully designed warehousing can:
Give LPs access to a portion of the manager’s existing portfolio
Allow LPs to benefit from marked-up positions at earlier valuations
Help de-risk the fund by seeding it with known assets rather than a fully blind pool
LPs will expect transparency around pricing, conflicts, and any economic adjustments related to warehoused assets.
How Sydecar’s Fund+ Supports Emerging Managers
Fund terms shape everything from capital deployment to portfolio construction and GP economics. Aligning with industry standards where appropriate—and deviating intentionally where it supports your strategy—is an important part of building an enduring firm.
Sydecar makes it simple and efficient for venture fund and syndicate managers to form SPVs and funds by automating banking, compliance, contracts, and reporting. Fund+ extends that infrastructure to emerging fund managers by offering:
Turnkey fund formation and admin tuned for sub–$30 million emerging funds
Integrated co-investment support so you can launch SPVs alongside your fund without additional operational overhead
Streamlined regulatory workflows that keep formation and ongoing compliance on track
By removing administrative friction, Sydecar frees managers to focus on what matters most: building portfolios, strengthening track records, and deepening relationships with limited partners.
Want to see how this comes to life in a real fund workflow? Explore our Fund+ interactive demo to walk through investor onboarding, managing commitments, and coordinating capital calls:
See How Sydecar Works in Under 2 Minutes
Explore our interactive demo to see how simple it is to launch and manage your next SPV.
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