Plaza Ventures – Accessible Venture Capital Micro-Fund Managing Team: Plaza Ventures Name of Fund: PV Fund I, II, III… each micro-fund is named in sequence Website: www.plazaventures.ca
Fund Type: Accessible venture capital through growth-stage micro-funds Restrictions: $25,000 minimum investment; must be Accredited Investor Fees: No assets under management fee; 8–9% expense budget over the life of each fund, plus 20% carry-forward interest History: Managed by experienced professional investors, but no track record published Plaza Ventures has been operating as a VC firm since 2009, but with a twist. They are a group of principal investors that have been operating a professionally managed co-investment club for high net worth investors. There are several business model differences between Plaza and Brightspark. First of all, instead of Angels picking the companies to invest in, they invest in an annual “micro- fund” of $4–6 million that invests in a portfolio of around four deals. Plaza has increased these funds in 2017 to $20–25 million, investing in four new deals plus four follow-on rounds in their high-performing portfolio. Second, the target is early-growth-stage companies at Series A and Series B (a typical stage for VCs where it is hard for Angels to participate). Doing later-stage deals means the likelihood of exit is higher, and putting four new deals in a small fund mitigates selection risk while maintaining concentration. Concentration allows one exit to return a whole fund. Matt Leibowitz explains the key differences of micro-fund investing versus traditional VC. “The historical VC model is broken. Normally it would take three years to raise a $100 million fund with a 2/20 fee structure. Since a fund might last for over 10 years, fees alone eat up over 20% of the money. Most funds are lucky if they can deploy 70 cents on the dollar. Under Plaza’s micro-fund structure, we are completely transparent about our expenses and cap them at around 8–9% over the life of the fund, or less than half what a traditional VC would charge. We close smaller funds each year and invest all the money within 12 months, and we tend to know where we will be investing a majority of the funds while we’re raising them. This transparency, combined with our team being motivated only by profit, not by fees, creates alignment with our LPs and our companies.” Plaza leverages the competencies of their Limited Partner (LP) Angel investors with quarterly meetings where investees directly update the investors and gain useful guidance and connections. The LPs are also encouraged to help out with deal flow, due diligence and other aspects of management; however, they are careful to ensure that the LPs are not involved in the final decisions made by the General Partners (GPs) at Plaza in order to protect them from liability under the VC legal structure of the fund. Angels who invest over $200,000 with Plaza are also invited to make their own direct co-investments (with no fees) into any investee companies.
48 A Practical Guide to Angel Investing
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