The most important golden rule of venture capital operations is to communicate, communicate, and communicate. Attorneys cannot advise clients about the dos and don'ts if they do not know what they are doing or planning to do. Venture capital operations involve a cross current of many different laws and regulations, most of which seem to be changing all the time. Advice that was good last year may no longer be valid. Constant communication with counsel is the only surefire way to address the volatile nature of the industry in a proactive and effective way.
Staying on Top of Changes: Keeping an Edge in the Industry
First, it is critical for an attorney who specializes in venture capital (or any area of law for that matter) to create a routine process by which he or she will review commentary and regulation changes that affect his or her area of practice. Most frequently, this can be achieved by diligent review of the trade publications.
However, the best way to stay sharp is to actively practice in the area. Beyond regular review of publications, being exposed to numerous deals of varying size and industry enables the attorney to know what the market is demanding from venture capital and correspondingly allows the attorney to counsel his or her clients on the best terms.
Keeping clients up to date on any new changes in the environment is usually done in the form of a telephone call or letter for issues that may impact a limited number of venture capital operations and via memorandum or newsletter for issues that have broader impact on the venture capital industry.
The Legal Documents a Firm Needs when Starting a New Fund
Typically, the central documents are the private placement memorandum and the fund entity documents, which represent the operating agreement for a limited liability company and the partnership agreement for a limited partnership. In addition, most fund structures require a management agreement pursuant to which a fund manager will obtain the nghts and obligations from the general partner/managing member to manage the fund's affairs.