FAQ : Dexter Ventures - Pre-pooled fund

How is this fund structured?
Fund is being offered using LetsVenture’s (platform or LV) SEBI registered Category 1 Alternate Investment Fund(AIF) - VCF - Angel Fund
An Alternative Investment Fund is a privately pooled investment vehicle which collects funds from investors
Investments are made into startups via Schemes under the fund. The Scheme contributors hold units of the scheme(s) invested in under the fund
The Fund will go on as a single entity on the cap table of the startup
Who can be an investor in this fund?
An investor into an angel fund should be an accredited investor as per the criteria laid down by SEBI.
The accreditation criteria is as follows:
Individual - They should have net tangible assets of at least ₹ 2 crores excluding value of principal residence. They should also satisfy one of the following criteria:
have early stage investment experience or
have experience as a serial entrepreneur or
is a senior management professional with at least 10 yrs of experience,
Corporate (LLPs, LLCs, Pvt. Ltd., etc)/ HUF - It should have a net worth of over ₹ 10 crores
What are the objectives of this fund ?
Provide an opportunity to Investors to diversify their exposure towards pre-seed and seed startups
Over last 3 years of syndication Dexter Angels we have seen a good number of opportunities slipping from us because of reasons like :
Not being able to commit soon to a deal , because of time taken in completing the syndication process
Not being able to commit our ticket size with the founders and quality founders not willing to engage without knowing exact ticket size
Founders not willing to come to present to our whole investor group
Founders keeping us as the second option as investing through the fund is a preference over a syndicate
What is this fund strategy ?
This fund will be deployed towards investing in pre-seed and seed stages of startups
Fund is largely targeted towards investing in Indian founders who have setup their companies in India or in US
The capital collected through the fund will be deployed equally across all the opportunities, if there is any change in ticket size in any particular opportunity it will be communicated with the investors
The goal of the fund is to diversify capital and get access to high quality fast moving deals
Whenever any opportunity comes to Dexter Ventures first allocation will be given to Pre-pooled fund and rest allocation will be filled through the syndicate
Deployment period is 12-15 months
Exit Tenure on an average will be 5-7 years
Exit will be provided on a deal by deal basis and carry fee will be deducted on a deal by deal basis calculated on a deal by deal basis . This means that whenever we receive an exit in an investment opportunity the same will be distributed to investors at the same time
If there is availability of allocation , investors can be provided co-investment opportunity in the deals
Who is the investment decision making entity ?
Dexter Ventures will be the investment decision making authority
Investors will be informed each time there is an investment being made from the fund
As part of SEBI and LV guidelines , all the investors have to provide a consent, when an email is sent to them through LV platform for each investment. Please note that this is just procedural step in nature and all investors by default will have to provide consent on the emails without delays
No individual investor discretion is allowed in the investment opportunities of the fund. Investors if they want to further top-up their investment in one particular opportunity may choose to do that through Dexter syndicate
What are the various fees associated with this fund?
To invest through LV AIF, there is a platform registration fee of ₹ 25,000 for resident Indians and ₹ 40,000/- for everyone else.
If you are an existing LV member who has paid the registration fee and your registration to the LV AIF doesn’t expire in the next 18 months, then the registration fee is not applicable to you.
One time upfront transaction fee to be paid is 4% of the commitment + GST . So if you commit ₹ 25 Lacs to the fund , upfront transaction fee would be ₹ 1,00,000+ GST
Carry Fee for the Fund will be 20% (17.5% Dexter + 2.5% LV).
Carry is paid as a share of profits at the time of exit. In the event of an exit from a startup, the amount up to the principal investment made into that startup gets allocated first pro rata to all LPs. From the remaining pie, carry fee is calculated and remaining is distributed to LPs
Carry Fee calculation : Lets say an Investor invests ₹ 25 L in the fund
lets say this capital is allocated across 10 investments equally
Then ₹ 2.5 L allocated to one investment
Lets say at the time of exit after 5 years , we receive 10 X returns on this investment
Then carry fee is calculated as : 20% of Profits i.e. 20% * ((2.5*10)-2.5) = ₹ 4.5 L
So investor will receive (₹ 25 L - ₹ 4.5 L) = ₹ 20.5 L
Similarly carry calculation for all the 10 investments done through the fund
What is the minimum investment required to be an LP in the fund & how will capital drawdown happen?
Minimum principal investment that an investor needs to commit to the fund is ₹ 25 Lacs
Ideally, there will be 4 equal quarterly drawdowns, incase of faster capital requirement the same will be communicated with investors
What is the maximum investment allowed ?
There is no cap on maximum investment.
Can I invest through any other entity than myself?
Yes, you can invest as an individual or a body corporate
As an individual, you can choose to invest in the name of your family member (spouse/parents/siblings/children) as well
The fund transfer should happen from the bank account of the entity (individual /body corporate) signing the AIF contributor agreement
The bank account can be a joint bank account between you and your family member
Why did we choose to use LetsVenture AIF for this fund?
LV is SEBI registered CAT 1 AIF, which is allowing fund managers like us to use their fund license to run our syndicate and funds. LV has been operational since 2013 and has experience syndicating over 400+ transactions while other platforms started allowing third party syndications more recently
We have been using LV for syndication since the beginning of our journey in 2020
We have plans to launch our own AIF in coming few months
What are the tax implications?
Please note that the below information does not constitute professional advice
The platform will act as pass through entity (after removing carry and TDS) for interest., dividend and capital gains/losses and investors have to file their own capital gains accordingly
TDS is 10% (additional cess based on residence may apply) unless the tax treaty provides for a lower rate as per DTAA for NRIs. For anyone without a PAN card, it would be 30%
LV will provide a tax certificate (Form 64C).
LTCG applies for holdings more than 24 months and STCG applies for holdings less than 24 months
for some additional information on taxation.

DISCLAIMER : Startup investments are extremely risky and illiquid (long holding periods). Investors should reserve their own judgement or take professional help before making the investment into the fund.

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