Sidecar funds primer: How do sidecars work in practice?

To distill the concepts of the last post into a concrete example: consider the VentureSouth Angel Fund III.

  • It’s a Limited Partnership

  • It’s “triggered” to invest when 10 or more VentureSouth members invest, in aggregate, $100,000 or more in an investment. Investments that attract fewer than 10 checks, or 19 x $5,000 checks, do not trigger the fund, so it does not invest.

  • Its match is up to 1:1 of the amount invested by VentureSouth angel group members, up to a maximum investment of $250,000 per company.

  • And the oversight is provided by the VentureSouth central team (as the fund’s General Partner). The GP has some flexibility on match levels and vetoing investments, but uses this flexibility sparingly.