Interactive resources for incubators and accelerators
Interactive resources for incubators and accelerators
Interactive resources for incubators and accelerators

Fund Management 101

This section provides an overview of the different fund structures that exist. It also looks at all of the things you need to consider when creating your own fund.

Fund Structures

There are two main fund structures to take into consideration when looking to manage your own fund:

  • 01.


    Where a group of investors actively manages the portfolio. This is a very hands-on type of management and includes using analytical research, forecasts, and personal judgment and experience in making investment decisions on what securities to buy, hold and sell.

  • 02.


    This is the opposite of active management where the investors either trust the fund manager to make the investment decisions or a small number of investors sit on an investment committee to make those decisions.

Key Questions for Angel Accelerators to Answer

Do you want to (simply) raise a fund?

Or, do you want to build an investment community?

Or, do you want to build a thriving, viable ecosystem?

Different Considerations When Creating a Fund

  • Committed Capital

    Do investors commit capital (money) at the time of investment? i.e. when they sign the contract to be a member of the fund.


    This is compared to “callable” capital promised e.g. Invest $1M but pay 20% per year for 5 years.

  • Target

    What are you investing in? What’s the purpose of your fund and the specific industry/ industries you want to invest in?


    What stage companies are you working with?

    – Idea, pre-seed: have a prototype but no paying customer

    – Seed: make prototype happen/pre-sales

    – Startup capital: have traction, ready to grow

    – Growth: million in revenues


    One investment per company or multiple? Usually, later stages will give multiple cheques.


    Do you have a specific sector you want to focus on? Any SDGs, or just 1, or a combination?


    Do you have a specific geographical focus?

  • Investment Style

    Debt, equity or both?


    Or perhaps neither? Revenue-based investing? Mezzanine debt? Convertible note?

  • Target Length to See Returns

    10 years? e.g. invest in 3 and wait 7 years.



  • Fees: How Do You Pay For This Fund?

    “2 & 20 fund

    This is the standard in America e.g. 2% management fee per year.

    Note: no one likes taking 20% of the capital; this has the potential of lowering odds of expected returns e.g. 2: 2% of $1M will not be able to cover even legal fees.


    20% carried interest per year

    Get back investment, the rest = profits and then split 0.8/$1 to the investor and 20% to the fund (carried interest – VC’s money) 20% on top of something else is called a hurdle.


    Getting rid of the management fee

    Don’t charge investors. 0 & 20 fund. e.g. Charge everything to entrepreneurs: will charge the management fee when Fledge makes an investment in the accelerator to the entrepreneurs.

Incorporation Options for Your Fund

  • 01.

    Limited Partnership (LP)

    A legal partnership with two types of partners (not shareholders).


    1. You have the General partners, and fund managers – who don’t put money in. General Partners are the ones liable for the fund.


    2. Limited partners, with investors who have no say.

  • 02.

    Limited Liability Company (LLC)

    A corporation that looks, feels, and is taxed like a limited partnership and costs less to set up.


  • 03.

    Holding Company

    A corporation that owns other companies.

  • 04.


    LPs (limited partnerships) and LLCs (limited liability companies) get taxed as a partnership – taxes flow through the owners and they pay gains and losses in their personal tax returns. A corporation does not get taxed.


    Holding companies have to pay 20% of corporate tax and individuals have to pay as well.


What does any of this have to do with accelerators?


1. A fund is a sustainable business model


2. The Angel Accelerator by definition either requires the existence of a fund, or the management of a lot of tiny investments.


  • Active Management

    An explanation of active management from Investopedia

  • Passive Management

    An explanation of passive management from Investopedia



Investment-Grade Accelerator Selection

How to build out and manage an accelerator program that involves investing in the entrepreneur cohort