What is warehousing?
Warehousing is the practice of acquiring investments personally, with the intent of transferring them to a fund that is currently fundraising.
When does AngelList support the transfer of warehoused investments to my fund?
AngelList supports the transfer of a fund manager’s warehoused investments to their Venture Fund or Rolling Fund. For Rolling Funds, investment assets cannot be split up and warehoused across multiple quarterly funds. AngelList does not support warehousing for SPVs or off-platform funds.
Which warehoused investments can I sell to my fund?
Generally, you can transfer any investment that has not been marked up or converted to your fund. For fund managers relying on the venture capital fund adviser exemption and whose fund must thus satisfy the requirements of a venture capital fund, personal investments that are transferred to the fund will most likely be considered non-qualifying investments. As a result, these investments must fit within the fund’s 20% limit on non-qualifying investments.
In specific cases, these investments may be considered qualifying investments if (i) the investment was initially purchased with the intent of moving it to the fund, and (ii) the terms of the investment were sufficiently disclosed to the fund’s investors. If desired, AngelList can assist with making this determination, based on the criteria below.
What needs to be true to treat warehoused investments as venture qualifying investments?
There are a number of requirements to treat these warehoused investments as qualifying investments. These investments must be ones that:
- Were made while you were actively fundraising for the fund to which you wish to contribute the investment to.
- Were intended to be contributed to the fund at the time you made the original investment (that is, you wanted to purchase them through the fund, but weren’t able to because the fund was not yet legally formed or didn’t have adequate funds.)
- Follows a time & thesis-based “objective criterion” you set (i.e., all on-thesis investments made 6 months before the fund’s first close). The SEC requires that you avoid “cherry picking” warehoused investments (i.e., selecting only the best or worst investments you’ve made). Therefore, you must warehouse all investments that fall under a criterion that you set out.
- Were sufficiently disclosed to limited partners (LPs) on your fund page and in the governing agreements for your fund at the time the LPs subscribed to your fund.
- Were themselves qualifying investments at the time you originally made the purchase (i.e., were not secondary purchases, crypto investments, or otherwise non-qualifying assets themselves).
What does the warehousing process look like?
Part 1: Submit investment information
For every investment you wish to warehouse, you will need to submit a form provided by your account manager. We ask that you submit all applicable investments for each fund at the same time to avoid unnecessary, repeated legal fees. As a part of this form, we will ask you to:
- Provide basic information about the investment you want to sell.
- Provide all original and fully-executed purchase agreements.
- Confirm that the relevant portfolio companies for each investment have approved a transfer of that investment to the fund.
- Specify if you would like to transfer the investment to your fund in exchange for cash or a fund interest.
- Note that we are unable to transfer investments in exchange for fund interests if the investment assets are no longer held in their original purchased value and state.
- Confirm if the portfolio company is comfortable using AngelList’s templated Transfer Agreement, or if they would like to use their own.
- Note that we are unable to facilitate company comments on our template agreements.
- Provide bank and contact information to facilitate the transaction.
If you would like AngelList to determine if an investment can be considered a qualifying investment, we will also ask you to provide your fund’s warehousing objective criterion (see third bullet point in the previous section).
Part 2: Investment review & LP consent
Upon receiving your submission, we will review the information you provide and determine whether the investment can appropriately be transferred into the fund.
For example, if certain investments have not been properly disclosed to LPs, we may require the fund to obtain LP consent for the investments and/or conduct LPA amendments. If this applies, AngelList will reach out with further instructions.
Part 3: Drafting & signing of agreements
Once investments have been approved for sale and transfer, the AngelList team will fill out two standard agreements for each warehoused investment.
- A purchase agreement — to effectuate the fund’s purchase of the investment from you. You will need to sign this document.
- A transfer agreement — to effectuate the transfer of investments from one party to another. Both you and the portfolio company will need to sign this agreement. All agreements will be circulated for signature via DocuSign. Because you have a pre-existing relationship with the portfolio company, we ask you to follow up with the companies if there is any delay in execution of these agreements.
Part 4: Conducting the payment & transfer
Once all documents are signed by all parties for all investments, AngelList will commence the payment process:
- AngelList will add the relevant investments to your fund’s dashboard.
- As long as your fund has enough capital that’s “Investable Now” to purchase the investments and pay the warehousing fee, funds will be wired to the original purchaser.
- AngelList will then follow up with the portfolio company to ensure their records are updated.
Please note that we do not begin the payment process until all agreements associated with the transferred investments have been signed, as we find that changes in one document can often require changes in others.
How long does the process normally take?
Once you submit all required information to AngelList, it usually takes ~1 week for our team to review the proposed investments, fill out the purchase agreements and any requested transfer agreements, and send them out for signatures. This process may be longer if there are a large number of investments to be transferred, or if we discover that information is missing.
Once all documents are signed, it usually takes 2-3 business days for AngelList to approve the investments and wire payment (assuming the fund has sufficient investable capital to pay for the investments).
Are there additional service costs associated with warehousing?
AngelList charges a $2k fee on each warehoused investment. This covers the AngelList’s end-to-end management of the warehousing process, as detailed above. If there are any additional legal tasks or costs required to complete the purchase and transfer of an investment (e.g., amendments to the fund’s governing agreement), such costs will be in addition to the $2k per-investment fee.
Does AngelList support the transfer process for investments purchased from other sellers?
No. Assets purchased from a seller that is not the Fund Lead themselves cannot be supported by AngelList’s warehousing process.
What can I warehouse assets in return for?
AngelList can warehouse assets in return for cash or GP-owned fund interest (“in-kind contribution”). AngelList does not warehouse assets in return for LP interests.
I am midway through fundraising for my venture fund and/or have completed my fundraise, can I still decide to warehouse investments to my fund?
Yes, but such cases will be handled on a case-by-case manner. It is likely these investments would not be considered a qualifying investment, and the transfer of such investments will likely require LP consent. If this situation applies to you, AngelList will reach out with further details.