How should we think about when distributions will potentially start? Is it as early as when Fund I has returned the remaining ~$2M to LPs, or will that money in some way be reinvested into Earnest? (and then Wefunder investors will receive 1/10 of the 20% of returns Earnest ta...

Good question! Yes, distributions would start as soon as any of our funds has returned >1x capital back to the investors (LPs) in those funds. They will be distributed then, not reinvested. We haven't set an exact cadence for when distributions would be dispersed to investors yet but I would expect them to be either quarterly or annually.

I really like what you guys are building and am trying to wrap my head around the #s. With $20M post and an effective 2% of carry, the fund would need to net $1B from carry to break even on distributions over time? Let me know if this is correct or if I'm screwing up the post-...

Hi Ryan, fair question. 1) I think you're over by a decimal place here. $20m is the effective valuation of the firm, but it's $2m for 10% of the carry (which you've got correct as effectively 2% carry assuming we never increase our carry from 20%). So at $100m fund profits = $20m of carried interest (not $1B) = $2m back to the Reg CF investors who then break-even. 2) This is definitely a bet that over the long-term we are able to raise and effectively deploy much larger funds than our current...

Hey! Can you walk through the exact carried interest calculations for the class CF units? I.e. does "a 10% share of that equity" mean 10% the entire pool of carried interest? (or 10% of the 80% that you personally own? or something else?) Walking through the math with a specif...

Yes! So we're working off a $20m valuation and $2m total raise for the 10% figure. If for some reason we raise less or more than $2m, we'll adjust the percentage accordingly. Eg If we uncap it and go to $2.5m total raise, 10% will go to 12.5%. That percentage is of the total carried interest (not a percentage of my ownership). So the most likely allocation of all the carry across all existing and future funds at the end of this is: 10% to Class CF investors, 20% Earnest Capital Team + Early L...

Hey Tyler, I've been following your journey for quite some time and I love what you're doing. I penciled myself in on your Twitter poll as an investor pending the terms. Can you say more about how you got the $20M post-valuation number? If I'm understanding this correctly, inv...

Hey Collin, good/tough question! Candidly valuing funds like this is hard and there aren't a lot of comparable examples except Backstage Capital which recently did a CF campaign at a $50m valuation. One way to think about it is that, as long as we do a good job investing (at least as good as we have so far) then for every cumulative $50m we are able to raise and invest, that should eventually mean $2m to the Reg CF investors ($50m * 3x returns * 20% carry * 10% to Reg CF) which would be 1x ea...

Are you planning on bringing on additional GPs anytime soon?

I definitely want to expand the number of GPs at Earnest Capital. Part of what we'll do with this investment is fund the referral compensation our scout program (which candidly we're still working on). Here's more detail on the plan https://earnestcapital.com/become-an-investor/

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