RISK FACTORS

An investment through VC Fund Ventures’ platform will involve risks not associated with other investment alternatives. Prospective investors should carefully consider, among other factors, the risks described herein. These risk factors are not meant to be an exhaustive listing of all potential risks associated with an investment through VC Fund Ventures’ platform. There can be no assurance that the investment objectives will be achieved, or that there will be any return of capital. An investment through the VC Fund Ventures platform is a potentially suitable investment only for sophisticated investors who are capable of assuming the risks of such an investment, including the potential risk of losing all of their invested capital. 

These risk factors are not a complete enumeration or explanation of the risks involved in investing through the VC Fund Ventures platform. Prospective investors should consult with their own advisers prior to making any decision to invest through the VC Fund Ventures platform. 

INVESTING IN TECHNOLOGY COMPANIES THROUGH VC FUND VENTURES

General 

A VC Fund Ventures investment vehicle will be subject to numerous risks generally related to investing in securities and other investments, and the additional risks associated with investing in non-marketable securities and non-public companies. The securities or other interests acquired by a VC Fund Ventures investment vehicle will have restrictions on resale and, even in the absence of such restrictions, may not be marketable. The ability of a VC Fund Ventures investment vehicle to profit from its investments will be highly dependent upon the ability of its investments to generate income or appreciate in value. Numerous factors may impede or prevent an investment from reaching this point, including inadequate capital, unfavorable competitive developments, adverse legislation at the national, state, or local level, inadequate management or loss of key persons, technology obsolescence, and lack of market acceptance. Investments may face significant capital shortfalls for a wide variety of reasons. Resource development may prove more expensive, or take more time, than anticipated, and the growth in revenues may be slower than expected. Any of such occurrences may result in the failure of an investment and a loss with respect to the investment vehicle’s investments. 

No Operating History 

Any VC Fund Ventures investment vehicle has no previous operating history and will be entirely dependent upon VC Fund Ventures LLC as the Manager (the “Manager”). No person should be willing to make an investment in a VC Fund Ventures investment vehicle unless such person is willing to fully rely upon the Manager’s ability to effect investments on behalf of such investment vehicle. 

General Investment Risks Associated with Investments 

A VC Fund Ventures investment vehicle will generally invest in shares of common or preferred stock of private issuers. Each of such investment opportunities will entail certain risks that may adversely affect the investment vehicle’s operations and, in turn, an investment in the investment vehicle. These risks may involve, without limitation, general economic risks and volatility associated with such investments, the illiquidity of such investments and a potential lack of recourse with respect to adverse actions by, or associated with, the issuers of shares of common or preferred stock invested in by a VC Fund Ventures investment vehicle. The value of the investment vehicle’s investments is derived, in part, from the value of the underlying issuers associated with its investments. Equity securities of private issuers can be highly volatile and expose investors to a high risk of loss. Moreover, there is no exchange market on which to close out an open investment. Consequently, it may be impossible to liquidate an existing investment, to accurately assess the value of investment or to accurately assess the exposure to risk associated with a particular investment. No person should be willing to make an investment in a VC Fund Ventures investment vehicle unless such person is capable of losing such person’s entire investment. 

Preferred Stockholder Liquidation Preference 

Each VC Fund Ventures investment vehicle invests in common or preferred stock of private companies (“Investee Companies”). An Investee Company may grant liquidation preferences to certain of its preferred stockholders. A liquidation preference provides that upon an initial public offering, liquidation, acquisition, or sale of all or substantially all of the assets of the Investee Company (a “Liquidity Event”), senior preferred stockholders will have the option to receive the amount of their liquidation preference first in full, before any proceeds are delivered to junior preferred or common stockholders. Where all classes of preferred stock elect to receive their liquidation preference in full, they may receive a disproportionate share of proceeds in a Liquidity Event, and common stockholders will generally share ratably in any remaining sales proceeds. Likewise, one or more classes of preferred stock may receive a disproportionate share of proceeds relative to junior classes of preferred stock in a Liquidity Event. Because a VC Fund Ventures investment vehicle may invest in common stock (or a class of junior preferred stock), a VC Fund Ventures investment vehicle’s overall returns may be negatively impacted by liquidation preferences. Specifically, if an Investee Company undertakes a Liquidity Event at a valuation that is less than the implied valuation at which a VC Fund Ventures investment vehicle purchases common or preferred stock in an Investee Company, the VC Fund Ventures investment vehicle overall returns may be negatively impacted than if no liquidation preference were present.  

Participating Preferred Stock 

Certain preferred securities issued by an Investee Company may hold participation rights (“Participating Preferred”), which entitles holders of those securities to participate pro rata with common stockholders in addition to receiving the holders’ liquidation preference amount in a Liquidity Event. Because Participating Preferred may result in less residual value accruing to holders of other securities of the Investee Company, which may include a VC Fund Ventures investment vehicle, a VC Fund Ventures investment vehicle’s overall returns may be negatively impacted by any Participating Preferred. 

IPO Ratchet 

The securities issued by an Investee Company may contain an anti-dilution provision under which, if an Investee Company goes public below a predetermined price, the holders of such securities will receive a downward conversion price adjustment, resulting in the issuance of additional securities to those holders (an “IPO Ratchet”). Because a VC Fund Ventures investment vehicle may invest in shares of common or preferred stock of an Investee Company that may be diluted by an IPO Ratchet, a VC Fund Ventures investment vehicle’s overall returns may be negatively impacted by the presence of any IPO Ratchet. 

Cumulative Dividends 

One or more securities issued by an Investee Company may contain cumulative dividend rights, whereby holders of those securities will accumulate unpaid dividends at a predetermined rate, which accrue to the liquidation preference of those securities over time (“Cumulative Dividends”). Because Cumulative Dividends may increase the liquidation preference of securities more senior to those held by a VC Fund Ventures investment vehicle, they may negatively impact the overall returns of a VC Fund Ventures investment vehicle over time. 

Lack of Transparency in Investee Company Operations 

As Investee Companies are not required to make periodic public filings, certain operational information about the Investee Companies are not available to the VC Fund Ventures investment vehicles prior to investment, including historical financial results and projected financial results, customer and sales data, strategic plans, and management discussion of operations. As a result, the investments of a VC Fund Ventures investment vehicle are made on the basis of publicly available information, which may be incomplete, inaccurate, or not confirmed by the Investee Company. 

Investee Companies’ Operations and Financial Results Subject to Various Risks 

Revenues and operating results of Investee Companies could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of the control of the Investee Companies and the VC Fund Ventures investment vehicles. As a result, operational results of an Investee Company known prior to an investment by any VC Fund Ventures investment vehicle may vary significantly following an investment. This may result in a decline in the value of an investment in a VC Fund Ventures investment vehicle, including a complete loss of such investment. Factors that may contribute to the variability of an Investee Company’s operational and financial results include: 

• the ability of an Investee Company to maintain an adequate rate of growth; • the ability of an Investee Company to attract new customers; 

• the ability of an Investee Company to retain existing customers; 

• the effects of increased competition in the Investee Company’s business and the ability of the Investee Company to compete with competitors that may have longer operating histories and greater financial and operational resources; 

• the ability of an Investee Company to keep pace with changes in technology and its competitors; 

• the ability of an Investee Company to protect its and its customers’ data, technology or other intellectual property from third-party infringement or from misappropriation in the U.S. and abroad; 

• the ability of an Investee Company to defend itself against potential and actual intellectual property litigation alleging such Investee Company of infringement of a third-party's intellectual property; 

• declines or disruptions in the industries and markets in which an Investee Company operates; 

• the ability of an Investee Company to successfully enter new markets and manage expansion, including expansion in international markets; 

• the ability of an Investee Company to provide a high-quality customer experience through its products and services; 

• the ability of an Investee Company to successfully manage any acquisitions of businesses, solutions, or technologies; 

• the success of an Investee Company’s marketing efforts; and 

• the ability of an Investee Company to comply with applicable federal and state laws, rules, or regulations as well as any rules of applicable networks and associations. 

No Assurance of Investment Return 

The task of identifying investment opportunities on behalf of a VC Fund Ventures investment vehicle and managing such investments is difficult. Many organizations operated by persons of competence and integrity have been unable to make similar investments successfully. There is no assurance that a VC Fund Ventures investment vehicle’s investment objectives will be attained, or that the value of the investments will not decline, or that there will be any return of capital. 

Diversification 

A VC Fund Ventures investment vehicle’s investments are expected to be concentrated in a relatively small number of investments and will not be widely diversified. Any investment, directly or indirectly, in a VC Fund Ventures investment vehicle should not be considered a complete investment program. Such concentration of risk may expose a VC Fund Ventures investment vehicle to losses disproportionate to those incurred by any particular market in general. In the event of a detrimental effect with respect to one or more of the underlying issuers comprising a VC Fund Ventures investment vehicle’s investments, such investment vehicle’s overall returns may be impacted much more negatively than they would be if its investments were spread more broadly. 

Market Factors 

General fluctuations in the economy may affect the value of investments held by a VC Fund Ventures investment vehicle. In such event, the ability of a VC Fund Ventures investment vehicle to achieve a favorable return on its investments may be severely impeded. 

Long-Term Investment 

Given the investment objectives of a VC Fund Ventures investment vehicle, its investments, by their nature, may be long-term investments. An investment in a VC Fund Ventures investment vehicle is therefore only appropriate for investors with a long-term investment horizon and a capacity to absorb a loss of some or all of their investment. 

Other Activities of the Manager 

The success of a VC Fund Ventures investment vehicle will be largely dependent upon the efforts of the Manager. Although a VC Fund Ventures investment vehicle will be one of the business activities of the Manager, the Manager will devote such time and efforts to the business of the investment vehicle as it believes are reasonably required to carry out the business of such entities. The Manager and its employees, and other affiliates may engage in other business activities, and the business of a VC Fund Ventures investment vehicle may not be such persons’ primary business activity.

Conflicts of Interest 

The Manger serves as manager to both VC Fund Ventures investment vehicles (“Single Name Funds”) that generally invest in shares of common or preferred stock of private issuers and to discretionary managed funds (“Discretionary Funds”), which make investments in portfolios of private securities offerings, and which may include one or more Single Name Vehicles.  As a result, there may be a conflict of interest between the Manager’s role for the Single Name Funds and its role for the Discretionary Funds. The manager follows a written allocation policy to ensure the fair and equitable allocation of investment opportunities, which the Manager believes avoids and/or mitigates potential conflicts of interest.  

Investments by Employees and Affiliates

Eligible employees and other affiliates of VC Fund Ventures are permitted to invest in both Single Name Funds and Discretionary Funds (each an “Affiliated Investment”), which may present a conflict of interest between the Manager and the investors in the Single Name Funds or Discretionary Funds. Each Affiliated Investment in the Single Name Funds is subject to a lower minimum investment than available to other potential investors and pays the same fees. Affiliated Investments in the Discretionary Funds are subject to lower minimum investments and fee waivers. Each Affiliated Investment is accepted in the same sequence and priority as other potential Members’ investments. Notwithstanding the foregoing, the Manager believes that the opportunities offered to prospective Members are fair to the Single Name Funds, the Discretionary Funds and their respective investors.   

No Right to Control Company Operations 

The investors in a VC Fund Ventures investment vehicle will have no opportunity to control the day-to-day operations of such investment vehicle, including investment and disposition decisions. The investors must rely entirely on the Manager to conduct and manage the affairs of the VC Fund Ventures investment vehicle. 

Illiquidity of the Interests; Limited Transferability of the Interests 

The membership interests in a VC Fund Ventures investment vehicle are highly illiquid, have no public market, and generally are not transferable, except with the consent of the Manager and compliance with applicable securities laws. Voluntary withdrawals of the interests are generally not permitted. 

Specified Minimum Investment 

The sale of a specified minimum investment, while necessary to the business operations of a VC Fund Ventures investment vehicle, is not designed as a protection to investors, nor to indicate that their investment decision is shared by other unaffiliated investors. Because there may be substantial purchases by affiliates or persons associated with, via employment or otherwise, any VC Fund Ventures investment vehicle, or other persons who will receive fees or other compensation or gain dependent upon the success of an offering, no individual investor should place any reliance on the sale of a specified minimum as an indication of the merits of this offering. Each investor must make his own investment decision as to the merits of each offering. 

Cross-Series Liability 

The Manager expects that pursuant to Section 18-215 of the Delaware Act, the debts, liabilities, obligations, and expenses of each VC Fund Ventures investment vehicle shall be enforceable against the assets of each respective VC Fund Ventures investment vehicle only, and not against VC Fund Ventures generally or against any other VC Fund Ventures investment vehicle. However, notwithstanding that series limited liability companies have been authorized by the Delaware Act, the robustness of their asset and liability segregation has not been extensively tested by the courts. There can be no guarantee that each VC Fund Ventures investment vehicle will be treated as a separate and distinct legal entity for purposes of the Delaware Act, ERISA, bankruptcy laws, or otherwise. 

Indemnification of Certain Persons  

The Limited Liability Company Operating Agreement governing a VC Fund Ventures investment vehicle will contain broad indemnification and exculpation provisions that limit the right of a member of any VC Fund Ventures investment vehicle to maintain an action against the relevant VC Fund Ventures investment vehicle, the Manager, VC Fund Ventures, and/or their affiliates to recover losses or costs incurred by a VC Fund Ventures investment vehicle as a result of such persons’ actions or failures to act. 

Disposition of Investments 

Part or all of one or more investments made by a VC Fund Ventures investment vehicle may not be completely disposed of prior its dissolution and liquidation, in the event of which a VC Fund Ventures investment vehicle may make in-kind liquidation distributions to its members of securities in the vehicle’s portfolio that have not been disposed of. 

Possible Adverse Tax Consequences 

Any VC Fund Ventures investment vehicle will be classified as a partnership for federal income tax purposes, and not as an association taxable as a corporation. No representation or warranty of any kind is made with respect to the tax consequences of an investment in a VC Fund Ventures investment vehicle, or the allocation of taxable income or loss, as provided in the applicable Operating Agreement. Potential investors are advised to consult their own tax advisors with respect to the tax consequences to them of an investment in a VC Fund Ventures investment vehicle. 

Absence of Regulatory Oversight 

A VC Fund Ventures investment vehicle is not registered as an investment company under the U.S. Investment Company Act of 1940, as amended, in reliance upon an exemption available to privately offered investment companies and, accordingly, the provisions of such Act (which, among other things, require investment companies to have a majority of disinterested directors, provide limitations on leverage, limit transactions between investment companies and their affiliates and regulate the relationship between the adviser and the investment company) are not applicable to VC Fund Ventures. Membership interests in the VC Fund Ventures investment vehicles have not been registered under the Securities Act or the securities laws of any state in the U.S., nor is it expected that they will be. The Manager has no plans nor has it assumed any obligations to register membership interests of any VC Fund Ventures investment vehicle. The Manager is an exempt reporting adviser and is not registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisers Act. Such status does not imply that the Securities and Exchange Commission has endorsed or approved the qualifications of the Manager or any of its respective affiliates or representatives to provide the advisory services described herein. 

Future Regulatory and Legal Developments 

This document cannot address or anticipate every possible current or future regulation or legal development (including change in law) that may affect the Manager, any VC Fund Ventures investment vehicle, or their respective businesses and operations. Such regulations may have a significant impact on the Manager and the investment vehicle, including but not limited to, restricting the types of investments a VC Fund Ventures investment vehicle may make, or requiring the Manager to disclose certain confidential information regarding its terms, investments, or investors. The Manager, in its sole discretion, may cause a VC Fund Ventures investment vehicle to be subject to certain regulations if it believes that an investment or business activity is in such investment vehicle’s interest, as the case may be, even if such regulations may have a detrimental effect on one or more investors. Prospective investors are encouraged to consult their own advisers regarding an investment in a VC Fund Ventures investment vehicle. 

Cybersecurity Risk 

Malware, viruses, hacking, and phishing attacks have become more prevalent in recent years, and may occur on VC Fund Ventures LLC’s systems in the future. Although it is difficult to determine what, if any, harm may directly result from an attack, any failure to maintain the security of VC Fund Ventures LLC’s systems may result in unauthorized requests to access bank and investment accounts, the disclosure of information that VC Fund Ventures LLC and its affiliates are obligated to keep confidential, or other improper or illegal activities that could result in a financial loss to VC Fund Ventures LLC, its affiliates, the VC Fund Ventures investment vehicles or investors in the VC Fund Ventures investment vehicles.  

Business Continuity and Disaster Recovery  

The Manager, its affiliates and VC Fund Ventures’ business operations may be vulnerable to disruption in the case of catastrophic events such as fires, natural disaster (e.g., tornadoes, floods, hurricanes and earthquakes), terrorist attacks or other circumstances resulting in property damage, network interruption and/or prolonged power outages. There can be no assurances that all contingencies can be planned for. These risks of loss can be substantial and could have a material adverse effect on VC Fund Ventures, the VC Fund Ventures investment vehicles, and the members’ investments therein. 

Systems and Operational Risks  

Each VC Fund Ventures investment vehicle depends on the Manager to develop and implement appropriate systems for its activities. Each VC Fund Ventures investment vehicle relies on financial, accounting and other data processing systems to execute, clear and settle transactions and to evaluate certain securities, to monitor its portfolio and capital, and to generate risk management and other reports that are critical to oversight of its activities. In addition, each VC Fund Ventures investment vehicle relies on information systems to store sensitive information about the vehicle, VC Fund Ventures, the Manager, their affiliates and investors in the VC Fund Ventures investment vehicles. Certain of VC Fund Ventures’ and the Manager’s activities will be dependent upon systems operated by third parties, including the administrator, market counterparties and other service providers, and the Manager may not be in a position to adequately verify the risks or reliability of such third-party systems. Failures in the systems employed by the Manager, the Administrator, counterparties, exchanges and similar clearance and settlement facilities and other parties could result in mistakes made in the confirmation or settlement of transactions, or in transactions not being properly booked, evaluated or accounted for. Disruptions in VC Fund Ventures’ operations or breach of VC Fund Ventures’ information systems may cause VC Fund Ventures to suffer, among other things, financial loss, the disruption of its business, liability to third parties, regulatory penalties or reputational damage. Any of the foregoing failures or disruptions could have a material adverse effect on VC Fund Ventures, the VC Fund Ventures investment vehicles, and the respective investments.  

Lack of Transparency in Investee Company Operations 

A VC Fund Ventures investment vehicle invests in common or preferred stock in private companies (“Investee Companies”). As Investee Companies are not required to make periodic public filings, certain operational information about the Investee Companies are not available to the investment vehicle prior to investment, including historical financial results and projected financial results, customer and sales data, strategic plans, and management discussion of operations. As a result, such investment vehicle’s investments are made on the basis of publicly available information, which may be incomplete, inaccurate, or not confirmed by the Investee Company. 

Post-IPO Transfer Restrictions May Limit Your Ability to Sell Shares on the Open Market 

When a company goes public, there are some procedural steps and legal requirements that must be followed. Generally, we will seek to unwind the VC Fund Ventures investment vehicle into which you invested (the "Fund") and transfer a number of shares, equivalent to your pro rata ownership in the Fund, to a brokerage account you designate. The shares held by the Fund are generally subject to two principal types of transfer restrictions. They are subject to a standard IPO lock-up, which means that for a period of 180 days after the IPO, the shares cannot be transferred. 

The shares held by the Fund are also considered Restricted Securities under the securities laws. Generally, this means, even post-IPO, the shares can't be sold on the open market until they've been held for 1 year. Together with the lock-up, shares held by the Fund can't be sold on the open market until the later of (i) expiry of the lock-up or (ii) one year following purchase. 

Generally, the company will use a transfer agent, who will hold custody of the pre-IPO shares. After the completion of the IPO, the shares purchased by the Fund will be held with the transfer agent. Once applicable transfer restrictions are satisfied, we will request the transfer agent to remove restrictive legends from the shares and transfer a number of shares, equivalent to your pro rata ownership in the Fund, to a brokerage account of your designation. 

Investee Companies’ Operations and Financial Results Subject to Various Risks 

Revenues and operating results of Investee Companies could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of the control of the Investee Companies and VC Fund Ventures. As a result, operational results of an Investee Company known prior to an investment by a VC Fund Ventures investment vehicle may vary significantly following an investment. This may result in a decline in the value of an investment in the investment vehicle, including a complete loss of such investment. Factors that may contribute to the variability of an Investee Company’s operational and financial results include: the ability of an Investee Company to maintain an adequate rate of growth; the ability of an Investee Company to attract new customers; the ability of an Investee Company to retain existing customers; the effects of increased competition in the Investee Company’s business and the ability of the Investee Company to compete with competitors that may have longer operating histories and greater financial and operational resources; the ability of an Investee Company to keep pace with changes in technology and its competitors; the ability of an Investee Company to protect its and its customers’ data, technology or other intellectual property from third-party infringement or from misappropriation in the U.S. and abroad; the ability of an Investee Company to defend itself against potential and actual intellectual property litigation alleging such Investee Company of infringement of a third-party's intellectual property; declines or disruptions in the industries and markets in which an Investee Company operates; the ability of an Investee Company to successfully enter new markets and manage expansion, including expansion in international markets; the ability of an Investee Company to provide a high-quality customer experience through its products and services; the ability of an Investee Company to successfully manage any acquisitions of businesses, solutions, or technologies; the success of an Investee Company’s marketing efforts; and the ability of an Investee Company to comply with applicable federal and state laws, rules, or regulations as well as any rules of applicable networks and associations. 

Disposition of Investments 

Part or all of one or more investments made by a VC Fund Ventures investment vehicle may not be completely disposed of prior to the dissolution and liquidation of such investment vehicle, in the event of which the Manager may make in-kind liquidation distributions to the investors. 

Possible Dilution of Company Assets 

On occasion, an Investee Company may need additional financing to support operations or growth. It is not certain that additional financing will be available to an Investee Company on favorable terms when required. If an Investee Company raises additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of the common stock held by a VC Fund Ventures investment vehicle. Furthermore, an Investee Company may raise additional funds through new classes of stock which convert into common stock on more than a one-to-one basis. This would materially impact the dilutive effects of this issuance on the investors. 

Operation and Investment of Parallel Series 

As part of a single transaction, one or more VC Fund Ventures investment vehicles may invest, or seek to invest, in the same Investee Company. In this instance, in accepting investors into a VC Fund Ventures investment vehicle, the Manager may separate investors who meet the requirements of an “accredited investor” from investors who meet the requirements of a “qualified purchaser” into separate parallel series. For such a transaction, it is expected that both series will generally operate in parallel with each other and are expected to invest in the Investee Company on substantially the same terms and conditions, legal, tax regulatory, accounting, contractual, business and other similar considerations applicable to a particular series of a VC Fund Ventures investment vehicle. It is possible however, that an Investee Company may limit, restrict or eliminate the amount or type of investments that can be made by any VC Fund Ventures investment vehicle or, in the event established by the Manager, its parallel series for such a transaction. Accordingly, the performance of any VC Fund Ventures investment vehicle or, in the event established by the Manager, its parallel series, may differ materially from each other due to differences in the respective portfolio construction of its investments. 

• INVESTING IN PRIVATE PLACEMENTS

No Investment Recommendations 

VC Fund Ventures does not make investment recommendations, except when acting as an investment adviser, and no communication through this website or in any other medium should be construed as such, unless otherwise indicated by VC Fund Ventures. 

Private Placement Investments 

Investment opportunities posted on this website are “private placements” of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by VC Fund Ventures, and MAY lose value. 

No Regulatory Oversight or Approval 

Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. 

No Reliance; High Risk of Loss 

Investors must be able to afford the loss of their entire investment. Any financial projections or returns shown on the website are illustrative examples only, and there can be no assurance that any valuations provided are accurate or in agreement with market or industry valuations. Any investment information contained herein has been secured from sources VC Fund Ventures believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore. Offers to sell, or the solicitations of offers to buy, any security can only be made through official offering documents that contain important information about risks, fees and expenses. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed on this website, and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.