Venture Capital Asset Protection

Venture Capitalists, Angels, Incubators, Accelerators and Co-working Hubs VC & PE Fund Managers and Angel Investors:

A VCAP (Venture Capital Asset Protection) Insurance policy recognises that venture capital firms and their partners have unique exposures. A risk transfer programme is specifically designed to help protect your firm’s returns through the preservation of capital. By mitigating potential losses, we can work with our Insurance partners to help safeguard reputations and investment returns. The following are some of the exposure that venture capital firms face as investors and developers of emerging companies:

  • Positions on Portfolio Company Boards
    Active participation in managing your portfolio companies is a hallmark of your firm, but there are risks to be considered.
  • Indemnification
    To what extent does the indemnification power of a portfolio company protect a venture capitalist serving as an outside director, in particular, on the board of a portfolio company in the seed or early stage of development?
  • Down Round Financing
    The perception created by down rounds may be that the best interests of other parties are intentionally not being considered.
  • Conflicts of Interest
    Divergent interests may create scenarios in which not all interested parties feel they have benefited to the fullest extent possible.
  • “Wash-outs”
    Some situations create the perception that a venture capital firm is acting unfairly and in its own best interest while breaching its fiduciary duty to a particular portfolio company, its management and its investors.
  • In-kind Distributions
    An in-kind distribution is a highly anticipated event. What happens if it doesn’t go exactly as expected?
  • Bankruptcy
    Declaring bankruptcy is a reality for some emerging companies, but that reality can carry significant liabilities for the company’s board of directors and business developers.
  • Confidential information
    How secure is confidential information when it is being communicated via e-mail, fax or letter or while it sits on a partner’s desk or in a filing cabinet?
  • Employment Practices
    In certain cases, new management is hired to take a portfolio company to the next level. How does old management feel about this?
  • Intellectual Property
    With thousands of new companies being started the world over every year it is becoming increasingly difficult to be certain that proprietary intellectual property has not already been ‘claimed’ by another.
  • Initial Public Offering
    Initial public offerings invite added scrutiny by unaffiliated third-party investors of past and present financial information, management decisions, the offering itself, etc, potentially resulting in costly and distracting litigation.