Blueprint's unique approach to venture capital investing represents a departure from traditional fund structures. By shifting the funding of the general partnership to manage investment deployment, Blueprint is able to reduce fees and increase returns for its Limited Partners (LPs).
One key aspect of this approach is the decision not to take a traditional management fee. Instead, Blueprint will be managed as an atypical Delaware Corporation, which will accept external funding and be managed by a board of directors. The corporation will build proprietary intellectual property designed to generate a profit for the benefit of its shareholders.
By generating profits through the intellectual property, the general partnership will be able to take a 10% carry on any profits generated as a result of deploying investments for the fund. This is in contrast to the traditional 2 for 20 fund structure, which typically involves a 2% management fee and a 20% carry on profits.
In addition, Blueprint will pass on an additional 10% carry back to investors on future funds. This is designed to be kind to the LPs and ensure that the fund structure remains sustainable over the long term.
An example of how this 10% carry will return to future funds is illustrated by considering a hypothetical investment in a startup. Suppose that Blueprint invests $10 million in a startup and generates a 5x return, resulting in a $50 million exit. Under a traditional fund structure, the general partnership would take 20% of the profits, or $10 million, leaving $40 million for LPs.
In contrast, under Blueprint's approach, the general partnership would take a 10% carry on profits, or $5 million, and pass on an additional 10% carry back to investors on future funds. This would result in $2.5 million being returned to LPs on future funds, leaving $42.5 million for LPs on the current fund.
Overall, Blueprint's approach to venture capital investing represents a bold new direction for the industry. By reducing fees and increasing returns for LPs, it offers a compelling alternative to traditional fund structures and could pave the way for a more sustainable and equitable approach to investing in startups.