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Venture Capital Insurance Policy
Venture capital firms and their partners have unique exposures. Venture Capital Asset Protection (VCAP) policy safeguards their reputations and investment returns by mitigating potential losses. The policy is a combined product offering management Liability, management indemnification, outside Directorship and professional services Liability insurance in one policy – helping eliminate gaps in your insurance programme.
Risks Covered
The following are some of the exposures 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.
