Glossary - Evergreen Fund
An Evergreen Fund is a type of investment fund that continuously reinvests its returns into new investments. Unlike traditional investment funds with a fixed lifecycle, an Evergreen Fund operates with no predetermined end date, allowing it to adopt a longer-term investment perspective. Capital is typically sourced from operating revenues, profits, or interest earned, rather than through external fundraising rounds. This structure allows for ongoing support and investment into portfolio companies or assets over an extended period.
Also known as
- Perpetual Fund
- Open-ended Investment Fund
Use cases examples
- Venture Capital Firm Evergreen Fund Policy: Our Evergreen Fund allows us to reinvest dividends received from portfolio companies back into the fund, enabling a continuous cycle of investment and support for startups.
- Evergreen Fund Operating Agreement: The fund shall operate on an evergreen basis, with returns on investments to be reinvested into new ventures, rather than distributed back to investors, unless a specific distribution is decided by the management team.
Considerations for investors
- Investors should evaluate the fund’s strategy for reinvestment and criteria for recycling capital, as these will impact the overall return and growth potential of the fund.
- Monitoring the performance and management of an Evergreen Fund requires a long-term perspective and patience, considering the fund’s continuous investment cycle and potential for longer holding periods.
Considerations for founders
- Founders should consider the long-term nature of partnership with an Evergreen Fund, as it can provide sustained support but may also imply extended involvement and oversight.
- Understanding the exit strategy or conditions under which the Evergreen Fund may seek to liquidate its investment in your company is crucial, as these might differ from those of traditional venture capital investors.
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