Hans Dellenbach, Emerald CFO, reflects on 10 years of Emerald’s flex‑term fund structure and why breaking the rules isn’t only for start-ups, but for fund managers as well.
Venture capital is an industry that prides itself on innovation. We back founders who challenge conventions, rethink established markets, and build something fundamentally new. Yet when it comes to our own industry’s most basic building block — the fund structure — innovation is often treated as something to avoid.
Ten years ago, this contradiction became impossible for Emerald to ignore.
As our investor base evolved and our relationships became longer‑term, it became clear that the standard fund lifecycle (the classical 10+2 year term) was optimized for process efficiency rather than for what the market demanded. We started asking – what do our LPs really need? What makes sense for strategic investors?
The traditional model (that we had used like everyone else) forced artificial decision points, repeated resets of successful relationships, and, in some cases, excluded investors simply because they were ready at the “wrong” moment. Because corporations invest into venture funds mainly for strategic reasons, investment decisions are driven by strategy, and not on a continuous basis. The result was that several corporate investors approached us when our fund was closed.
The next question was obvious: should we simply accept these constraints as immutable, or was it possible to adjust the structure itself without breaking the fundamental logic of a venture capital fund? What followed was not an attempt to reinvent venture capital, but a very deliberate effort to adapt an existing model to better reflect economic reality and investor needs.
We ended up keeping the traditional closed-end GP/LP model, but questioned one specific assumption: that a venture capital fund must have fixed start and end dates that apply equally to all investors, regardless of who they are or why they invest.
That question led to what we now call Emerald’s flex‑term fund structure. Today, ten years later, I believe the experience is worth sharing — not as a manifesto, but as an invitation to think further together. Why? Because our flex-term fund structure can make our whole industry a lot more professional.
The difference between fixed lifecycles and investor‑level flexibility
In a traditional fixed‑term venture capital fund, all limited partners share the same investment period and are subject to a common end date defined at launch. Capital is deployed, realised, and distributed within that predefined timeframe, after which the fund is wound down.
A flex‑term fund retains the core GP/LP structure but introduces flexibility at the level of the individual investor. Each limited partner can join at their convenience (the fund is always open) and commits for a minimum period (of 5 years, in our case), with the option to remain invested beyond that point or to terminate their active investment period independently, without forcing the entire fund to end.
The two key amendments we applied, compared to the traditional fix-term model, are deliberately simple:
- No re-allocation of existing assets when a new LP joins.New investors only participate in new investments after they join. This avoids any transfer of value between LPs, eliminates potential conflicts of interest, and makes discussions around portfolio valuation or entry pricing unnecessary.
- Continued reinvestment as long as an LP remains active.As long as an LP has not terminated its individual investment period, proceeds from exits can be reinvested on its behalf. In practice, this allows an investor to stay invested with a single commitment, while capital continues to work through reinvestment rather than repeated recommitments to successor funds.
Key advantages of flex‑term funds beyond the fund manager
LP‑level advantage: continuity instead of artificial resets
It became very clear to us early on that the new flex-term fund model works particularly well for our strategic investors. Corporate investors typically invest in venture funds not only for financial returns, but to gain long‑term access to expertise, networks, and innovation capabilities. These relationships are, by nature, meant to be continuous. Yet the traditional fund model forces them into artificial decision points every five years: recommit, or the relationship effectively ends.
A flex‑term structure removes this friction. It allows strategic LPs to remain invested — and engaged — for as long as the collaboration makes sense, while still preserving the right to exit on an individual basis. This is, quite simply, why the model has proven to work so well for corporate investors.
Most of our founding LPs still have an active investment period, meaning they continue making new investments each year since 2016 – with a single commitment at the outset. This is possible because we continuously reinvest parts of the proceeds from exits on their behalf.
LP‑level advantage: time alignment instead of vintage alignment
But the benefit goes beyond strategic investors. At a more fundamental level, flex‑term funds address a structural mismatch between how capital actually wants to behave and how venture funds are traditionally designed.
In most parts of the investment world, capital is allocated with a minimum commitment, but not a forced ending. For example: You invest into a company, a fund, or an asset as long as the investment case holds. You exit when it no longer does. This is normal in public markets, and increasingly common in other private asset classes.
Venture capital has so far been different mainly because of illiquidity. This may justify a minimum investment period. But it does not logically require a universally fixed exit date.
A flex‑term structure separates these two ideas. LPs commit for a minimum period, reflecting the realities of private markets, but they are not forced to exit simply because a fund reaches an arbitrary anniversary. Capital stays invested while value is being created. For institutional allocators, this creates something that is surprisingly rare in venture capital: time alignment. Investment decisions can be driven more by fundamentals and less by fund mechanics.
If the entire venture capital industry was using flex-term fund structures, institutional investors could much more easily decrease their exposure when needed. They would do so by simply terminating their active investment periods, which is much smoother for both the GP and the LP compared to the alternatives of drawing outstanding commitments or defaulting.
Market‑level advantage: from fragile funds to durable institutions
The most interesting implications, in my view, emerge at the market level. European venture capital is highly fragmented. Many funds are young, relatively small, and structurally dependent on raising a new vehicle every four or five years to survive. This does not make them bad investors, but it does make them fragile organizations.
At the same time, allocators often say they value stability, institutional memory, robust processes, and experienced teams. There is a tension here. The dominant fund structure systematically works against the very qualities the market claims to reward.
Flex‑term funds change the economics of the fund manager itself. Because management fees are not tied to a single vintage, firms can be built with a genuinely long‑term perspective. Teams can grow, knowledge can compound, and expertise can be transferred from one generation of professionals to the next. Over time, this turns a venture firm into an institution rather than a sequence of fundraising projects. That is not an argument against traditional fixed‑term funds — they will and should continue to exist. But it is a reminder that durability is not a by‑product of the current system; it is often achieved despite it.
Emerald Technology Ventures, for example, has been able to build a team of 55 employees across three continents over a period of 25 years. Such a set-up allows the Senior Partners to continuously learn and build expertise within the firm, as well as to train junior talent within the organization. Our survival doesn’t depend on the next fund raising cycle.
Can you imagine what would happen if other VC funds copied our model? Wouldn’t a European VC ecosystem dominated by a smaller group of large and experienced managers be able to attract more institutional money, contribute more capital into growth-stage financing rounds and professionalize our industry? And isn’t this exactly what investors and governments are looking for?
Break the rules of VC and see what you can build
After ten years of living with four flex‑term funds, my conclusion is a simple one: We wouldn’t want anything else! Not only has it worked well in practice, but it addresses some structural issues the industry rarely discusses.
For an asset class that defines itself by backing innovation, now is the time to approach innovation in fund structures with more curiosity and less reflex. I would love a conversation with anyone who sees that making this an additional, wide-spread part of the VC toolbox would benefit not only investors, but also VC firms and the industry as a whole.
More insider VC views:
How to Build a VC Team that Lasts
Breaking Barriers: a Secondee’s Transformative Journey in Corporate Venture Capital at Emerald
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