Engineering First Close: The Operational Manual
How African GPs accelerate first-close timelines through disciplined operational design
The free article introduced the Commitment Decay Function and why first closes in African VC are time-sensitive execution races shaped by institutional gaps.
This edition is the operating manual.
It focuses on the mechanics that determine which funds close and which stall.
1. LPA Terms That Create Timeline Drag
A small cluster of clauses generate most of the negotiation friction in African fund formation.
Pre-engineering these removes a significant portion of expected delay.
Management Fees
Standard ranges:
2.0–2.5 percent on committed capital during the investment period
1.5–2.0 percent on invested capital or NAV thereafter
LP pressure points include fee breaks for large tickets, earlier shifts off committed capital, and tighter caps on reimbursable expenses.
Hold the headline fee rate.
African funds operate across multiple jurisdictions, currencies, regulators, and tax systems, so 2 percent on a 40–60M USD fund already runs lean.
Give flexibility on basis-shift timing and partial expense offsets.
A basis shift refers to moving the fee base from committed capital to invested capital.
Carry
Market norms: 20 percent carry and a 6–8 percent preferred return (hurdle).
LP asks often include fund-level waterfalls, broad clawback language, and CPI-linked hurdles.
Hold the fund-level waterfall.
Africa’s return profile is driven by a small number of outliers, and deal-by-deal waterfalls combined with broad clawbacks destabilise GP economics.
Give narrower clawback definitions and a cap tied to taxes paid plus a small buffer.
Clawback is the mechanism where GPs return earlier carry if later losses reduce overall LP returns.
GP Commitment
LP expectations sit at 1–2 percent of fund size, but African first-time GPs typically close with:
100k–300k USD in cash
fee-waiver contributions over two to three years
deferred contributions linked to deployment milestones
These structures maintain alignment while recognising GP liquidity constraints.
Some anchors fund or backstop the GP commitment by taking equity in the GP entity, using convertible structures tied to execution milestones, or taking a small strip of GP economics across future funds.
GP economics refers to management fees and carried interest accruing to the GP.
Key Person
Hold a narrow list of key persons and require LP approval for suspension.
Give reasonable time allocation thresholds and annual measurement instead of quarterly assessment.
Investment Restrictions
Institutional templates often misalign with African market depth.
Examples include sector caps that ignore pipeline concentration, geographic limits that clash with real deployable opportunities, and diversification requirements built for deeper Series A markets.
Sensible ranges:
20–30 percent per company
sector caps only where genuine pipeline breadth exists
flexible geographic caps
40–50 percent follow-on reserves, reflecting shallow later-stage capital markets and longer time-to-Series B
Some GPs use the EETAM framework to clarify where certain restrictions constrain deployment.
EETAM assesses whether a company’s actual market has the economic depth to support revenue momentum (its Effective Economic TAM) and produces a marker of expected revenue potential.
While not a portfolio-construction tool, it helps demonstrate where viable pipeline is concentrated.
Example: LPs ask to limit logistics to 15 percent.
EETAM analysis shows that logistics companies in Kenya and Egypt hold the strongest revenue momentum signals in the pipeline, and a meaningful share of viable opportunities sit in that segment.
This helps the GP show that the proposed cap would constrain the strategy.
MFN Architecture
MFN provisions must be tightly scoped.
Define economic, governance, and information categories separately.
Regulatory accommodations, such as ERISA language, Sharia compliance, or SARB/CMA reporting, should not trigger MFN.
MFN stands for Most Favoured Nation and allows LPs to claim improved terms granted to others.
Below is the subscriber-only section.
This part covers the specific negotiation positions, clause-level structures, and sequencing models GPs use to remove 40–60 percent of first-close friction.
If you work in fund formation, LPAC review, or institutional allocation, this is the section that matters.