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The Super Fund

The Super Fund serves as both a rebalancing mechanism and an investment vehicle, creating a critical bridge between village rebalancing needs and accredited investor capital.

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📋 Overview & Purpose

Super Fund in the Backerville Ecosystem
The Super Fund is a key innovation in the Backerville ecosystem that serves as both a rebalancing mechanism and an investment vehicle. It operates as a Regulation D offering available exclusively to accredited investors, providing critical liquidity and enabling portfolio optimization across the village network. The Super Fund addresses several critical functions:

Rebalancing Support

Absorbs excess promissory notes during village rebalancing

Liquidity Provider

Creates a market for fractionalized promissory notes

Accredited Access

Allows qualified investors to gain exposure to pre-IPO companies

Portfolio Diversification

Creates a “fund of funds” with exposure across multiple sectors

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�� How the Super Fund Acquires Assets

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Village Rebalancing Process

  • Concentration Limits
  • Algorithm-Driven
  • Cross-Village Optimization
1

Identify Overweight Positions

When a company exceeds the 25% concentration limit in a village
2

Transfer Excess

Excess exposure is transferred to the Super Fund
3

Receive Compensation

The village receives cash or other promissory notes in exchange

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Fractionalization of Promissory Notes

Fractionalization of promissory notes is a key innovation that enables precise portfolio adjustments and creates liquidity for otherwise indivisible assets.
A key innovation of the Super Fund is the fractionalization of promissory notes:
Each promissory note can be divided into fractional interests, allowing for precise adjustments to village portfolios. A single $100,000 promissory note might be split across multiple villages or partially sold to the Super Fund.
Fractions can be transferred across villages or to the Super Fund, enabling fine-tuned rebalancing that would be impossible with whole-note transfers only.
Allows precise portfolio adjustments without all-or-nothing transfers, reducing the cost and complexity of rebalancing.

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Example Fractionalization Process

Fractionalization Example
Example: Village A has a $100,000 promissory note for AITech. After rebalancing, it needs to reduce exposure by 30%. The note is fractionalized, with 30% ($30,000) transferred to the Super Fund. Village A uses the proceeds to acquire promissory notes for other companies.

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📜 Super Fund as a Reg D Offering

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Regulatory Structure

The Super Fund operates as a private investment vehicle under Regulation D:
  • Rule 506(c): Allows for broader marketing to accredited investors
  • Accreditation Verification: Strict verification of investor qualifications
  • Size Limitations: Structured to remain under thresholds requiring additional regulatory filings
  • Offering Documentation: Comprehensive offering memorandum and risk disclosures

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✅ Investor Requirements

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Accreditation Standards

  • Individual Investors
  • Entity Investors
Must meet ONE of the following criteria:
  • $200,000+ annual income for past 2 years ($300,000 with spouse)
  • $1,000,000+ net worth excluding primary residence
  • Professional certifications (Series 7, 65, or 82 license)
  • “Knowledgeable employees” for private funds

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🏦 Participation Structure

  • Investment Parameters
  • Capital Call Structure

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Commitment Levels

  • Minimum Commitment: $100,000
  • Standard Commitment: $250,000

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Fund Terms

  • Duration: 10-year fund life (2-year extension option)
  • Capital Calls: Quarterly, aligned with rebalancing
  • Lock-up Period: 2-year minimum

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📊 Portfolio Management

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Asset Composition

Super Fund Asset Allocation (Example)
The Super Fund’s portfolio consists of:
  • Fractionalized Promissory Notes: From numerous private companies across sectors
  • Cash Reserves: Maintained for liquidity needs and operational expenses
  • Occasional Direct Shares: From liquidity events where shares are received instead of cash

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Consistent NAV Determination

The Super Fund’s NAV is calculated using the exact same algorithmic approach used for valuing village holdings:
The Super Fund’s NAV is simply the sum of its underlying holdings, which include:
  • Direct promissory note interests purchased from villages during rebalancing
  • Direct company interests from special situations
  • Cash and other liquid assets
All company valuations follow the same algorithm used throughout the Backerville system:
  • Latest financing round as baseline value
  • Algorithmic time-decay factors applied consistently
  • Same growth metric adjustments applied to all holdings
  • Identical treatment of comparable company data
  • Unified valuation database across the entire system
This approach ensures:
  • No arbitrage opportunities between villages and the Super Fund
  • Full transparency for all stakeholders
  • Elimination of potential conflicts in valuation
  • Consistent treatment of the same assets regardless of which vehicle holds them
  • Computational efficiency through a single valuation system

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Portfolio Composition

Unlike traditional venture funds with rigid diversification requirements, the Super Fund’s composition is determined by its core function: providing liquidity to the village system.
  • System-Driven Allocation
  • Risk Management
The Super Fund’s portfolio naturally reflects:
  • Holdings that villages need to sell during rebalancing
  • Special situation opportunities across the ecosystem
  • Strategic positions that benefit the overall network
This allows maximum flexibility to support village liquidity needs without artificial constraints.

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Investor Terms

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Lock-up Periods

Super Fund Liquidity Timeline

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Fee Structure

The Super Fund employs a straightforward fee structure designed to align interests:
  • Operational Expenses: Reimbursement of actual operational costs for legal, accounting, etc.
  • Performance Fee: 10% of profits, subject to a high-water mark
  • No Management Fee: Unlike traditional funds, there is no annual management fee
  • No Redemption Fees: As investors are locked until fund termination

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Compliance Considerations

  • UCC Filings
  • Blue Sky Laws
1

Initial Filing

UCC-1 filings establish security interests in promissory notes
2

Amendment Filing

When notes are fractionalized, UCC-3 amendments document the changes
3

Continuation Filing

Every five years to maintain security interests
4

Termination Filing

When obligations are fully satisfied

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Advantages for the Ecosystem

The Super Fund creates substantial benefits for the entire Backerville ecosystem:
  1. Enhanced Liquidity: Creates a market for otherwise illiquid assets
  2. Rebalancing Efficiency: Enables villages to optimize their portfolios
  3. Additional Capital: Brings external investment into the ecosystem
  4. Scale Benefits: Creates a larger pool with more negotiating power
  5. Risk Distribution: Spreads risk across a broader base of investors
By serving as both an investment vehicle and liquidity mechanism, the Super Fund completes the Backerville ecosystem, creating a comprehensive solution for private company equity diversification.