The Pearl Fund Investor Portal

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The PearlFund Limited Partnership
506(c) Offering Platform

FUND OVERVIEW

Every once in a great while, something happens in life when things come together in a way that you just know the timing is perfect, the situation is ideal, and it’s time to act quickly.

The General Partner believes that this is one of those times. In today’s world, when politicians from both parties and a technology billionaire all agree and move swiftly to create the QOZ program to create an incentive to deploy capital gains in economically distressed areas of the United States, it is a unique event. Add in the fact that investors have significant capital gains and are now highly incentivized to deploy some of that capital into the most distressed areas of our country, and it is indeed a special time to be ideally located with the knowledge and expertise to act.

The Pearl Fund intends to provide investors unique access to private venture capital opportunities, identified and evaluated by an experienced team of successful entrepreneurs, while offering investors an opportunity to take advantage of a full suite of tax benefits offered under the 2017 H.R. 1, known as the Tax Cuts and Jobs Act (the “TCJA”). The General Partner will manage the Fund as a Qualified Opportunity Zone Fund and target early-stage, high-potential businesses that operate in federally Qualified Opportunity Zones. The Pearl Fund’s priority will be the growth of investors’ capital and realization of maximum tax benefits.

The Pearl Fund’s investment objective is to achieve capital appreciation through equity investments in companies located in areas designated as Qualified Opportunity Zones (“Investments”). The Fund intends to deliver market-leading tax-free investment returns (10X+) to investors by identifying promising investment opportunities, providing innovative capital solutions, and actively contributing seasoned management expertise to maximize long-term performance and value. The Fund’s portfolio will focus on early- and growth-stage companies that display the potential to scale effectively and are positioned to dominate a given market, and target an exit potential.

The Fund is targeted specifically for investors who want to leverage the tax benefits on capital gains from Qualified Opportunity Zone businesses, while benefiting from the potential upside of an early stage venture fund with the intent that all Portfolio Companies qualify as Qualified Opportunity Zone Businesses (“QOZBs”).

Note that, as with all investment funds, venture investing carries risks, and the Fund’s ability to achieve its return objectives is not guaranteed.

HOW OPPORTUNITY ZONE FUNDS WORK

An investor can receive up to three tax benefits by investing capital gains in a QOF.

The first is temporary tax deferral on the capital gains reinvested in a QOF on a timely basis. The deferral lasts until the date the taxpayer’s interest in the QOF is sold or exchanged, or until December 31, 2026, whichever comes first.

The second benefit is a 10 percent step-up in basis for capital gains invested in a QOF if the investment is held for five years. The basis is increased an additional 5 percent for any investments held for seven years. This step-up in basis means taxpayers can exclude up to 15 percent of their reinvested capital gains from their taxable income recognized when the investment is sold or exchanged or on December 31, 2026.

Finally, QOF investors can permanently exclude from taxation any capital gains that accrue on their investment in a QOF, if the investment is held for at least 10 years, by making a special election to step up the basis of the investment to 100 percent of its fair market value on the date it is sold or exchanged.

THE FUND’S INVESTMENT STRATEGY

Unique Portfolio Access: Access to a diverse portfolio of early-stage deals. Sources for investment opportunities stem from extensive personal networks of investment partners, educational institutions, and corporate entities as well as the “New Lab” at the Brooklyn Navy Yard. The General Partner will emphasize areas where its management team possesses, or has access to, specific industry, market, or technology expertise. Moreover, The Pearl Fund is establishing the country’s first OZ-Incubators ™, which are expected to contribute significantly to the Fund’s access to potential Investments.

Active Investment Management: The Fund will take an active approach from initial investment through successful exit that leverages the expertise, relationships, and operational experience of the General Partner to reduce risk and maximize value. The General Partner is committed to providing more than just money to drive the success of Fund portfolio companies.

In selecting investments, the General Partner’s management team will identify successfully expanding companies with disruptive technologies and significant market size potential. The General Partner’s management team will deploy investors’ Capital Commitments, as described herein, and will take an active approach to assist Portfolio Companies by leveraging their experience and deep network of industry professionals to provide operational expertise, industry knowledge, and valuable contacts to build value and shorten the path to a successful exit.

The General Partner believes success in early- to expansion-stage Portfolio Companies requires more than just sufficient capital, but must also include a focus on great leadership teams, industry experience, actively managed strategy and planning, and clear execution plans. The General Partner believes this comprehensive approach should generate above-market returns.

Targeted investment categories of Portfolio Companies include seed and early stage, pre-revenue, first investments, up to an “A Round” with co-investors as growth capital, Confidential Copyright © 2019 The Pearl Fund www.thepearl.fund info@thepearl.fund capital for acquisitions, and capital to solidify balance sheets. The Fund intends to require a board seat (at least through the respective entity’s A Round) in its portfolio investments and receive preferred equity with a liquidation preference.

Investment Size in Portfolio Companies: The Fund has no specific minimum amount of its Investments in the Portfolio Companies. However, the General Partner anticipates investments ranging in size from approximately $100k to $1 million with a maximum anticipated of $2 million per Investment. The General Partner will seek to invest in Portfolio Companies that it believes are capable of achieving an enterprise value on exit of 10X the initial valuation. The General Partner intends to invest in Portfolio Companies that will be QOZBs. The General Partner’s management team will take an active approach in assisting portfolio company management by providing operational experience and sharing efficient capital deployment practices.

UNIQUE ASPECTS OF AN OPPORTUNITY ZONE / VC FUND

Due to The Pearl Fund’s goal, as a qualified Opportunity Zone fund, of maximizing investors’ tax incentives provided under the TCJA, a number of unique terms apply:

  • The Fund duration/term will be at least 10 years. Investors who hold their investment in a QOF for at least ten years are eligible to receive a step up in basis equal to the fair market value of the investment when sold. Thus, investors who hold the QOF investment for at least 10 years do not recognize any gain from the appreciation of the QOF investment when it is sold.
  • Once the 10-year holding period has been met, the Fund will strive to manage investor exits through the sale of the Fund. Limited Partners may be required to sell their Interests under certain circumstances described in the Limited Partnership Agreement. To achieve maximum opportunity zone benefits under current guidance, some exits may extend past the 10-year requirement. Regardless, proceeds from the sale of the Fund will be distributed to the General Partner and the Limited Partners in accord with the distribution waterfall in the Limited Partnership Agreement.
  • If the General Partner determines it is in the best interest of the Fund’s performance to sell, exit, or dispose of an investment before the 10-year window, the GP has the right to do so, but will endeavor to do so in a way that also maximizes the available tax advantages pursuant to Qualified Opportunity Zone regulations in effect at that point in time.

We’re witnessing the inception of an investment asset class and a potential game-changer: an innovative economic development program that is structured to simultaneously benefit struggling U.S. communities, developers, issuers, investors — and the nation at large.

— nesfinancial.com -

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The PearlFund Limited Partnership
506(c) Offering Platform

summary of operations

The Pearl Fund is a Pennsylvania limited liability company that is launching a venture capital fund with a fresh approach, which is to provide OZ investors with access to venture capital investment opportunities that have been identified and evaluated by an experienced team of successful entrepreneurs and investors. All of the Fund’s investments in the Portfolio Companies are intended and will be designed to allow the investors to qualify for the full suite of QOZ tax benefits.

Objective -- The objective of the Fund is to deliver market-leading tax-free investment returns (10X+) to limited partners by identifying promising investment opportunities in multiple Portfolio Companies. The Fund’s management team intends to provide innovative capital solutions and actively contribute seasoned management expertise to maximize long-term performance and value. The Fund’s Investment activity in Portfolio Companies is expected to focus on early- and growth-stage companies that display the potential to scale effectively and are positioned to dominate a given market, and possess the potential for one or more exit opportunities through a sale, refinancing or recapitalization.

Use of Proceeds -- The General Partner intends to deploy the funds raised in this Offering in equity investments in the Portfolio Companies in diversified asset classes including, but not limited to, defense, healthcare, mobile wireless, software, media, manufacturing, energy, agriculture, and consumer products including food and beverage companies, and may also include opportunistic real estate investments from time to time. The General Partner believes these sectors are well positioned to leverage new technologies and financially benefit from enhanced operational efficiencies provided by the Fund.

The Fund will generally invest in early stage Portfolio Companies with high potential business models that the General Partner believes have the potential to grow more than tenfold and will meet all of the qualifications of being a Qualified Opportunity Zone business (“QOZB”). We also intend to invest in growth stage companies that have had their first initial orders or customers, but would benefit from additional investment to support their growth, such as to fulfill large orders and financing to scale effectively.

Fundraising Regime -- The Fund intends to raise funds on a rolling basis throughout the Offering Period and to deploy the capital in a timely manner following each closing of additional subscriptions. The rolling-basis of fundraising contemplates multiple, investment-specific fundraising tranches (each, a “Funding Tranche”) of additional subscriptions from existing and additional investors.

The Fund’s rolling fundraising regime in the form of Funding Tranches will allow the General Partner to control the pace of fundraising and deployment of the capital gain funds to satisfy its investors’ reinvestment deadlines under Section 1400Z-2(a)(1) of the Code and accompanying proposed and future regulations and guidance, and enable the Fund to deploy funds at a cadence that allows the General Partner to comply with the Fund’s QOF investment restrictions.

Once the Fund has identified additional Investments and determined the amount of investment anticipated into the Portfolio Companies for the upcoming tranche, the Fund will open a new Funding Tranche on its online portal inviting subscriptions up to the amount requested. In the event an Investment requires more capital than anticipated during the solicitation of Capital Commitments with respect to such Investment, the Fund may reopen the respective Funding Tranche to raise additional funds including providing notice to existing Limited Partners offering the option to increase their Capital Commitments with respect to such Funding Tranche.

The Fund does not intend to register as an investment company in reliance on an exemption contained in Section 3(c)(1) of the U.S. Investment Company Act of 1940, as amended (the “ICA”), which exempts issuers whose outstanding securities are beneficially owned by not more than one hundred (100) persons who meet the conditions with respect to “beneficial ownership”.

The potential tax benefits are expected to provide a substantial incentive for investors to make equity investments in new businesses located in the designated Opportunity Zones.

— www.lexology.com —

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The PearlFund Limited Partnership
506(c) Offering Platform

The Fund's Leadership

The fund's leadership is ideally suited for this nexus of building and scaling high-performing businesses to generate attractive returns and positively impact communities.

Brian P. Phillips

Brian P. Phillips

General Partner

Mr. Phillips has a unique background ideally suited to lead The Pearl Fund. He has a rare blend of being an early-stage entrepreneur, a global expert on economic development through entrepreneurship, an advisor to Ivy League faculty on how to convert their inventions into viable businesses, and an entrepreneur in several global organizations.

Mr. Phillips has been a part of the founding team of a number of startups; two companies went public, two were acquired and one was sold via an MBO. As a founding CEO, he has raised more than $33M in venture capital. His most recent investment is in a clean-tech company out of Cornell University, which has increased in valuation 280% over the last 4 years and is still growing.

Mr. Phillips has been an advisor on entrepreneurship to global firms including Goldman Sachs, Wal-Mart, Coca-Cola, IBM and Arthur Young, as well as charitable organizations focused on entrepreneurship. He has met, vetted and worked with hundreds of entrepreneurs in the USA, as well as in Africa, India, China and Latin America.

Mr. Phillips is a national thought leader on Opportunity Zones Business investing, is the founder of The Pearl Fund, the first OZ Venture fund, and the founder of the national Opportunity Zone Venture Capital Working Group. He frequently speaks at Opportunity Zone conferences and publishes articles on Opportunity Zone business investing. He can be followed on Twitter at @thepearlfund and more detail on his career may be found on his LinkedIn profile at: www.linkedin.com/in/brianpphillips.

Eve Tetzlaff

Eve Tetzlaff

Venture Partner

Eve Tetzlaff brings 26 years of experience at McKinsey & Company, Investment Banking and Venture Capital, and roles in strategy, marketing, business development, product development, and retail innovation, for companies from startups to multibillion-dollar corporations. She has worked in industries including dot.com, high tech, healthcare, life sciences, and consumer products and services, both in the United States and abroad. Her breadth of experience across industries and functions makes her a uniquely capable and well-rounded resource for the Pearl Fund’s portfolio of investment companies.

Ms. Tetzlaff began her career at McKinsey & Company in New York, serving clients in media, financial services, and food and beverages. She left McKinsey to join Russia’s largest Russian-owned investment bank (United Financial Group, later acquired by Deutsche Bank) and was on the founding team of one of Russia’s earliest venture capital funds, identifying opportunities and investing into Russia’s emerging consumer sector, and serving as a hands-on management team member of investment targets.

Ms. Tetzlaff has spent more than a decade of her career in startup companies. During the dotcom boom of the mid-to-late 90s, Ms. Tetzlaff moved to Silicon Valley, where she was on the leadership team of two startup companies, responsible for Marketing, Business Development, and Product Development. Ms. Tetzlaff is also a seasoned large company leader, having spent nearly a decade in executive roles at the Estee Lauder Companies. More detail and references can be found on Ms. Tetzlaff’s LinkedIn profile at: http://www.linkedin.com/in/evetetzlaff/.

Businesses and developers may combine the tax incentives from the OZ (Opportunity Zone) Program with other tools, such as New Markets Tax Credits, to make projects in QOZs (Qualified Opportunity Zones) more attractive to investors. And, for investors, the OZ Program provides a unique opportunity to capitalize on tax incentives while stimulating economic activity in geographic areas that need it most.

- www.cobizmag.com -

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The PearlFund Limited Partnership
506(c) Offering Platform

terms of the offering

Name of Fund

The Pearl Fund Limited Partnership (“The Pearl Fund” or the “Fund”), a newly formed limited partnership that is accepting investors that are “accredited” as such term is defined in Rule 501 of Regulation D of the Securities Act of 1933, as amended.

The General Partner

The Pearl Fund Management Company, LLC (the “General Partner”), which is owned and governed by Brian P. Phillips. The General Partner will be responsible for providing investment and management services to the Fund, including (a) identifying companies that represent attractive investment opportunities (each, a “Portfolio Company”), (b) conducting due diligence, (c) structuring and negotiating the terms and conditions of investment, (d) monitoring and supporting the progress of each Portfolio Company, and (e) supporting negotiation and management of exits (collectively, “Investments”).

Company Objective

The Pearl Fund’s investment objective is to achieve capital appreciation through equity and equity-related Investments in Portfolio Companies located in areas designated as Qualified Opportunity Zones (“QOZs”). The Fund is specifically for investors who desire to leverage the tax benefits on capital gains derived from a QOZ, while benefiting from the potential significant upside of an early stage venture fund.

Fund Size

$10 Million of limited partnership interests (10,000,000 Interests at $1.00 per Interest), with capital contributions expected to be payable at the time of subscription or soon thereafter, within each investor’s 180-day compliance window under the QOZ tax laws created by the 2017 H.R. 1, known as the Tax Cuts and Jobs Act (the “TCJA”).

The General Partner may increase the Fund’s size by up to $5 Million. The Fund is offering its Interests on a rolling basis in connection with specific Investments in Portfolio Companies, as discussed herein. The Fund’s per investor Minimum Investment is 100,000 Interests ($100,000), subject to the discretion of the General Partner to adjust such amount on a case-by-case basis.

DISTRIBUTIONS

Investors will be entitled to receive:

  • The return of their capital contributions
  • A cumulative, non-compounded preferred return equal to 10.0% per annum on their capital contributions, calculated in each case as of the date on which capital contributions are made with respect to a particular funding tranche,
  • After #1, and #2 above, investors will then receive 80% of the Fund’s net profits and the General Partner will receive a 20% carried interest.
  • At the point, if ever, that Investors have received an aggregate amount (including preferred returns and return of capital contributions) three (3) times their respective capital contributions, the net profit split with the General Partner will thereafter shift to 70% of profits to Investors and a 30% carried interest to the General Partner.
Management Compensation

The General Partner or its Affiliates shall be entitled to receive the fees and other compensation including, but not limited to, those set forth in the Limited Partnership Agreement. The management fee due will be the standard rate for all venture funds which will be an annualized rate of 2.0%

The PearlFund Limited Partnership
506(c) Offering Platform

so much more than what you see

prospect dashboard

The PearlFund Limited Partnership 506(c) Investor Portal provides the opportunity to learn about our investment opportunity. Once registered, you will have:

  • Access to the Private Placement Memorandum, which outlines our company and gives greater detail about our offering;
  • Access to our SEC filing;
  • View real time offering metrics of how far along we are in the offering process;
  • View a timeline of your progress in the investment process;
  • View company contact information and send email directly to the administrator;
  • Easily upgrade your account with the click of a button.

Once your account is upgraded you will have additional access including:

  • The ability to complete the subscription documents via download or online;
  • Upload of subscription and accreditation documents as applicable;
  • Specific process information for investing and instructions on transfer of investment funds;
  • Access to company shared quarterly / annual reports, Financial documents and Supporting Documents;
  • Access to the Asset Portfolio as applicable;
  • Access to News articles written by the company;
  • Access to documents associated with your account.

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