🧑🏫 VC Fundraising
ALLOCATE 2020 is going to take place next week (LinkedIn). It is a magic moment when GPs of VC funds and LPs gather in the same (virtual) room to mingle, discuss trends and pitch their funds. Oh yes, VCs raise capital too!
Know your LPs
There is no such thing as a standard LP. Public funds, private individuals, funds of funds, pensions funds and family offices can all be Limited Partners. They also have a strategy and various selection criteria. Some might require a minimum ticket size ruling out small funds, others are less likely to reinvest in a sector. Vetting LPs is everything, especially if you want them to stick to your funds (sifted).
Founder-Investor relationship can last very long, GP-LP relationship will last even longer. Better not to screw it up at the first conversation! Patience and soft skills are required here. As a matter of fact it takes several months for an LP to sign a check. Undoubtedly painful, the best way to cope with it is to get to know as many LPs as possible and to follow-up with them frequently (sifted).
N degrees of preparation
As GPs raising capital is ...
... Almost impossible if you are completely new to investing and have no story whatsoever.
... Easy done if you are Seedcamp, you are a well established fund and have a rocking track record. It's enough to collect your data in a slides deck, hit the road and close a brand new £78M Fund V (LinkedIn <- check the deck, totally worth it!).
... Difficult if you have a brand new fund, but there are bunch of tactics that might help out: leveraging on your angel investments, offering lower managements fee, approaching wealthy family and friends (TechCrunch) ...
Interesting fact stats show and real life proves that new funds are better performing than established ones (Cambridge Associates). Beginner's luck or more persistent hustle?