Fundraising

If you have a Hurdle Rate of 4%, then you need to get 104% returned before you get any carried interest. Since your primary compensation is through carry, this is really unfair to the GP, especially in smaller funds. You’re already maki...

If you have a Hurdle Rate of 4%, then you need to get 104% returned before you get any carried interest. Since your primary compensation is through carry, this is really unfair to the GP, especially in smaller funds. You’re already making a big sacrifice due to the small fund size etc. It’s just not fair. Also, it doesn’t really de-risk the fund that much, especially when it’s small, so it’s not that beneficial.

yes they can

yes they can

We recommend that you don’t include your own contribution for this exercise.

We recommend that you don’t include your own contribution for this exercise.

Generally, you desire to oversubscribe. So, you state a very realistic target, and then work to raise more. So, I would say that you are raising $20 MM, and then shoot to try and get $30 MM.

Generally, you desire to oversubscribe. So, you state a very realistic target, and then work to raise more. So, I would say that you are raising $20 MM, and then shoot to try and get $30 MM.

This depends on what you have. It is not uncommon to include: Presentation, Deal Memo, Term Sheet and Legal Agreements. It can also include any Research, Models and Bios, particularly for later stage deals. Try to make the folders as con...

This depends on what you have. It is not uncommon to include: Presentation, Deal Memo, Term Sheet and Legal Agreements. It can also include any Research, Models and Bios, particularly for later stage deals. Try to make the folders as consistent as possible with information on the deals.

Generally, you can not directly compensate for sourcing and closing money, as these are fundraising commissions that require licensing in many jurisdictions. Funds normally offer Venture Partner roles to people that help with fundraising...

Generally, you can not directly compensate for sourcing and closing money, as these are fundraising commissions that require licensing in many jurisdictions. Funds normally offer Venture Partner roles to people that help with fundraising after the funding closes.

Send them a PACT and don’t over-think this. It’s a LONG way between here and them wiring money. So say: Great, here is a non-binding commitment as a next step.

Send them a PACT and don’t over-think this. It’s a LONG way between here and them wiring money. So say: Great, here is a non-binding commitment as a next step.

I would not share a Deal Memo with anyone that did not sign a PACT, and the PACT has light NDA language.

I would not share a Deal Memo with anyone that did not sign a PACT, and the PACT has light NDA language.

It's more of a nice to have. In my experience, this usually causes more confusion that it's worth. First, people usually don't read them. Second, the data room should not be opened until after an LP signed a PACT for you, and at that po...

It's more of a nice to have. In my experience, this usually causes more confusion that it's worth. First, people usually don't read them. Second, the data room should not be opened until after an LP signed a PACT for you, and at that point you don't want to over-inform.

Focus on the thesis first. Once you get the thesis right, then focus on the story, then focus on portfolio construction. There is no right answer to your question, because this is dependent on your stage, and thesis. The vast majority of...

Focus on the thesis first. Once you get the thesis right, then focus on the story, then focus on portfolio construction. There is no right answer to your question, because this is dependent on your stage, and thesis. The vast majority of Fund 1s will not have follow-on because they funds are too small for example.

You can’t talk about a fund until it is closed, so having an established VC or GP as an LP does not add anything to your fundraising process. Furthermore, you should NEVER talk about LPs with other LPs, or you risk both reputational dama...

You can’t talk about a fund until it is closed, so having an established VC or GP as an LP does not add anything to your fundraising process. Furthermore, you should NEVER talk about LPs with other LPs, or you risk both reputational damage and losing LPs. Some established funds want access and deal flow, which is why they have the ability in their LPA to invest in other funds. Select LP investing is part of their Thesis and / or strategy. Making these types of investments is commonly prohibited in the LPA AND presents both conflicts of interest and fiduciary duty issues. It’s fairly uncommon to see established VCs or GPs make LP investments, so don’t waste a lot of time on this. Among nearly 300 alumni firms, I’ve heard of this happening only a handful of times.

It’s very complicated and the KYC is also very difficult. Unless the amount is very large, like $1 MM or more, then it is not worth it. The LP should convert the crypto and invest like normal.

It’s very complicated and the KYC is also very difficult. Unless the amount is very large, like $1 MM or more, then it is not worth it. The LP should convert the crypto and invest like normal.

These platforms don’t work for LP fundraising. There are no shortcuts in fundraising unfortunately

These platforms don’t work for LP fundraising. There are no shortcuts in fundraising unfortunately

Venture Funds are long term investment vehicles and their structure makes it very difficult/impossible for LPs to pull their money out unless there are liquidity events such as exits. This is because your capital is directly invested in ...

Venture Funds are long term investment vehicles and their structure makes it very difficult/impossible for LPs to pull their money out unless there are liquidity events such as exits. This is because your capital is directly invested in private companies and the allocation is realized when there is a liquidity event. That being said, if there are exits before, which is possible, you will get distributions right away.

Avoid name dropping LPs. This is a major mistake. Say: "We can not reveal the identities of our LPs without their explicit permission, and we would not do that with you either."

Avoid name dropping LPs. This is a major mistake. Say: "We can not reveal the identities of our LPs without their explicit permission, and we would not do that with you either."

GPs should dedicate 60 - 80% of their time fundraising until you close the fund.

GPs should dedicate 60 - 80% of their time fundraising until you close the fund.

A "no" is a "no." Take it and move on. LP's almost never tell you the true reason that they are passing...

A "no" is a "no." Take it and move on. LP's almost never tell you the true reason that they are passing...

Send them as little info as possible. The goal of the email is to get the meeting. You can’t close a deal over email. The more info you send - the more opportunities for the person to say no. If you know the LP well, just write a 2 sente...

Send them as little info as possible. The goal of the email is to get the meeting. You can’t close a deal over email. The more info you send - the more opportunities for the person to say no. If you know the LP well, just write a 2 sentence email to get them on a Zoom. If you don’t get a 2nd degree connector to send a  email for you which includes a few stats and maybe a teaser deck that has like 4 slides.

Foresight.is has a bunch of handy tools for projections etc… check this out:  https://foresight.is/vclab/model That being said, just focus on the angel investments that you have made that are on thesis with your firm. Then, try to calcul...

Foresight.is has a bunch of handy tools for projections etc… check this out:  https://foresight.is/vclab/model That being said, just focus on the angel investments that you have made that are on thesis with your firm. Then, try to calculate markups on those investments.

Read the following articles: https://govclab.com/2022/06/28/general-solicitation/ https://govclab.com/2022/01/11/tips-to-avoid-general-solicitation-for-vcs/

Read the following articles: https://govclab.com/2022/06/28/general-solicitation/ https://govclab.com/2022/01/11/tips-to-avoid-general-solicitation-for-vcs/

The chances of them investing is very low, so don't waste time. They will do extensive background reference checks on the general partners, speak with portfolio company CEOs, review the Data Room and validate the model.

The chances of them investing is very low, so don't waste time. They will do extensive background reference checks on the general partners, speak with portfolio company CEOs, review the Data Room and validate the model.

Yes - you must focus on accredited investors

Yes - you must focus on accredited investors

Your track record statistics referenced in your Thesis and in your deck should only be at the related stage and in the related industry. These are the only things that matter to limited partners reviewing the opportunity. If you are work...

Your track record statistics referenced in your Thesis and in your deck should only be at the related stage and in the related industry. These are the only things that matter to limited partners reviewing the opportunity. If you are working in space and referencing deals in other industries or at other stages, this will be misleading and irrelevant. 

So, in other-words, the LP is trying to negotiate to lower your carry. You should push back and say no. You’re going to be managing their money for 10 years! 80 - 20 is standard.

So, in other-words, the LP is trying to negotiate to lower your carry. You should push back and say no. You’re going to be managing their money for 10 years! 80 - 20 is standard.

Brokers are not a good use of time. Please avoid brokers at all costs. 

Brokers are not a good use of time. Please avoid brokers at all costs. 

You control the schedule. So schedule them on a date where you feel comfortable pitching them, vs ASAP.

You control the schedule. So schedule them on a date where you feel comfortable pitching them, vs ASAP.

No. You do file a number of things when you start a fund with various government agencies, but these are not a license. 

No. You do file a number of things when you start a fund with various government agencies, but these are not a license. 

Yes you can. But, be clear with the founder that you're unable to predict the timing on your fund closing and don't make any promisses to invest or sign any term sheets until after you complete a closing.

Yes you can. But, be clear with the founder that you're unable to predict the timing on your fund closing and don't make any promisses to invest or sign any term sheets until after you complete a closing.

The vast majority of new managers are closing with 506b funds. How do we know? VC Lab will accelerate ~60% of funds in 2022, and a small handful are 506c. I would say less than half of the other 40% are 506c, mostly with AngelList, so t...

The vast majority of new managers are closing with 506b funds. How do we know? VC Lab will accelerate ~60% of funds in 2022, and a small handful are 506c. I would say less than half of the other 40% are 506c, mostly with AngelList, so the total would be about 20 to 22% are 506c.

SPV's count for previous activity if they are related to your Thesis. The are similar to making angel investments. However, they do not have any impact on your track record being a fund manager, as SPVs are viewed as slightly more compli...

SPV's count for previous activity if they are related to your Thesis. The are similar to making angel investments. However, they do not have any impact on your track record being a fund manager, as SPVs are viewed as slightly more complicated angel investments by sophisticated LPs.

It’s normal for anchors to ask for preferential terms, which you can manage in a side letter. That being said, anchors tend to delay closings and are very difficult to work with. So, to qualify them before wasting time with them, send th...

It’s normal for anchors to ask for preferential terms, which you can manage in a side letter. That being said, anchors tend to delay closings and are very difficult to work with. So, to qualify them before wasting time with them, send them a PACT first. You can offer them the ability to buy some of the GP as well, and several VC Lab alumni have done this and our template docs make this process pretty straight forward. The key is that you prioritize people who will make your first closing now, and this LP is probably not going to make it.

I think it’s better that you don’t because you can’t really control if someone forwards it and the newsletter is usually a broader audience. We like to send the deck to super qualified leads that came from introductions. Then, for people...

I think it’s better that you don’t because you can’t really control if someone forwards it and the newsletter is usually a broader audience. We like to send the deck to super qualified leads that came from introductions. Then, for people that looked at the deck, we think they should be in a different stage in your pipeline in your crm with a completely different set of follow-up messages.

That is bad advice from a previous age when such things mattered. The world has changed, and the advice is therefore wrong. Is it possible to get corporate backing? Yes, but it takes 18+ months and is very slow and painful. Will a VC p...

That is bad advice from a previous age when such things mattered. The world has changed, and the advice is therefore wrong. Is it possible to get corporate backing? Yes, but it takes 18+ months and is very slow and painful. Will a VC possibly invest in other fund? Maybe, but very unlikely. Less than 2% chance. Most are prohibited by the LPA to invest in other funds. Following this advice would be a wild goose chase that could take years.

It's ok to do so if you want. Just make sure the site doesn't mention the fund or the thesis. You can mention the Firm however (the name of the ManCo) and a very high level description of what the Firm does.

It's ok to do so if you want. Just make sure the site doesn't mention the fund or the thesis. You can mention the Firm however (the name of the ManCo) and a very high level description of what the Firm does.

Your best ROI per unit of time spent for your first closing is high net worth individuals. The others are better for your 2nd close or Fund 2 because they typically don't invest in new managers.

Your best ROI per unit of time spent for your first closing is high net worth individuals. The others are better for your 2nd close or Fund 2 because they typically don't invest in new managers.

You can share the deck if they request it

You can share the deck if they request it

Legal fees can be an organizational expenses and paid by LPs. It can cost a lot more for legal work depending on the setup etc… You should only work with law firms that specialize in VC fund formations.

Legal fees can be an organizational expenses and paid by LPs. It can cost a lot more for legal work depending on the setup etc… You should only work with law firms that specialize in VC fund formations.

You need to use numbers, preferably exits or markups. If you can't get these metrics, then look for revenue increases or some other clear indication of value creation and growth.

You need to use numbers, preferably exits or markups. If you can't get these metrics, then look for revenue increases or some other clear indication of value creation and growth.

It’s really difficult to roll in an SPV into a fund, because the SPV is a fund. 

It’s really difficult to roll in an SPV into a fund, because the SPV is a fund. 

In Delaware, if the fund is <=$10m then it’s 250 LPs. If the fund is >$10m is 99 LPs

In Delaware, if the fund is <=$10m then it’s 250 LPs. If the fund is >$10m is 99 LPs

You’re not going to be able to honor these terms because they are dependent on the company. What if the company doesn’t want them to lead? These are definitely NOT standard terms.

You’re not going to be able to honor these terms because they are dependent on the company. What if the company doesn’t want them to lead? These are definitely NOT standard terms.

Avoid anchors in Fund 1s and avoid favorable terms for any LP

Avoid anchors in Fund 1s and avoid favorable terms for any LP