Fundraising

Preferred stock rounds are typically raised via pre-money valuations. 

Preferred stock rounds are typically raised via pre-money valuations. 

The absolute minimum of a 1st closing needs to be $1m+ or 10% of the fund, whichever is larger. We strongly advise against closing on less then $1m because it will be very difficult to get the fund operational upon the first capital call...

The absolute minimum of a 1st closing needs to be $1m+ or 10% of the fund, whichever is larger. We strongly advise against closing on less then $1m because it will be very difficult to get the fund operational upon the first capital call which should be 25% or less.  If the manager were to do 25% capital call on $500k, this does not give the manager enough money to invest in enough companies, draw down management fees and pay organizational expenses.

We have received feedback from the community that some managers increased conversion when they used the word form instead of PACT in their verbal conversations and in emails.

We have received feedback from the community that some managers increased conversion when they used the word form instead of PACT in their verbal conversations and in emails.

In most cases, your suggested approach is the right one. There are some exceptions such as when the founders did something bad or unethical, but in general, your approach is sound. With insider rounds, the CEO needs to drive this proce...

In most cases, your suggested approach is the right one. There are some exceptions such as when the founders did something bad or unethical, but in general, your approach is sound. With insider rounds, the CEO needs to drive this process. They should have an idea of the construction of the round and terms. Then, they should speak 1:1 with trusted investors like yourself for feedback on the round. Then, they can go to all other insiders with the proposal. Consider proactively reaching out to the CEO to help them navigate this.

Avoid promising targeted returns to LPs. You may want to model out some returns based on your strategy showing High, Medium, Low scenarios at some point, but the answer to the LPs should be: "I will share our deck which will describe sev...

Avoid promising targeted returns to LPs. You may want to model out some returns based on your strategy showing High, Medium, Low scenarios at some point, but the answer to the LPs should be: "I will share our deck which will describe several returns scenarios for our fund. Since VC fund returns have asymmetric upside and follow a Pareto distribution, one successful investment can be the difference between a 10x+ on the fund and a 2x"

Most investments are in USD, so use USD. Use CAD if you are primarily planning to invest in CAD in Canadian startups, raising primarily from Canadian LPs.

Most investments are in USD, so use USD. Use CAD if you are primarily planning to invest in CAD in Canadian startups, raising primarily from Canadian LPs.

The Venture Studios in the VC Lab program have a VC fund attached. Please review this article: https://govclab.com/2023/04/25/how-to-build-a-venture-studio/ The capital calls for the VC fund that's attached to the studio will work the s...

The Venture Studios in the VC Lab program have a VC fund attached. Please review this article: https://govclab.com/2023/04/25/how-to-build-a-venture-studio/ The capital calls for the VC fund that's attached to the studio will work the same as any other VC fund.

No LP can own more then 25% of the fund and ideally they should own less then 20%.  LP ticket sizes are based on demand and capacity. Your minimum ticket for the 1st close should be not be lower then $100k.

No LP can own more then 25% of the fund and ideally they should own less then 20%.  LP ticket sizes are based on demand and capacity. Your minimum ticket for the 1st close should be not be lower then $100k.

PACT links generated via Hub don’t expire. 

PACT links generated via Hub don’t expire. 

It's more of a nice to have. If LPs are requesting it, take your deck and put the major points in each slide into a section of the executive summary.

It's more of a nice to have. If LPs are requesting it, take your deck and put the major points in each slide into a section of the executive summary.

While we can't speak specifically as to an FCA regulated fund or being the nominee thereof - there are general principles to keep in mind.   Typically, vehicles may not be considered as being helpful for a "first fund" if:  • the fund m...

While we can't speak specifically as to an FCA regulated fund or being the nominee thereof - there are general principles to keep in mind.   Typically, vehicles may not be considered as being helpful for a "first fund" if:  • the fund managers are not in complete control (and also own) of all of the fund's entities; • there is no management company (firm/brand) that will be carried over; • the fund is part of (or connected to) a larger structure (or regulatory regime) where there are entities involved that the fund managers do not control or own; AngelList is one example - as investors do not own or operate the vehicles and are considered "consultants", AngelList vehicles are not considered helpful as a track record for a "first fund" (though they may be helpful for an angel investing track record, potentially). 

On the quantitative side, cash on cash returns is the number one metric that emerging managers working on Fund II or Fund III are evaluated on, followed by unrealized markups. On the qualitative side, operating drama in previous funds, s...

On the quantitative side, cash on cash returns is the number one metric that emerging managers working on Fund II or Fund III are evaluated on, followed by unrealized markups. On the qualitative side, operating drama in previous funds, such as partner disagreements or firm turnover, affect the decisions by prospective LPs. The Thesis-alignment of portfolio investments, as well as any notable portfolio companies, are factored in. The overall quality of operations, including Deal Memos and reports, also matter. It is safe to assume that larger limited partners in Fund II or Fund III will do extensive due diligence on any previous funds.

You need to follow the general solicitation laws of the countries where you and your various counterparties are located. Here are two guides to help you navigate these matters. https://govclab.com/2022/06/28/general-solicitation/ https:...

You need to follow the general solicitation laws of the countries where you and your various counterparties are located. Here are two guides to help you navigate these matters. https://govclab.com/2022/06/28/general-solicitation/ https://govclab.com/2023/05/13/leveraging-connectors/

No. This is a bad idea. Avoid placement agents at all costs. First - the reputable placement agents rarely work with new and emerging managers.  Second - the vast majority of placement agents don't have your best interest in mind. Third ...

No. This is a bad idea. Avoid placement agents at all costs. First - the reputable placement agents rarely work with new and emerging managers.  Second - the vast majority of placement agents don't have your best interest in mind. Third - there are major broker dealer issues with this type of arrangement in many jurisdictions.  There are no shortcuts to fundraising. It's very rare that random LPs that are not 1st or 2nd degree connection will invest in first closes or even Fund 1s. If you don't have the network, you're not ready to start a fund. VC is a network business. You need an extensive network to be succesful in VC both for fundraising and for deal-flow.  

You're defining every early stage startup in the world here when you say "pre-revenue startup with a high potential and high-risk profile". Startup valuations are typically set by the market of investors and not by some methodology or sp...

You're defining every early stage startup in the world here when you say "pre-revenue startup with a high potential and high-risk profile". Startup valuations are typically set by the market of investors and not by some methodology or spreadsheet. 

Read VC Lab's Limited Partner guide: https://govclab.com/the-venture-capitalists-guide-to-limited-partners/

Read VC Lab's Limited Partner guide: https://govclab.com/the-venture-capitalists-guide-to-limited-partners/

The most effective way of sourcing LPs is via 1st or 2nd degree connections in their network. 

The most effective way of sourcing LPs is via 1st or 2nd degree connections in their network. 

No, they are not required. Also, it's absolutely critical that new and emerging managers do not engage with any vendors including lawyers until they have a minimum of 10%+ of their fund hard circled in PACTs. Finally, institutional LPs r...

No, they are not required. Also, it's absolutely critical that new and emerging managers do not engage with any vendors including lawyers until they have a minimum of 10%+ of their fund hard circled in PACTs. Finally, institutional LPs rarely invest in new or emerging managers. 

According to VC Lab's most recent nextgen manager report, 63% of new managers are over the age of 40, whereas only 5% are under the age of 30.

According to VC Lab's most recent nextgen manager report, 63% of new managers are over the age of 40, whereas only 5% are under the age of 30.