Fundraising

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Fundraising

Venture Partner Carry percentage

Asked by:
Community Member
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Apr 07, 2024

A potential Venture Partner, tells me they can help me raise 30% of my target.  I know I cannot give them cash or an earning proportional to the amount they raised. Is a percentage of carry the only compensation option? How much would be a reasona...

Top answer:

Venture Partner claims and reality often do not match up to reality. As a result, most Venture Partners are terminated by Managing Partners. So, use the Venture Share agreement and place a six month cliff on the Carried Interest venting....

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Fundraising

What assurance does an LP have that the GP will not call capital faster than over the promised investment period of 3-4 years?

Asked by:
Community Member
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Mar 26, 2024

An propective LP wants some assurance that their commitment will not be called substantially faster than the proposed 3-4 year investment period. What's the best way to address this contractually in the LPA, and in practice?

Top answer:

There is nothing contractually in the LPA that prohibits a GP to call capital as needed and a GP shouldn't make promises or capital call schedules since they have no definite way of knowing how their deal flow and investment needs will b...

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Fundraising

What's the ideal way to identify quality connectors within my network?

Asked by:
Community Member
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Mar 24, 2024

My experience with connectors is limited, and it's unpredictable to determine which contacts might be good connectors in advance. Those I initially thought could be good connectors sometimes didn't fit the bill. How can I identify who to approach?...

Top answer:

The best connectors are already 'supporters' of you or your fund or both. As a result, they naturally want to help you on your missions without anticipating something in return. To better help you triangulate on the right archetype, try ...

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Fundraising

Is SBIC funding a viable option for venture?

Asked by:
Community Member
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Feb 07, 2024

Top answer:

If by funding you're referring to SBIC investing in your fund, then the answer is no. However, it can be an option for your portfolio companies. 

 -  Mike Suprovici
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Top answer:

0. Avoid working with broker dealers. They struggle to place LPs in emerging manager funds due to the risk and red tape. In addition, their fees are too expensive for emerging managers with small funds and because they are usually due on...

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Fundraising

How to best use LP databases when you can’t generally solicit?

Asked by:
Community Member
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Jan 16, 2024

Using them for newsletters, attending targeted conferences, general networking, and cold calls seem like good places to start, but are there any other ideas/strategies/best practices?  Thank you.

Top answer:

Cold emails don't work and should be avoided. What you should do is to work to develop relationships with connectors that can introduce you to LPs first. You can, also attend events and host events as well to build your top of funnel.

 -  Mike Suprovici
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Fundraising

When should I share my materials with an LP?

Asked by:
Community Member
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Jan 14, 2024

Top answer:

As a result of global general solicitation rules and best practices, a manager should only share materials with a limited partner that they know and are confident meet the local accreditation or wealth standards. Practically speaking, th...

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Fundraising

What are effective ways to ask an LP for a PACT?

Asked by:
Community Member
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Jan 14, 2024

Top answer:

There are many ways to ask a limited partner for a PACT, ranging from more passive ways to more forward ways. A manager should decide which way to ask which limited partner based where in the process the limited partner is and how the re...

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Fundraising

Do you share the fund's current AUM to early LPs when catching up after some time/when asking for LP intros?

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Jan 11, 2024

Do you share the fund's current AUM to early LPs when catching up after some time/when asking for LP intros?  How do you position it so it's a positive and not a negative?  How do you leverage it to get more LP intros?

Top answer:

You should share how much you have closed, if an LP asks. However, unless you have closed at least 50% of the fund, it's sub-optimal to lead with this type of information because it's unclear if you will reach your target. This is also w...

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Fundraising

How do I set my target fund size?

Asked by:
Community Member
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Dec 23, 2023

Top answer:

The target fund size should be thought of as the minimal viable fund size to operate. Most new and emerging mangers set fund size targets that are too large, resulting in them under-subscribing and ensuring an extremely difficult time ra...

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Fundraising

For GPs who have hosted LP events - have you ever hosted joint events with other GPs who lived in your area? If so, how did they go?

Asked by:
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Dec 21, 2023

I recently discovered that a few VC Lab cohort members live in the DC area. I am wondering about the effectiveness of planning LP events with other GPs.  What’s more beneficial to GPs and more attractive to LPs - a larger joint event like a happy...

Top answer:

GP - LP events are very effective and are foundational to a succesful fundraising strategy. In order to maximize the effectiveness of your LP events: 1.  Invite LPs that have signed PACTs or have closed 2. Ask the LPs that have signed P...

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Fundraising

Can I have a first close of $500k with a target fund size of $4 MM?

Asked by:
Community Member
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Nov 20, 2023

WIth a target fund size of $4 MM, should I be aiming for more than $500k in my first close? 

Top answer:

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...

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Fundraising

What's the new language for pacts with 'Fill in the Form' - do we include this on the PACT landing page and/or the custom banner when potential LPs are viewing our deck?

Asked by:
Community Member
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Nov 11, 2023

Mike had mentioned it this week - 'fill in the form' for PACT signing. Is it better softer language (more inviting) that we're going for to up PACT signing %? I don't think we can edit banner language and have prompted Robert about the possibili...

Top answer:

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.

 -  Mike Suprovici
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Fundraising

Negotiating an Insider Round

Asked by:
Community Member
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Nov 01, 2023

Hi all, I am working on a potential small insider bridge round for a portco (capped SAFE) and there are three key existing investors in the mix for this. The other two investors want to chat amongst ourselves about valuation etc. before responding...

Top answer:

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...

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Fundraising

Target returns communicated to LPs

Asked by:
Community Member
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Oct 10, 2023

I just got this questions from a potential LP:  What should i assume in terms of overall MOIC and target timing? Appreciate exits are hard to predict, but what should be the target based on the seed-stage VC asset class? 3-5x MOIC and some liquid...

Top answer:

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...

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Top answer:

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...

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Top answer:

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.

 -  Mike Suprovici
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