Fundraising

It depends on the LP For HNWs a good data room is about it. Same for smaller family offices. However, for larger LPs they will reference check your portfolio, which is why your deal memos are important, as well as your legal and will ver...

It depends on the LP For HNWs a good data room is about it. Same for smaller family offices. However, for larger LPs they will reference check your portfolio, which is why your deal memos are important, as well as your legal and will verify the back office team. 

The best practice is to *not* share the names of investors with a prospect until their are signed on themselves.

The best practice is to *not* share the names of investors with a prospect until their are signed on themselves.

Just put in your fund's name. This is a non-binding document so don’t worry about it too much. 

Just put in your fund's name. This is a non-binding document so don’t worry about it too much. 

Yes, you should standardize on one currency. 

Yes, you should standardize on one currency. 

That is a “no”, so put them on the newsletter and move on. This is a process of managing a funnel with a few hundred people on it. Any signal of a “no,” is a no.

That is a “no”, so put them on the newsletter and move on. This is a process of managing a funnel with a few hundred people on it. Any signal of a “no,” is a no.

PACTs have ~6 months effective window. They are non-binding letters of intent, and there is no set timing. As with most things, ‘time is the enemy of all deals’

PACTs have ~6 months effective window. They are non-binding letters of intent, and there is no set timing. As with most things, ‘time is the enemy of all deals’

Anything that is not a yes is a no. Move on. You need to be pursuing dozens of people simultaneously. Compliance is a relatively easy issue to solve with larger companies. He or she just needs to submit the materials for review and appro...

Anything that is not a yes is a no. Move on. You need to be pursuing dozens of people simultaneously. Compliance is a relatively easy issue to solve with larger companies. He or she just needs to submit the materials for review and approval. It can take time, but it is not hard. Hesitation means that they are not interested.

You would ‘Warehouse’ this deal into your fund. This is a common practice which makes your fund more attractive to investors. Basically, you would move your investment into your fund. LPs would invest in your fund and get a return onc...

You would ‘Warehouse’ this deal into your fund. This is a common practice which makes your fund more attractive to investors. Basically, you would move your investment into your fund. LPs would invest in your fund and get a return once a liquidity event takes place from this deal.

You are expected to contribute 1% of the target fund size as your GP commit. Tell the LP that you are following the standard protocol, and do not let them bully you around. If they want to join the closing great. If they want to push you...

You are expected to contribute 1% of the target fund size as your GP commit. Tell the LP that you are following the standard protocol, and do not let them bully you around. If they want to join the closing great. If they want to push you around for a small amount of money, then you don't need them in the close. *Your time is too valuable. You should not even be engaging in these conversations with anyone investing less than $1 MM.*

No. Build a relationship first. Then, when they give you an indication that they want they want to invest, send them a PACT.

No. Build a relationship first. Then, when they give you an indication that they want they want to invest, send them a PACT.

The odds of this happening are less than 5%, maybe 1% or 2%. Don’t waste your time. Have them chase you.

The odds of this happening are less than 5%, maybe 1% or 2%. Don’t waste your time. Have them chase you.

The smallest realistic venture capital fund size is $2 MM, and this would be domiciled in Delaware, the cheapest place to form and run a fund. The reason for the $2 MM minimum is that set up and operating costs can easily be $200,000 or ...

The smallest realistic venture capital fund size is $2 MM, and this would be domiciled in Delaware, the cheapest place to form and run a fund. The reason for the $2 MM minimum is that set up and operating costs can easily be $200,000 or more for a fund. Set up can cost $50,000 or more, and annual expenses can easily run $15,000 or more. As a rule of thumb, you don’t want your fund expenses to be 10% or greater of the fund size. At a $2 MM fund size, the low estimate of $200,000 for expenses is 10% of the fund size. 

No it does not count as your track record if you invest though a friend. 

No it does not count as your track record if you invest though a friend. 

Assume that all conventional wisdom is either old or wrong. Now, there may be contractual rules that prevent a general partner from raising a new fund before deploying an old fund. Outside of contractual limitations, it is very common to...

Assume that all conventional wisdom is either old or wrong. Now, there may be contractual rules that prevent a general partner from raising a new fund before deploying an old fund. Outside of contractual limitations, it is very common to see general partners deploy and raise at the same time. It is hard to do. Think about it this way. If you are deploying and raising at the same time, then your are deploying from Fund 1, raising Fund 2 AND possibly also deploying from Fund 2, all simultaneously. That's tricky.

Corporate LPs take 9 to 18 months to close, and require about 500 to 1,000 hours of follow-up and due diligence. They also are often prohibited from investing in new managers, and traditionally have a <5% close rate. If you are prepared...

Corporate LPs take 9 to 18 months to close, and require about 500 to 1,000 hours of follow-up and due diligence. They also are often prohibited from investing in new managers, and traditionally have a <5% close rate. If you are prepared to spend that kind of time and effort for an LP, then go for it. :pray:

Send LPs VC Lab's guide to investing in VC: https://govclab.com/2023/04/26/how-to-invest-in-vc/

Send LPs VC Lab's guide to investing in VC: https://govclab.com/2023/04/26/how-to-invest-in-vc/

You/your fund admin, will need to re-verify LPs after a certain time period to ensure they are accredited investors. Very large LPs are not going to be comfortable disclosing their financial or tax information and it's very likely that t...

You/your fund admin, will need to re-verify LPs after a certain time period to ensure they are accredited investors. Very large LPs are not going to be comfortable disclosing their financial or tax information and it's very likely that they will pass on investing in your fund.

Try to avoid telling LPs who else is investigating. It's bad practice to name drop. You just don't know if they like each other.

Try to avoid telling LPs who else is investigating. It's bad practice to name drop. You just don't know if they like each other.

A Delaware 3 entity structure is strongly recommended if your goal is to build an enduring VC firm. 

A Delaware 3 entity structure is strongly recommended if your goal is to build an enduring VC firm. 

Your operations will be outsourced to vendors like Decile Partners. Also, don’t work with people you don’t know really well.

Your operations will be outsourced to vendors like Decile Partners. Also, don’t work with people you don’t know really well.

$100k - $250k is pretty normal for a 1st closing. It’s hard to predict the close rate because it really depends on your thesis and pitch.

$100k - $250k is pretty normal for a 1st closing. It’s hard to predict the close rate because it really depends on your thesis and pitch.

No we don’t. It’s a non-binding letter of intent. So just, update it to your local jurisdiction and remove US specific language as first step.

No we don’t. It’s a non-binding letter of intent. So just, update it to your local jurisdiction and remove US specific language as first step.

For any fund over $5 MM, syndicates are a waste of time. They take an enormous amount of effort to close and to manage, and they don’t raise sizable amounts of capital. For example, it’s not uncommon to spend hundreds of hours, $50,000 U...

For any fund over $5 MM, syndicates are a waste of time. They take an enormous amount of effort to close and to manage, and they don’t raise sizable amounts of capital. For example, it’s not uncommon to spend hundreds of hours, $50,000 USD and 6 months to raise less than a million.

If most of your investors and investments are in the US, then don’t bother looking at a Cayman subsidiary or shell. The advantages of these tax havens have been degraded as a result of expanding KYC and taxation regimes.

If most of your investors and investments are in the US, then don’t bother looking at a Cayman subsidiary or shell. The advantages of these tax havens have been degraded as a result of expanding KYC and taxation regimes.

The best practice is to have a high minimum, but also to increase the minimum for each close as a closing strategy. With a $10 MM fund, the minimum for the first close might be $50K for friends moving to $100K for normal investors. By th...

The best practice is to have a high minimum, but also to increase the minimum for each close as a closing strategy. With a $10 MM fund, the minimum for the first close might be $50K for friends moving to $100K for normal investors. By the second close, the minimum might commonly be $250K.

If you trust the person, and you know who they will forward it to, then yes. If not, it’s not worth it because then you will always have to audit your mailing list to ensure you want everyone on there.

If you trust the person, and you know who they will forward it to, then yes. If not, it’s not worth it because then you will always have to audit your mailing list to ensure you want everyone on there.

It’s not really going to build your credibility in the market. Your brand and your experience will do that. Also, they will not make investment decisions on your timeline, most likely, because they have to get approvals etc… There are ot...

It’s not really going to build your credibility in the market. Your brand and your experience will do that. Also, they will not make investment decisions on your timeline, most likely, because they have to get approvals etc… There are other ways to build a relationship with them besides doing co-investments that will yield just as good of an ROI. In my personal opinion, this is a distraction right now.

You can find the PACT here: https://govclab.com/2023/01/30/the-pact-a-commitment-letter-to-hard-circle-lps-2/

You can find the PACT here: https://govclab.com/2023/01/30/the-pact-a-commitment-letter-to-hard-circle-lps-2/

The LP is asking for the ability to invest in future follow-on rounds into your portfolio companies. You allocate an LP a portion of your pro rata tights. This is normally offered verbally and handled by creating an SPV for each deal in ...

The LP is asking for the ability to invest in future follow-on rounds into your portfolio companies. You allocate an LP a portion of your pro rata tights. This is normally offered verbally and handled by creating an SPV for each deal in the subsequent rounds. It’s common to offer this to investors in your first close.

We don’t have examples because theses are confidential. But here is a framework to help:  Catchy subject Intro sentence announcing some great news with some sort of call to action.  Summary Section  • Section 1 summary (~5 words)  • Se...

We don’t have examples because theses are confidential. But here is a framework to help:  Catchy subject Intro sentence announcing some great news with some sort of call to action.  Summary Section  • Section 1 summary (~5 words)  • Section 2 summary (~5 words)  • Section 3 summary (~5 words)  Section 1 Paragraph  Section 2 Paragraph  Section 3 Paragraph  Closing with with reminder to call to action

You will be an employee, not a fund manager, and I have never seen these situations work out. As a simple test, ask them to send you an LOI plus a term sheet for the economics by next Wednesday for you to seriously evaluate the opportuni...

You will be an employee, not a fund manager, and I have never seen these situations work out. As a simple test, ask them to send you an LOI plus a term sheet for the economics by next Wednesday for you to seriously evaluate the opportunity. My guess is that this will not happen. There is a phenomenon called ‘LP Love,’ where prospective LPs will say things that shower you with love, but they never execute. You will have people promise that they will participate for 50% of your fund, and they never do anything but keep promising. So, get it signed as an LOI and in writing. Then, there is a 75% chance that this is real. Ask Rafeh Saleh about his similar experiences in the last cohort.

Your goal is to build relationships. Many of the folks may become connectors to LPs or invest directly. Learn about them and try to be helpful where you can.

Your goal is to build relationships. Many of the folks may become connectors to LPs or invest directly. Learn about them and try to be helpful where you can.

Family offices care a lot about deal flow. You will likely have pro-rata opportunities that the fund will not be able to fill. Build your pitch narrative around the fact that they will have opportunity to double down on some of your best...

Family offices care a lot about deal flow. You will likely have pro-rata opportunities that the fund will not be able to fill. Build your pitch narrative around the fact that they will have opportunity to double down on some of your best deals.

Do not register any entities until you’re ready to start closing. This is a major mistake. MAJOR. All 3 entities will need very specific operating agreements and they need to have relationships. It will be so hard for you to fix this mi...

Do not register any entities until you’re ready to start closing. This is a major mistake. MAJOR. All 3 entities will need very specific operating agreements and they need to have relationships. It will be so hard for you to fix this mistake that you will likely need to throw it way and start from scratch.

Just say that you will provide standard quarterly reporting when the fund is set up with a quantitative analysis of the returns and qualitative updates on the portfolio.

Just say that you will provide standard quarterly reporting when the fund is set up with a quantitative analysis of the returns and qualitative updates on the portfolio.

1. it should be similar, but there are other sections that are important as well that are not in your deck, such as the fund rules section 2. it gives a quick snapshot of the fund, similar to an executive summary. it does not replace the...

1. it should be similar, but there are other sections that are important as well that are not in your deck, such as the fund rules section 2. it gives a quick snapshot of the fund, similar to an executive summary. it does not replace the PPM

It appears that the limited partner is asking for there to be a penalty or catch-up fee for late entrants into the fund. You can simply response that you are not adding any penalties or catch up fees, as you your intention is to close qu...

It appears that the limited partner is asking for there to be a penalty or catch-up fee for late entrants into the fund. You can simply response that you are not adding any penalties or catch up fees, as you your intention is to close quickly and keep fund admin complexity to a minimum. With most smaller funds the costs of administering such programs can be high, and, worse, the programs scare aware qualified LPs. In general, we strongly discourage this until you are an established fund manager with top returns.

The majority of these types of events are scams. 

The majority of these types of events are scams. 

We recommend that you raise the minimum between closing as your forcing function. You may start with $25K and increase it to $500K.

We recommend that you raise the minimum between closing as your forcing function. You may start with $25K and increase it to $500K.

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.