Brace yourself startups — funds, you know, those folks who hand out money and make your startup dreams come true, have to fundraise too….
And they have just as tough time of it, until they have a track record, just like the startups pitching them.
A deck for a new fund hit my inbox this week. Skipping past the opportunity, I went straight to the team. Why? The opportunity is irrelevant if the team can’t execute it.
And here’s what people will ask about: how long have the GPs worked together. If GP don’t have experience working together, it is a challenge — just like a first time founding team. This fund had a large number of GPs listed. What is the story about how they met, and decided to create a fund, together? Potential LPs need to understand that story.
Unless you’re a household name, fundraising (in the startup world at least) is a networking game, not a cold-calling-dialing-for-dollars-Wolf’ish-of-Wall-Street exercise. It is trust and confidence first.
Fundraising GPs have to start with and exhaust every trail of their existing networks — just like a startup. I’m repeating myself here, intentionally: investing in a fund is as much about trust and confidence in the GPs as it is about the opportunity, especially if it is a first time fund. Those closest to them are the right people to make intros. GPs need to keep chasing down the rabbit holes of their own networks, not knowing where they lead. A cold call however, is most likely going to end like this — advice and a No.
Exhausting, yes but so is running a fund and managing/returning people’s money.
For reasons of time as well as belief in the importance of investing early, in emerging technology, I chose to become an LP in a fund last year. I chose the fund I did, after knowing the GPs for three years. A call with a friend in the Midwest reinforced my thoughts: raising a new fund, potential investors who have been on the sidelines since the initial fund was raised in 2010 are now ready to pull out their checkbooks.
Prospective fund founders, like startups are often looking for a quick intro to check ratio and frankly, it does not exist — and not because it’s January 2016 and global markets are in disarray. Fundraising is a relationship game first and foremost. If you’re a startup, perhaps there is some cold comfort in knowing funds get this fundraising thing wrong too.