1/ Sharing one LP’s perspective (family office w/ 16 fund portfolio, look at 5+ new funds/week), in case helpful, esp. for emerging managers:
• Pre-fundraising
• GP commit
• LP decision making & co-invest
• Post-close

(Yes, big 🧵time bc I’m too lazy for a blog post).
2/ Disclaimers:
• All perspective informed by my exp both investing in funds & collaborating with other family offices but it’s still n =1 (treat accordingly)
• I spend ~25% of my time on funds & 75% on direct startup investments – not an expert, just sharing my knowledge 🤗
3/ Pre-fundraising: Quantum?

Fund size = defined by your strat (stage, lead/collaborative, check size etc.); most EMs start w/ collaborative checks = more flexibility

Don’t be afraid to start small – I know great EMs who started w/ $1-5M fund I & built track record from there
4/ Pre-fundraising: Type?

Raising a fund vs. building a firm are v diff things

Raising a fund: rolling funds can be great esp if (1) have following & (2) still testing the VC thing

Building a firm (+want institutional LPs eventually): don’t start with a rolling fund
5/ Pre-fundraising: Fund mgmt?

Good practices are good – don’t suffer in the future from legal/ops debt. @cartainc seems to be leading in fund mgmt these days but explore your options + negotiate your fees down on initial fund(s) (you’ll be a valuable customer in the LT, right?)
6/ Pre-fundraising: Who to raise from?

Most EMs can’t raise from institutional LPs UNLESS those LPs have specific EM programs. HNWs (esp successful founders & other GPs) + family offices are the best bet; many big VC firms also invest in EMs. Fund of funds can be complicated.
7/ Fundraising:🔑 to success:

Build LP relationships BEFORE you raise (not that different from founders building relationships with VCs before a round!).

Build relationships w/ institutional LPs 1-2 *funds* before you’ll raise from them.
8/ Fundraising: 2nd 🔑 to success:

Warm intros to LPs (from founders, other GPs, other LPs, etc.) are great. Warm intros from LPs that already committed are the best.

Most LPs – like most people – are sheep.
9/ GP commit: What?

Traditionally LPs required “meaningful” GP commit defined in absolute terms (% of fund), which gatekeeps the industry & contributes to diversity issues. Fortunately many LPs now think about GP commit in relative terms (% of manager’s net worth).
10/ GP commit: Strategies?
• Roll your angel investments into the fund as GP commit
• Use mgmt fee offset
• Sell part of GP/mgmt co. – some anchor LPs love this deal; as a GP avoid if you can, put limits (e.g. first X funds) if can’t

Do NOT take a personal loan for GP commit
11/ LP Decisions? (1/2)

Every LP has diff criteria. Things u control:
• References (!! imho #1 factor)
• True differentiation (everyone has “proprietary deal flow” & “value add” 🙄)
• Track record (even if angel) + repeatability (lucky or flywheel?)
• Co-invest potential
12/ LP Decisions? (2/2)

Some LP criteria are out of your control:
• VC portfolio mix (overweigh to your stage/sector)
• Overall portfolio construction (overweigh to alternatives)

Expect low hit rate
Do everything to build relationships
"No" today can be a "yes" in the future
13/ LP Decisions: Coinvest (1/2)

Coinvest flow can range from a top 3 factor to a non-issue – understand ur & ur potential LP’s strat/expectations.

Most LPs say they want coinvest, many don’t actually follow through. When LP asks, ask about their coinvest decisions in the past.
14/ LP Decisions: Coinvest (2/2)

You can’t contractually promise coinvest – it’s a handshake deal based on trust (that you'll do your best, alongside or through follow-on allocs). Bringing a coinvest oppty BEFORE/DURING fundraising process goes a long way in building that trust.
15/ Post-close: now what?
• “Do what you said you will do”
• LP updates are the best tool for maintaining & growing LP rels. Best practices:
📅Quarterly freq
🤑Latest markups (not just qual!) + portfolio summary (or link to full)
👶New deals w/ high level thesis (what AND why)
16/ What did I miss? Let me know your Qs below and I will do my best to answer! 🤗

/fin
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