As a foundation a member of TI Platform Management, I funded more than $ 200 million in investment in fund managers for the first time in the world. That portfolio includes one of the first institutional controls in Atomic Labs ($ 170 + million, SaaStr ($ 160 + million), and Entrepreneur First ($ 140 + million), among many others.
Having witnessed successful returns as a fund manager and VC at an early stage (as well as recently raising my angel fund), I have formulated several best practices and strategies for investing in fund managers. If you want to raise your first fund, here's how.
Understand the mentality of an LP
Just as VCs group startup founders into categories, limited partners (the investors in your venture capital fund, also known as "LPs") have an unwritten way of classifying venture managers. The vast majority fit one of the three archetypes:
- The former founder / operator became VC
- Spin-off manager of a mega fund
- Angel investor with solid experience
Here's how each of them is perceived by the institutional LPs and the unique blocks they have to overcome:
The former founder / operator became VC
After embarking on the journey to start a business, former founders / operators often have a strong intuition in identifying founders and an empathy / relationship that increases their win rate over deals. Plus, having built an innovative company, they can bring special insights into where the market is going. However, setting up a business requires different skills than founding a fund.
If you are a former founder / operator turned VC, expect LPs to ask questions that discover:
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