A guide for emerging managers

How to Raise Your First Fund

Part 1: Ecosystem, Network & Team

Theron McCollough
7 min readAug 18, 2020

--

Keys:

  1. Leverage your reputation and network to show early investors that you know enough people in the industry and have access to strong, proprietary deal flow.
  2. Show any traction including previous investments or high-quality deals you scouted or helped investors close. Track key metrics and convert them into pitch decks.
  3. Anchor your commitment to raising your first fund with a clear personal motivation. Why you want to raise a fund will help explain why you are the right person to raise a fund.
  4. Surround yourself with great people building great things. The best teams bring together partners that may have very different backgrounds but aligned values.

Over the past decade, early-stage deal count and value has more than doubled. According to Crunchbase, the number of “Nano” and “Micro” VC funds have grown rapidly in the last 3–5 years, with 295 venture funds of $100M or less reported in 2018.

https://pitchbook.com/news/reports/q2-2020-pitchbook-nvca-venture-monitor

The pandemic has presented considerable setbacks so far, especially to early-stage VC investments. Despite these obstacles, Kauffman Fellows reported that, as of late June 2020, there are “358 emerging and micro-VC managers actively raising a new fund, which in aggregate represent about $6–8Bn in capital demand.” As a result, it is even more crucial than ever that emerging managers gather all the advice and guidance they can.

Stay tuned for further articles in the series on developing your fund and thesis, building relationships and converting leads, and managing your fund.

Why you shouldn’t start a venture capital fund.

Because direct investments in early stage companies can be very time intensive and picking winners is hard to do.

If you are a new fund, you are competing with more established funds with track records. Your losses to those competitors, especially in the beginning can be greater than expected and frustrating at times. Hot companies with interest will be hard to score. In addition, the horizon for many of these companies is 7+ years and with the IPO goal posts moving to a median age of 11.5

--

--

Theron McCollough

Managing Director at Citizens Private Bank | VC/Tech; past Managing Director with First Republic,@SVB_Financial. founder, investor, limited partner, and banker