Insights for emerging managers

Whenever you talk to a potential investor, always try to end with, ‘Is there anyone else that I can talk to? Because even if someone says no or it’s outside of their mandate, it doesn’t mean that they can’t be helpful to you. And it’s just a lost opportunity to forget to ask that question.

View fundraising as an opportunity to cultivate relationships rather than merely securing immediate capital. Recognise that many potential investors may not have funds available currently, but they may in the next bull market. By focusing on relationship-building during the fundraising process, you lay the groundwork for future investment opportunities when circumstances are more favourable.

Undoubtedly, this topic could warrant its own podcast episode. Among the rapid-fire tips I’d offer, one stands out: craft a deliberate strategy for attracting the ideal investors as your limited partners (LPs) right from the start. Highlight your unique approach and track record of selecting and capitalising on profitable investment opportunities. Ensuring this distinctiveness remains at the forefront of your engagement with potential investors is paramount.

As a GP, it’s crucial to identify what sets you apart. What unique value do you bring to the table? Is it your exclusive deal flow, a solid track record, or perhaps a distinctive investment thesis? Simply showcasing a laundry list of features won’t cut it. Instead, focus on specificity. Are you targeting a particular region or vertical? How do you support portfolio companies, perhaps through recruitment or other means? When I review VC decks, I often encounter ones that sound like countless others. To stand out, your deck needs to reflect what truly distinguishes your approach from the rest.

Discover your unique approach. Explore three key pillars essential for success: access, selection, and execution. Access can be gained through privileged networks or through persistent outbound efforts, including building meet-ups. Selection involves leveraging deep expertise in a specific vertical, enabling valuable contributions to the decision-making process. However, expertise alone isn’t enough; it must be coupled with a genuine ability to assist founders and establish trust-based relationships with them.

The number one tip is to keep faith. Fundraising is a very unfair process. When you’re an emerging VC, either you have an established track record because you know a new combination of existing pieces is working together or not. And that’s fine because there’s a common view amongst LPs that those are very valuable combinations.

Success in venture capital is a marathon, not a sprint. It’s a rigorous test of endurance, both physically and mentally. While some may view it as a shortcut to wealth, the truth is that it’s more akin to a gradual accumulation of riches. Building a thriving venture capital portfolio demands unwavering dedication and perseverance over the long term. You must remain steadfast, weathering the inevitable highs and lows with resilience and determination.

Find your anchor investor within your specialised niche. Start small and take calculated risks to showcase your capabilities, even considering purchasing a deal if needed. Initially, don’t obsess over terms; instead, focus on gaining experience and honing your skills. Prioritise getting started and accumulating practice over optimising minor details, which won’t greatly impact long-term success if your goal is to build something substantial.

Just be a student of venture and portfolio construction and know what a Montecarlo simulation is or whatever method you want to use to talk about portfolio diversification. But you have to be a student of that stuff because if you don’t demonstrate to LPs that you’re a good money manager they won’t give you money.

Discover your unique approach by considering three essential pillars for achieving success in getting deals done: access, selection, and execution. Access can be gained through privileged networks, persistent outbound efforts, or by organising meet-ups. Selection involves leveraging deep expertise in a specific vertical, allowing you to contribute meaningfully to the process. However, expertise alone isn’t enough; it must be complemented by building trust and providing valuable assistance to founders. Remember, having access is only part of the equation; your ability to support founders and foster trust is equally crucial.

Supporting and benefiting your LPs through education, investment opportunities, and access to infrastructure is crucial for nurturing strong relationships. Set realistic targets and steer clear of the “spray and pray” approach. Instead, capitalise on your specific expertise and competence, leveraging your MVP knowledge to its fullest. This targeted strategy is key to achieving more effective and successful outcomes.

Don’t oversell. LPs want to understand the mistakes that you’ve made as a fund manager.

Even if it’s not the best news, communicate about it and tell LPs why you made the decision and what you are thinking. It helps the LP understand your thinking and the way you approach things and this builds trust.

Transparency is paramount; avoid overselling. LPs appreciate understanding the mistakes you’ve made as a fund manager. Making numerous decisions daily is part of the role, and the mark of a good fund manager is not avoiding decisions but rather learning from them. Decision paralysis is a pitfall to avoid; instead, embrace transparency and share insights gained from both successes and failures.

Always plan for the downside, even as you envision the upside. Incorporate provisions to mitigate risks, even if you never need them. Preparation is key; fortune favours the mind that is ready for any eventuality.

You rarely get your narrative right the first time, so you have to test it often and with multiple stakeholders.