VC Lab has helped launch over 100 VC firms on continents such as the Americas, Europe, Asia, Africa, and many more. We have worked with thousands of VC fund managers in this process and gained valuable insight into the past experiences and accomplishments that helps GPs launch enduring VC firms.
In our free accelerator program, we’ve seen fund managers leverage five critical areas of their track record to raise capital from limited partners. Through these, fund managers can create a unique thesis to capture value in the market and obtain the means to access great deal-flow and fundraise effectively.
Table of Contents
- VC Lab’s insight
- Leveraging your track record
- Community leadership
- Angel investments
- Advisor work
- Founder success
- Executive accomplishments
VC Lab’s insight
In our conversations with hundreds of aspiring fund managers, we’ve seen a multitude of GPs leverage their various sets of experiences and track records to raise from LPs. Refer to our data below to see the track records fund managers in VC Lab have leveraged and focused on in limited partner conversations.
Notably, those in the program often look to leverage their past experiences in angel investing and community leadership, forming over 50% of Cohort 4 & 5.
The data of program graduates present intriguing insights, as seen above. It would appear that theses that leverage the fund manager’s track record on community leadership, advisor work, and angel investments seem to be beneficial in closing LPs and getting to a first close.
Leveraging your track record
You may be wondering how you can leverage your track record to raise funds from LPs. For a detailed guide to constructing a compelling venture capital thesis, refer to VC Lab’s guide “What is Your Venture Capital Investment Thesis.”
When looking to leverage your past achievements and track record, it can be beneficial to consider the LP’s point of view. The key can often be to look through the lens of how a particular experience or accomplishment can enable you to obtain excellent deal flow to activate your network in your fundraising process. Such factors often determine the success of a new fund manager and are criteria in LP’s decision-making.
Additionally, the theme of a compelling thesis can often be quality over quantity. When looking to leverage your track record, you may want to feature highly relevant information for LPs to focus on to deliver a succinct message. This theme applies to all backgrounds and track records and can be a common theme in all the track records outlined below.
Community leadership can be several related things in this context. For example, in VC Lab, we’ve seen fund managers who have organized and brought together a vast community of entrepreneurs, investors, and thought leaders in a particular domain. It can also mean having an extensive network of connections in your area of focus.
A track record of community leadership can be compelling from the viewpoint of LPs and help you get to a first close. Having a quality network can often enable fund managers to obtain great deal flow and get allocations in competitive deals. It can also mean that you are an expert in a domain and can activate your network of connectors to fundraise effectively and add value to your portfolio companies. Read more on how to ‘activate your network and leverage connectors’.
As the data shows, a track record of successful angel investments can be effective in helping fund managers get to a first close. It can be essential to note that LPs often value the quality of your companies over the quantity of your portfolio. For example, suppose you have an outstanding company in your portfolio, such as Uber. In that case, it may be better to feature the company’s exceptional success instead of highlighting multiple investments that are all performing well.
Also, it may be best to feature angel investments related to your fund’s thesis. For example, if your fund is focused on B2B SaaS companies, highlighting your investments in consumer goods may not be entirely relevant from the viewpoint of the LPs. Therefore, it can be a good idea to include exits and markups in your area of focus. This can be helpful as it can signal your ability to invest and pick highly valued and well-performing companies, a skill that you can replicate as a professional investor and fund manager.
Advisors, in this context, are those who have helped companies scale and grow. When looking to leverage their track records, there are some potentially beneficial feats advisors can focus on to impress potential investors. For example, LPs are likely to place a higher emphasis on the caliber of companies you’ve advised and may want to understand how you drove results and markups with your actions and insights.
If you have advised noteworthy companies with your expertise in growth and scaling, it can be helpful to quantify the results of your accomplishments. This can signal that you can replicate such feats again as a fund manager. You can highlight the network you have acquired in your advisory roles and your large sphere of influence in your domain.
Interestingly, though success as a startup founder is a challenging and impressive feat to accomplish, preliminary data shown above suggests that it may not be the highest converting track record relative to some of the others. A simple explanation for this may be in the execution of demonstrating relevancy to the role of a fund manager to LPs.
The challenge for founders may be to show their ability to investors. A good way to exhibit this might be to leverage and highlight your multiples, markups, and exists generated as a founder. This can be a good indicator of your ability to drive value in a company. It can also be a good way to present your domain expertise.
Another value add you can show to your LPs is your great deal flow. For example, if you can demonstrate that other entrepreneurs require and value your expertise and often come to you for mentorship and guidance, you can signal to LPs that you have the right skill set to be a good fund manager and sought-after source deals.
Those seeking to highlight their executive accomplishments may want to show their operations experience in their track record and thesis. As an executive, these can be accomplishments you drove and achievements that helped companies scale. When featuring such noteworthy feats, it may be a good idea to demonstrate how your achievements drove positive results and quantify your results. For example, perhaps you may have helped several startups land large customers which then enabled the companies to raise subsequent financings. Again, it may also be noteworthy to draw on your domain expertise and how you can leverage it to attain great deal flow.
The key theme in highlighting your track record can be your value add to founders, the network you’ve built, and your operational excellence. Operating as an executive in high-profile roles can often provide an arsenal and toolkit unbeknownst to new founders and can be an incredibly valuable asset for fund managers. You can leverage such experiences to help companies grow in your domain of expertise and may want to highlight it to potential investors in your fund.
VC Lab runs Genesis, the four-month accelerator for venture capital firms and venture builders.
Cohort 6 starts in February and will help participants from around the world close on capital and start investing by June of 2022.
Learn more and apply here