In this AMA, we meet the funds in Cohort 5 of VC Lab, who share their experiences in launching their dream VC firms with VC Lab. Our panelists give prudent advice to those looking to become GPs, and we also open up the floor to questions to get a better view into the minutia of venture firm building.
Watch the full interview with VC Lab Cohort 5 Fund Managers below.
The diverse panel of fund managers have domain expertise spanning from FemTech to Investment Banking as well as extensive regional experiences across Africa, Europe, the Americas, and Asia. All of our panelists are passionate about VC and are advocates in promoting their local ecosystem and particular sectors of focus.
Developing a compelling thesis is important when launching a VC fund. In their theses, aspiring managers should think about how they can gain outscaled returns in this competitive environment and implement a unique strategy for their funds. VC Lab helps new fund managers develop their ‘secret sauce’ and thesis, which you can read more on here.
Importance of Crafting a Unique Investment Thesis: Develop a distinct investment approach to stand out in the competitive environment.
Hands-On Approach in Emerging Markets: Partner with founders to provide expertise and capital. Focus on knowledge transfer and nurturing entrepreneurship.
Influencing public policy as an avid backer of entrepreneurship and venture capital in Lagos, Africa, Biola talks about the importance of partnering with founders and having a hands-on thesis to venture capital in emerging markets.
She explains a need to transfer knowledge and nurture entrepreneurship in the African ecosystem by giving founders the necessary expertise and capital. The way to do this is by a thesis of hands-on synergy. By doing so, new fund managers can help founders and prime the startups for success. This way they can also develop a reputation for adding value post-investment, which can later help in sourcing excellent deal flow.
Leveraging the past for future success:
A part of your ‘secret sauce’ can be your past experiences and expertise – your track record. Being an expert in your fund’s domain is a very good indicator of your capabilities as a fund manager and something you should look to highlight to LPs.
Utilizing Past Experiences: Highlight your past experiences and expertise to Limited Partners (LPs). Illustrate how this background provides a unique investment perspective.
The Advantage of Diverse Backgrounds: Utilize varied experiences for comprehensive due diligence. Leverage past roles for better understanding and support of portfolio companies.
Paolo discusses how his past experiences in financial services help him as a fund manager. He shares the benefits of having a multitude of experiences when it comes to investing in startups and how his background as a founder allows him to have a unique perspective and empathy.
Paolo also dives deeper into the importance of leveraging said experiences when conducting diligence and adding value to portfolio companies’ post-investment. He also shares that this helps them have great deal-flow and spot investment opportunities where others cannot.
The perfect first fund size:
Neeraj points out that setting pragmatic and feasible goals for your fund size is a prudent course of action when strategizing your fundraising campaign.
Setting Realistic Fund Size Goals: Aim for achievable fund size based on proof of concept. Avoid over-ambitious capital raising goals for the first fund.
Network Evaluation for Fund Size Estimation: Analyze personal and professional networks to estimate fund capacity.
Our panelists note that when strategizing about their ideal fund size, VC Lab helped set realistic expectations and evaluate their network to calculate their optimal size. The panelists also believe that new fund managers should think about approaching their first fund as a proof of concept and not look to raise vast sums of capital.
When working on a fund thesis, managers should spend some time finding market opportunities in their domain of expertise.
Focusing on Market Gaps: Identify underserved or emerging sectors in your domain. Create a compelling case for investing in these areas.
Investing in Underserved Sectors: Nicolas explores FemTech as an underserved segment for high potential investments. Can ecosystems be built for these untapped markets?
Market gaps are in abundance, and new managers should look to make a compelling case to LPs on how their fund’s focus can address them.
Nicolas explores underserved segments such as FemTech, which receives only 4% of all venture capital investments in the healthcare category. He highlights the disproportional amount of investment FemTech receives in the healthcare sector and shares his vision and the significance of having new venture capitalists operate in and build ecosystems in underserved markets.
Looking for the perfect partner:
Venture capital is a long journey, and most closed-end funds have a lifetime of around ten years, so finding the right partner is quite important for launching a VC firm.
The Importance of Finding Compatible Partners: Seek partners with shared values and investment philosophies.
Building Long-Term Partnerships: Ensure there is decade-plus long compatibility with goals and working styles .
Biola and Silvia both highlight the significance of finding alignment in values when looking for a partner, as it can often sustain relationships through the trials and tribulations of launching and operating a VC fund.
When looking for a partner, clearly understanding your talents can help to find someone to complement your skillset and have a harmonious symbiotic relationship. An excellent way to find such individuals is to be active in an ecosystem where you are very passionate and add value to the ecosystem.
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