How to Start a VC Fund in 2025

A comprehensive guide to launching your first venture fund

Starting a venture capital fund means creating an investment vehicle that raises capital from Limited Partners (LPs) to invest in promising startup companies. In 2025, launching a VC fund has become more accessible than ever before, thanks to specialized programs, tools, and resources designed to help emerging managers navigate this competitive landscape.

The venture capital industry is undergoing a remarkable transformation. There’s a growing trend toward specialist managers launching smaller funds averaging around $12 million that can deliver stronger returns through focused investment strategies. This shift has opened doors for new managers who bring unique insights, networks, and expertise to specific sectors or geographies. Programs like VC Lab, the world’s leading venture capital accelerator, have helped launch over 800 VC firms, with 65% based outside the US and 29% led by female General Partners (GPs).

Getting started as a new fund manager requires a structured approach that includes:

• Developing a compelling investment thesis
• Building a strong network of initial supporters
• Securing early commitments from trusted connections
• Executing your first deal to demonstrate capability
• Growing beyond your immediate network

This guide will walk you through the essential steps to launch your venture fund in 2025, drawing from proven methodologies that have helped hundreds of emerging managers successfully raise and deploy capital. Whether you’re an experienced operator, successful angel investor, or industry expert looking to formalize your investing activities, understanding these fundamentals will be crucial to your success.

While raising a venture fund is undeniably challenging, the biggest hurdle is often simply taking that first step. The key is to start with a clear thesis, secure support from your immediate network, and grow systematically from there. As Adeo Ressi, CEO of Decile Group, puts it: “The hardest commitment to get is your first one. After that, it’s about executing your strategy and building momentum.”

What is a Venture Capital Fund?

A venture capital fund is a bling pool of investments that raises capital from Limited Partners (LPs) to invest in startup companies with high growth potential. These funds typically operate on a 10-year lifecycle, with an investment period of 3-4 years followed by a harvest period where investments are managed and ultimately exited.

For new managers in 2025, the landscape has shifted dramatically from the traditional mega-fund model. Today’s emerging managers often start with more focused, specialist funds that target specific sectors, geographies, or investment themes. I’ve seen firsthand how this evolution has opened doors for diverse perspectives and innovative approaches to venture investing.

First-Time Fund Characteristics

The typical first-time fund has become more manageable and focused:

• Average fund size: $7MM (based on VC Lab data)
• Investment period: 2-4 years
• Portfolio size: 15-25 companies
• Check sizes: $150K-$300K
• Target returns: 3-5x net to LPs
• Management fee: 2%
• Carry: 20%

Legal Structure and Requirements

Most venture funds are structured as Limited Partnerships (LP) with these key components:

• General Partner (GP): The GP entity makes investment decisions and manages the fund’s portfolio. GPs have unlimited liability and typically invest 1-2% of the fund’s capital
• Management Company (ManCo): A separate entity that employs the investment team and handles day-to-day operations, fund administration, and receives management fees
• Fund Entity: The Limited Partnership vehicle that holds all portfolio investments and distributes returns to LPs
• Limited Partnership Agreement (LPA): The governing document that defines the relationship between GPs and LPs, including investment terms, fee structure, and distribution waterfall
• Limited Partner Advisory Committee (LPAC): A governance body of select LPs that provides oversight on conflicts of interest, valuations, and key fund decisions

For emerging managers, platforms like Decile Base’s Start Fund offer a streamlined alternative, providing pre-established fund structures that allow managers to launch institutional-grade vehicles quickly while building their track record.

The Role of Accelerators

Programs like VC Lab have become game-changers for helping new managers launch successfully. The numbers tell a compelling story:

• Over 800 VC firms launched through VC Lab
• Average time to first close: 6 months
• 65% of firms outside US
• 29% female GPs
• 88% focus on pre-seed/seed stage

Why Smaller Funds Make Sense

For first-time managers, starting with a smaller fund ($5-8M) offers several advantages:

• Easier first close with existing network
• More manageable deal flow requirements
• Lower regulatory hurdles in most jurisdictions
• Ability to prove thesis before scaling
• Better alignment with early-stage opportunities
• Higher potential for strong returns

The venture capital landscape has evolved to favor specialist managers who can deliver unique value to portfolio companies. As one VC Lab graduate shared with me: “It’s not about the size of your fund anymore; it’s about the depth of your expertise and the strength of your thesis.”

Here’s the reality: While the barriers to entry in venture capital have lowered, the bar for success remains high. New managers need to combine domain expertise with strong operational capabilities and a clear investment thesis to succeed in today’s market. Success comes from understanding your unique edge and building authentic relationships with both LPs and founders.

Steps to Reach Your First Fund Close

Launching a venture capital fund successfully demands a systematic approach that builds credibility while securing commitments from your inner circle first. After analyzing data from over 800 VC firms that launched through VC Lab, we’ve identified seven key steps that emerging managers typically complete within 4-6 months when they have proper support.

Step 1: Develop Your Investment Thesis

Your thesis forms the bedrock of your fund and needs to communicate your unique value proposition clearly. The most compelling theses follow this template:

“[Fund Name] is launching a [$x MM] [Stage] venture fund in [Country/City] to back [Geography] [Sector/Market Companies] [with Secret Sauce]”

Consider these examples:

• “Quantum Ventures is launching a $5MM seed fund in Singapore to back Southeast Asian B2B SaaS companies leveraging our enterprise sales network”
• “Green Future Fund is launching a $7MM pre-seed fund in Berlin to back European climate tech startups with technical founders”

Here’s what works: Keep refining until you can pitch your thesis in under 30 seconds. The strongest theses strike a balance between being specific enough to stand out and broad enough to find sufficient deal flow.

Step 2: Engage Your Confidants

Before you pitch potential LPs, test your thesis with trusted advisors who will give you candid feedback. Smart confidant engagement looks like this:

• Choose 5-10 people with relevant expertise
• Prepare thoughtful questions to guide their feedback
• Document and evaluate all responses systematically
• Refine your pitch based on recurring themes
• Practice until you consistently receive enthusiastic responses

Step 3: Source Your First Deal

Nothing proves your execution ability like having a promising investment opportunity ready. Focus on these activities:

• Develop a repeatable deal sourcing process
• Screen at least 50 potential investments
• Identify 1-2 standout opportunities
• Draft comprehensive investment memos
• Gather feedback from confidants on your deal selection

Step 4: Secure Initial Commitments

Armed with a refined thesis and attractive deal, start with your closest connections for soft commitments. VC Lab data reveals these patterns:

• First-time funds average $5MM in total commitments
• Personal networks contribute 65% of capital raised
• Initial LP checks typically range from $50K-$250K
• Most funds secure 15-25 LPs before first close

Step 5: Execute the First Close

This crucial phase demands meticulous attention to legal and regulatory details:

• Prepare essential fund documents (LPA, PPM, Subscription Agreements)
• Follow up methodically on soft commitments
• Track documentation status with precision
• Establish firm deadlines for capital calls
• Maintain strict securities law compliance

Step 6: Make Your First Investment

After securing capital, act decisively to close your inaugural deal:

• Form your LPAC and establish investment processes
• Conduct comprehensive due diligence
• Structure and negotiate favorable terms
• Finalize all investment documentation
• Launch your portfolio support program

Step 7: Expand Your Network

With your first close and investment completed, shift focus to scaling:

• Ask LPs for warm introductions to their networks
• Share content highlighting your thesis and portfolio
• Select industry events that align with your strategy
• Cultivate relationships with institutional allocators
• Plan your timeline for subsequent closes

The path from concept to first close demands persistence and methodical execution. VC Lab data demonstrates that managers following this structured approach reach their first close three times faster, typically within 6 months, compared to those taking an ad hoc approach.

Here’s the bottom line: Start with people who already trust you. Save your energy pursuing institutional investors or unfamiliar high-net-worth individuals for after you’ve built momentum with your existing network. Your early believers become your most powerful advocates.

How to Prepare for Fund Launch

The months leading up to your fund launch are crucial for building the foundation of your venture firm. Successful first-time managers typically spend 6-12 months preparing before formally starting fundraising. This preparation period is essential for developing your expertise, network, and initial supporter base.

Building Your Track Record

Even without formal investing experience, you can demonstrate investment acumen through various activities:

• Create a mock portfolio with detailed investment theses
• Make angel investments of $5-10K per deal
• Join angel groups or syndicates to access small-check opportunities
• Document your investment decisions and rationale
• Track and analyze your investment performance
• Build relationships with promising founders

Developing Thought Leadership

Content creation helps establish your expertise and attracts both founders and potential LPs. According to Decile Group data, managers who actively create content before launch close their funds 30% faster on average.

Key content strategies include:

• Writing detailed market analysis pieces
• Publishing regular newsletters in your sector
• Speaking at industry events
• Hosting founder roundtables
• Creating educational content for startups
• Engaging thoughtfully on social media

Building Sector Expertise

Your deep knowledge of a specific sector or technology will be your primary differentiator. Focus on:

• Mapping the competitive landscape
• Identifying key trends and opportunities
• Building relationships with domain experts
• Understanding technical challenges
• Following industry news and developments
• Connecting with relevant founders

Establishing Your Network

Before launching, aim to build relationships with three key groups:

1. Potential LPs

• Family offices interested in $50K-250K commitments
• High-net-worth individuals making $25-100K investments
• Industry executives
• Successful entrepreneurs

2. Deal Sources

• Accelerators
• Angel investors
• Other VC firms
• Industry associations
• University programs

3. Operating Partners and LPAC Members

• Technical experts who could join your LPAC
• Industry veterans with operational experience
• Successful founders willing to advise
• Corporate executives who understand your sector

Pre-Launch Checklist

Before officially starting your fundraise, ensure you have:

• [ ] Clear investment thesis documented
• [ ] Initial supporter group identified
• [ ] Basic legal structure planned with 2/20 model
• [ ] Professional online presence established
• [ ] Pipeline of potential deals ($50-250K check sizes)
• [ ] Initial operational tools selected
• [ ] Compliance requirements understood
• [ ] Basic financial model created
• [ ] Potential LPAC members identified

Remember, launching a fund is a marathon, not a sprint. Programs like VC Lab can help accelerate this preparation phase, providing structured guidance and access to a global network of emerging managers. With over 800 funds launched, the data shows that managers who complete comprehensive preparation programs like VC Lab are 65% more likely to reach their first close within six months.

Focus on building genuine relationships and demonstrating real expertise in your chosen sector. The most common mistake I see is managers rushing to launch before they’ve built a solid foundation. Your preparation period is an investment that will pay dividends throughout your fund’s lifecycle.

Common Pitfalls and Legal Considerations

Launching a venture fund means navigating a complex regulatory landscape. From my experience working with over 800 emerging fund managers globally through VC Lab, I’ve seen firsthand how understanding these challenges early can save you from costly delays and legal headaches.

General Solicitation Rules

Here’s what catches most new managers off guard: you can’t publicly advertise that you’re raising a fund. The rules are stricter than you might think:

• No posting about fundraising on LinkedIn or Twitter
• No sending blast emails about your new fund
• No pitching at conferences or meetups
• No sharing deck details with anyone who isn’t a qualified investor
• No “we’re raising!” announcements anywhere public

Instead, focus on building genuine relationships first. Have private conversations about your fund only after you’ve established meaningful connections with potential LPs.

Common First-Time Manager Mistakes

Setting Too Large of a Fund Size Target One of the biggest mistakes I see is managers setting an ambitious $25MM target for their first fund when their realistic capacity is closer to $10MM. Missing your target signals weakness to the market. Smart managers set conservative targets they can oversubscribe—raising $12MM on a $10MM target looks far better than raising $12MM on a $25MM target. Always aim to be oversubscribed, not undersubscribed.

Accounting Mistakes and Financial Mismanagement Fund accounting isn’t like running a startup’s books. I’ve seen managers stumble over management fee calculations, carried interest waterfalls, and expense allocations for their $3MM funds. These aren’t just embarrassing mistakes. They can trigger regulatory violations, tax penalties, and angry LP calls.

Weak Deal Flow and Investment Selection Without a strong network or proven sourcing strategy, new managers often chase the same overpriced deals everyone else sees. Poor investment decisions in your $5MM first fund don’t just hurt returns. They make raising Fund II nearly impossible.

Incomplete Processes and Operational Gaps Too many managers launch with a “we’ll figure it out as we go” mentality. But when you’re managing $2MM of other people’s money, improvisation leads to missed follow-on opportunities, botched reporting, and frustrated LPs who expected professionalism.

Illegal or Unfair Side Letters Side letters can be perfectly legal when done right, but I’ve seen managers accidentally promise conflicting terms to different LPs or grant privileges that violate securities regulations. These mistakes can unravel your entire fund.

Insufficient Support from Your LPAC Your Limited Partner Advisory Committee should be more than just big names on your deck. Without engaged LPAC members who understand venture and can provide real guidance, you’re missing a crucial support system for tough decisions.

Complex Capital Calls and Administrative Burden Traditional funds make LPs wire money every time you want to make an investment. For a $7MM fund, this creates a nightmare of chasing signatures, managing wire deadlines, and dealing with LPs who are traveling or slow to respond. It’s exhausting for everyone involved.

Risk Mitigation Strategies

The managers who succeed aren’t necessarily smarter. They’re just better prepared. Here’s what works:

• Join a structured program like VC Lab for proven frameworks and peer support
• Hire an experienced fund formation attorney (not your startup lawyer friend)
• Set up proper fund administration from day one
• Build an engaged LPAC with relevant expertise
• Document everything: investment decisions, LP communications, operational procedures
• Use modern tools that automate compliance and reporting

Our data at VC Lab shows that managers who follow these practices reach their first close 65% faster than those who try to figure it out alone.

Regulatory Requirements

While requirements vary by jurisdiction, every fund needs to handle:

• Investment advisor registration (or exemptions)
• Anti-money laundering (AML) procedures
• Know Your Customer (KYC) verification
• Tax reporting and K-1 preparation
• Quarterly LP reports and annual meetings

Smart managers use platforms like Decile Hub that have these requirements built in, rather than cobbling together solutions or doing everything manually.

The regulatory side may feel overwhelming at first. But hundreds of first-time managers successfully launch funds every year. The difference between those who succeed and those who struggle? They get help early and build the right infrastructure from the start.

Conclusion

Starting a venture capital fund in 2025 has never been more achievable, thanks to established pathways and support systems like VC Lab, which has helped launch over 800 VC firms globally. While the journey demands careful planning and dedication, the structured approach outlined in this guide offers a clear roadmap for aspiring fund managers.

The key to success lies in methodical preparation and execution:

• Develop a compelling thesis that communicates your unique value proposition
• Build a strong network of confidants who can provide honest feedback and early commitments
• Focus on securing a first close from your immediate network before expanding outward
• Leverage professional resources and accelerators to sidestep common pitfalls
• Stay compliant with regulatory requirements, especially regarding general solicitation
• Execute your first deal effectively to build credibility and momentum

For those ready to embark on their venture capital journey, here are your immediate next steps:

1. Join a structured program like VC Lab to access proven methodologies and support
2. Start developing your thesis using the template provided
3. Begin building your track record through angel investments of $25K-$100K or joining an LPAC
4. Create content and establish thought leadership in your target sector
5. Build relationships with potential LPs in your immediate network, starting with $250K-$500K check sizes
6. Research and understand the regulatory requirements in your jurisdiction

Remember, successful fund managers don’t just raise capital. They build lasting institutions that create value for entrepreneurs and investors alike. With proper preparation, the right support system, and a methodical approach to fund formation, you can join the next generation of venture capitalists shaping the future of innovation.

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