Airstream Alpha provides Modern CFO & Back Office Solutions to entrepreneurs & investment firms, specifically venture capital, private equity and hedge funds, as well as bespoke investment vehicles.
Our team has extensive experience working with and investing >$1 billion in >100 investment firms and companies (thousands evaluated).
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TLDR
- Fund Launch Series Part 2 of 3: Show Me the Money! Fundraising & De-mystifying LPs
- There are tools, tactics, and processes (see below) to raise the capital to fund your unique investment strategy
- Know your audience, make a list, stack rank, qualify, and follow-up
Welcome back to the Airstream Alpha “Fund Launch” series, Part 2 (if you missed Part 1, read it [HERE] first). Good news! This post is short and sweet, as we try to pull insights from what’s already on the world wide web (links to original content also included for further reading).
Now that you’ve defined your unique investment strategy and built your fund model, it’s time to raise capital for your fund! There are a lot of opinions out there on how to do this and we’ve seen many different approaches as LPs and CFOs.
I can’t count the times I’ve said “remember, this is hard and takes time. If it were easy everyone would do it.” This isn’t a unique insight from just me! Listen to someone like Mark Suster @ Upfront Ventures, who has raised hundreds of millions as an entrepreneur and investor:
“The hardest thing about fund raising is how dispiriting it can be. The reality is that very early in your process you’ll hear “no” and it can set you back and make you think that nobody sees your vision or values your progress to date. You might hear 9–10 “no’s” in the early stretches of your fund raising process. It is CRITICAL that you not let this get inside your head.”
Stay strong, there’s a way to work through this with tools, tactics, and processes!
Know Your Audience
The first step is to know your audience and define them. Who is in your target audience? Do they typically invest in funds? If they do, what are common characteristics of these funds that are relevant to your fund, and how can you tailor your message accordingly?
Most funds start with “high net worth individuals”, who are often executives at startups and corporations, and partners at established VC and PE firms, per Oper8r in their recent “LP Analysis” post.
Many funds hope to ultimately raise “institutional capital.” As a LP, I enjoyed leaning on people that had been doing it longer than I had for perspective (LPs talk to each other a lot!). One of those individuals was Chris Douvos, who shared some unique insights via this Kauffman Fellows post. My two favorites from it:
- Do not be too transactional
- Communicate your unfair advantage
Make A List
The investor universe out there is broad. You only have 24 hours in a day. How do you narrow the universe down to spend your time effectively, with individuals likely to invest in your fund or make the right connections to ones that will?
Back to Mark Suster, who shares his thoughts on the first thing to do before fundraising in this post. Here are our favorites:
- Create a list
- Stack rank opportunities
- Qualify, qualify, qualify
- Follow up. Be humble
Final Thoughts
Fundraising is hard. However, challenges can be managed with the right tools, tactics, and processes! Know your audience and define them. Implement a process-driven approach to contact the right people and follow up.
Please check out Part 3 (CFO Foundations: Build Your Budget). We appreciate you reading and sharing with your network!
Special thanks to David Perretz for his significant contributions to this article.
