The First Time Fund


This post is by Jeff Carter from Points and Figures


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It’s interesting how a “first time fund” often isn’t a first time fund.  Generally, VC funds are spin outs.  A partner is with a big firm and then spins out and raises a fund.  To me, that’s not really a first time fund.  It’s a spin out fund.  Fred Wilson talks about a “hard raise” and I am sure it was hard but it wasn’t as hard as a lot of them.

Spin out funds don’t have as hard a time raising capital as real first time funds.  They know where to go, already have relationships, and already have been in the game.  Some funds started out with one partner being politically connected.  They have a political benefactor that gives them a slug of capital to get going which makes the water safe for more investors.  Some funds are simply connected.  That’s how they really get started.

When you are

me, it’s a true first time fund and it’s a slog raising capital.  There is virtually no help.  Maybe there is if you go to a school like Stanford, Cal, Harvard or Wharton where most VC partners seem to come from.  But for 99% of the people like me at least a third of your time is spent trying to find LPs.  There is an entire leech-like industry that will promise the world to you and gladly charge you an arm and a leg for it.  They remind me of Ursula from The Little Mermaid.

The core problem is vetting of fund managers and the size of check that big pools of capital need to write. Venture funds have a similar problem when going downstream to entrepreneurs.

Entrepreneurs laugh when I tell them that I know what it’s like to be on their side of the table but I do!

That’s why I appreciate people like Samir Kaji blogging about it.  We need more of this.  This is similar to what Brad Feld and people like him did for VC; removing the mysterious veil of how to raise capital.  Knowing the right questions to ask so you didn’t waste everyone’s time.  Having Samir and people like him consistently blogging about how to raise capital from Fund of Funds and other LPs is a time saver because raising money can be a real time suck.  Not to mention the expense.

I’d love to see a platform that really worked for funds like ours.  An Angel List for smaller funds.  Would put the leeches out of business.