Category: Fund placement

Why So Many Small Emerging Managers Don’t Use Placement Agents


This post is by David from David Teten's blog


The pros and cons of choosing a placement agent for small funds

It would make life a lot easier for emerging managers if they could outsource the entire fundraising process. But can you?

Empirically, few small emerging investment managers hire placement agents, particularly in venture capital. And even the firms that hire a placement agent almost always still have to run their own internal process. 

Homebrew doesn’t report hiring a placement agent for their Fund I, despite (or because of) a well-pedigreed team. Greycroft in 2010 also had an experienced team, but didn’t either. Instead, they hired an outside assistant – not a placement agent – to help in the process. 

As Greycroft said in an essay: “Since we were a small fund, it would have been overwhelming to us and our small administrative staff to set up the meetings and follow ups, fill out questionnaires (which for the most part fall into a dark hole), and respond to the myriad of questions which occur during the due diligence process. Although not a placement agent charged with raising the money, this person was an important and critical member of the team and was a key factor in helping us to keep track of where we had been and where we were going – ‘If it’s Tuesday, it must be Belgium.’ ”

Greycroft’s results give you a sense of the complexity involved: The firm said it  had 515 contacts with potential LPs; roughly 250 passed for various reasons and 100 were non-responsive. (Read more...)

15 Steps to Fundraising for Your New Venture Capital or Private Equity Fund


This post is by David from David Teten's blog


Launching is easy; fundraising is harder. I’ve been fortunate to be a Partner at two different VC firms over the past 9 years, and we’ve grown AUM 10X both times. If you take the fifteen steps below, you’ll have the core of a high-performing fundraising and investor relations function. 

  1. Build the firm as much as possible before you solicit limited partners. 

The more baked you are, the more investable you are. The best possible move is to invest in and warehouse some special purpose vehicles that fit your strategy. However, that may distract you from the larger goal of raising a fund, not just a Special Purpose Vehicle.

The next best move is to build your core team, e.g., recruit an Advisory Board, Venture Partners, and EIRs. For ideas, see How Executives Can Work from Home with Private Equity and Venture Capital Funds.

Lastly, gather feedback. Yohei Nakajima, Founder of Untapped.vc, said, “Before pitching LPs and building my firm, I talked with over 50 people I knew to get feedback.” 

  1. Set up the basic marketing toolkit: deck, website, accurate online databases, and social media accounts. 

It’s virtually mandatory to develop a detailed, data-backed deck, and ideally a video pitch. Your materials should ideally meet the expectations of the Institutional Limited Partners Association, even if you’re not targeting institutions. Keep these documents constantly up to date, so all team members are aligned on key numbers, e.g., total dollars raised so far. You’ll look unprofessional if you’re not coordinated. For (Read more...)