5 Tips for Raising a Fund
Ellie Cachette is the Managing Director at Cachette Capital Management, a fund of funds which invests into venture capital funds.
Venture Capital as an asset class is currently on a roll. As we see traditional venture firms going larger in their fund sizes and smaller independent venture funds popping up each day, the future of venture capital is an exciting one; while founders get exited and reap the fruits of their labor we see more founders-turned-fund managers. At my firm, Cachette Capital Management which is a fund-of-funds, we specialize in investing into venture capital funds themselves. After having reviewed now 400+ venture capital funds in the last year (which means also evaluating their fund manager’s quirks and underlying startups in their portfolios) you start to pick up on trends which work and don’t work, and things the good fund managers do and the not so great ones don’t.
If you are raising your next fund or even your first one, here’s some advice and tips while fundraising for finding that right investor:
(1) Be Organized
Everything from emails to appointments to lunch orders. Everything is a reflection of a person’s character and professionalism. LPs (aka investors who invest into funds) can smell disorganization a mile away so whatever it is you are doing, do it in an organized fashion. I once had a fund manager somehow mix my phone number up with a taxi driver and they kept calling the taxi driver asking for their term sheet even when I kept messaging them to contact my actual phone number. Not only was this annoying but it got me thinking, if they can’t keep phone numbers straight how are they going to track money? See also 5 Steps to Good Investor Relations
(2) Ask for Checkins, Don’t Assign Checkins
Another annoying thing VCs often do to generate urgency is set arbitrary dates or checkins and are quick to be aggressive about telling their LPs WHEN they plan to check back in with them. investors (LPs) often have their own things going on as well — travel or financial commitments, family events, board meetings etc. and even if they miss your deadline you never know if you might need them. One of the best things to do to help keep the dialogue going is to ASK when is a good time to check in with an LP, you would be surprised how much information you might gain and strengthen a relationship over it. In the end checkins and deadlines often shift anyhow, what you don’t want is to start a relationship with an investor appearing to be more bossy than a collaborator. See also What to Do When your VCs Just Don’t Get It.
(3) Obsess over Fund Quality
Early on in my fund manager career I often had to choose over meeting new investors or focusing on the quality of fund strategy or investments out. At the time one mentor told me to hurry and get LOIs (Letters of Interest) and another to get VC placement and figure out where the money would go. Flash forward a few years later and we no longer need LOIs but get signed LPAs (the actually investment documents) and have one of the world’s leading fund-of-funds strategies that could have only happened from the hard work of years before. The short of it is that fund managers who obsess over their investments, which for VCs is startup deal flow, eventually will get all the investment they need if not more. Obsess over your investments not just getting capital, it’s a long game. See also 5 Tips for Getting to Product Market Fit or even When Your Customers Want One Thing, And Your Investors Want Another.
(4) Set Clear Milestones and Communication
Another thing we see often is that fund managers will obsess over capital raising and nothing else. Thing is when you are running a fund capital in is not the only metric to follow; there’s also number of investments looked at, reach, key hires, community events, recognition, partnerships and more. When talking with your future LPs let them see the vision around what you are building and the milestones in which you plan to execute, that’s not just capital. When you are raising a fund, it’s important your best business skills come to light, and to consider maneuverability if business needs shift. See 5 Business Things to Understand for Technical Diligence as well as 5 “Tech” Things to Understand for Technical Diligence
(5) Remember that Fundraising is a sport
If any fund manager tells you they are not into sports they are lying. Catching last minute flights, running across airports, pitching on no sleep, carrying luggage to restaurant meetings, lugging around printed materials… fundraising is a legitimate sport and survival of the fittest.You should be in the strongest physical shape possible when you hit the road. Other small pieces of advice which seem silly but come in handy: always carry water, tupperware helps for taking snacks and food to go as well as packing supplies, hand wipes are always useful, and try to use credit card miles for business class upgrades because airplane flights take their physical toll after a while. See also Boostrapping: 5 Tips and 5 Ways to Maximize Your Development Budget.
Ellie Cachette (@ecachette) is the Managing Director at Cachette Capital Management, a firm which specializes in investing into venture capital funds. Their debut fund which launched in 2018 raised $1BN. Prior to fund management Cachette was a founder and entrepreneur of several startups, completing Springboard Enterprises in 2012.
