Learnings From Fund I: Time Is Your Best Friend

Upon launching Parade Ventures, I thought I had a clear edge over other new funds. I had a track record. I had an interesting story. I had great relationships within the tech community. The one thing I didn’t account for is what I now believe is the most important thing for new fund managers: TIME.

Every year, there are a couple of managers that raise their first fund with complete ease. Usually they fit one of two molds, either spinning out of a large company or ecosystem that has scaled and could potentially spur an entrepreneurial revolution (see: Homebrew/Google, Slow/FB, Obvious/Twitter, etc) or an investor leaving an established, top-tier venture platform (see: PivotNorth/Sequoia, Upside/FRC, Unusual/Lightspeed, etc). These are highly intelligent, well-qualified individuals (just like you or me), but they fit the mold of what LPs tend to look for to de-risk the fund. What if you don’t have it, but have the traits I mentioned above?

What you need is TIME. Why is time important? I have found time to be very important for two distinct reasons. TIME gives new fund managers the ability to build LP relationships and execute their portfolio strategy. Doing both of these things under a new fund umbrella should significantly de-risk underwriting a new manager, if done well.

Build relationships with LPs.

This matters because most long-term LPs are neither compensated by carry nor are they investing their personal money, but are on the payroll at an endowment or foundation or pension fund. They want to get to know you. They want to socialize your fund with colleagues. They want to meet your team. Trust is a huge part of this, so make sure you get introduced to LPs by people that they trust. That said, in most instances, this trust and deeper relationship is developed over time. FOMO works if you have a hot fund raise (see above), but the result of a bad fund investment could mean their job and reputation, so they want to get to know you.

Execute the portfolio strategy.

This may sound crazy, but even if you start a new fund with a track record, investors want to invest in a fund manager that has a strategy that will win. Do you have unique deal flow? Are you winning competitive and good deals? Can you get the high ownership that you target? They want to see your strategy execution. The next step is deal progress. Funny enough, potential investors always ask about mark-ups. Some seed investments take 1.5–3 years to get PMF. We need to have time on our side to see our execution play out, and then to get the markups and outside validation in the form of investment from top-tier, follow-on investors.

So to all new fund managers: Remember to be patient. Don’t beat yourself up. Put in the work. Stay focused. Invest in relationships. Invest in good companies. The rest will work itself out.

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