How do VCs raise funds for themselves?

Boy, it is very hard.

Over 250+ new “micro-VCs” have been raised in the last 48 months alone:

VC funds at / below $200M in size (new funds raised since 2011)

Everyone wants to raise a fund.

What do you need?

  • An anchor or two. One or two brand named “LPs”, folks that invest in VCs, that will go first. Most LPs want to go last.
  • A track record. For a tiny fund, your track record as an angel or even entrepreneur may be enough. But to raise “even” a $50m fund, you need a track record as a VC, not just an angel. Ideally, at least 3x+ returns on whatever track record you do have. If you don’t have a true track record, start with a very small fund. Or go try to join someone else’s fund.
  • Something differentiated. With 300+ new VC funds and maybe 3000+ folks wanting to raise a fund — Why You? This is not always an easy question to answer.

It is 100x harder statistically speaking to raise a VC fund than a VC round.

Answer the question Why You? and that’s the best place to start.

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Published on April 4, 2017

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