Alternative Investment

How Emerging VC Managers Should Approach LP Fundraising

In August, Forbes published the article How Emerging Venture Capital Fund Managers Should Think About Their LP Fundraising Strategies. This article is a great read and breaks down best practices on how emerging managers can invest their time into fundraising from LPs and approach the market.

Emerging fund managers can look at fundraising as a B2B sales process and view the fund as a financial product they want to sell. The process is similar to best practices in enterprise sales with steps such as:

• Identify and have access to the investors that are most fit to build a long-term relationship with
• Engage and educate them on the opportunity in your market, what you are offering, and also addressing their specific needs (direct primary, direct secondary, SPVs, fund primary, fund secondary, fund-of-funds)
• Evaluate different options to expose them to the opportunities you have presented

Within the B2B process model, you should continuously convince them of your approach and justify a potential investment in your fund. The long-term relationship will mitigate steps to help ensure their satisfaction and keep retention for future subsequent funds. The responsiveness you provide will benefit your investment close and potential expansion of their allocation to your business, as well as receiving their advocacy to generate potential leads for fundraising.

LPs get many requests from investment opportunities; therefore, a customized go-to-market approach will succeed when managers have a better understanding of the types of LPs and their target audience.

Choosing the right marketing approach is significant. Emerging managers should try to experiment with multiple channels to reach their audience and also co-investors and entrepreneurs looking for funding. Emerging managers can consider using different materials and approaches to manage an efficient sales funnel and position. These strategies can increase their chances of succeeding in fundraising and attract potential LPs.

If you have any questions on how to approach LP fundraising, read the article linked above and contact Steve Vlasak.