What are the best strategies for finding LPs for your fund?

There are different categories of LPs: Endowments, Fund of Funds, CVCs, Family Office, High Net Worths. For the majority of Fund 1s you will want to go the High Net Worth and Family Office route because as a whole those are more open to managers with big visions but smaller track records. As you graduate to Fund 2 and Fund 3 with more and more track record under your belt, you can work your way up to CVCs, Fund of Funds, and eventually Endowments. There is one exception to the rule, if your fund thesis has strong alignment with certain CVCs, you might be able to prioritize them for your Fund 1. In this case, your fundraising strategy can prioritize showing alignment between your deal flow, your strategy, and what the CVC is looking for.

Define which type of LP works better for your fund A. Founders Today's entrepreneurs are tomorrow's LPs. As they have successful exits, they will be more inclined to invest in vehicles operated by former entrepreneurs like ours. And they offer much more than just money: contacts, expertise, and deal flow.

To attract LPs, sharply define your fund’s niche—whether it's in AI, cleantech, or another sector—highlighting your unique value and expertise. Tailor your pitch to showcase your fund’s edge and past successes in this area, directly targeting LPs interested in this space. Utilize focused networking and thought leadership to reinforce your standing and draw in aligned LPs seeking specialized investment opportunities.

To secure the investment you need, it's crucial to have a clear and compelling vision that resonates with potential Limited Partners (LPs). But it's not just about what you say - building trust is equally important. That's why it's a smart strategy to start by developing relationships with those closest to you and to leverage these connections to get referrals to other like-minded investors who believe in your investment thesis. Remember, it's not just about securing funds; it's about finding the right LPs who can help you unlock doors to their own networks, so you can grow your portfolio and achieve even greater success.

Fundraising is an ongoing process, where you need consistent efforts even after securing initial commitments so as to ensure a steady flow of capital for future investments. Cultivate relationships and Identify potential LPs who align with your fund's investment thesis and clearly articulate the unique value proposition of your fund. Seek for transparency with potential LPs regarding fund performance, investment strategy, and risk management practices and conduct thorough due diligence on potential LPs The compliance issue is critical with regulatory requirements and legal obligations when soliciting LPs but aim for a diversified LP base across different investor types, geographies, and industries to mitigate risk and enhance stability.

B. Corporations I firmly believe that corporates provide differential value in technical and market validation, as a distribution channel once product-market fit is reached, and in providing deal flow. It's crucial to understand what the corporation is looking for when approaching an external venture capital fund and how you fit into their open innovation strategy. And I don't just mean the company's strategic plan, but on a more prosaic level, how you make your contact person successful and align with their personal objectives.

To secure LP investment, your track record is crucial. Showcase your investment performance, highlighting returns generated and successful exits. Detail your portfolio companies, emphasizing how you've navigated challenges and spurred growth. A solid track record not only proves your expertise but also builds trust with potential LPs, underscoring your capability to deliver returns.

To start your fund, you must first showcase to potential LPs that you have the exceptional ability to identify and select the right startups with high growth potential. Along with backing the right founders, your intuition and research skills should be top-notch, especially in emerging areas. A visible track record of successful companies will testify to your cherry-picking skills. Not all of your picks will be successful, demonstrate how you dealt with failures and the lessons learned by incorporating this experience into your process while identifying startups, making you an even more attractive partner for LPs. Remember, a strong track record with an added layer of resilience can be the key to unlocking your fund's success!

C. Family Offices Investing in VC is still considered exotic by most Family Offices in southern Europe or LATAM. You need to establish personal relationships, looking for their preferred sectors and previous investments before making contact. Take advantage of connections to get intros that convey trust and be very concise in your value proposition. D. HNWI - High Net Worth Individuals The very rich are another source of deal flow, especially abroad. Thinking long-term, providing value from the start, and understanding that emotional engagement is key are essential factors. E. Public Money Public support is fundamental in this country and in Europe to raise a relevant fund, while it comes with strings attached

Pick up your phone and call through your contact list. Stop thinking about the perfect approach and just approach. Some might invest directly, some might know a potential LP. Get things rolling.

It is important to carefully consider your trusted connections, their risk tolerance, and their willingness to support startups. When discussing with them, avoid focusing solely on the potential financial gain, and instead, emphasize the bigger picture of how many lives the startups you support could positively impact and how it can contribute to the larger ecosystem. Not only will this approach attract their support, but it will also encourage them to introduce you to other high-net-worth individuals in their network.

Do your darn best to never do cold outreach. Instead, find mutual connections with your goal contacts and ask for warm introductions. Put yourself out there an networking events to see how you can organically meet more folks to improve your chances of someone that can make a warm introduction for you. As in every business relationship though, lead with value first. Don't just take take take - you need to earn every favor that you get or very soon no one will want to help you anymore. As such, in parallel to growing your network, keep building yourself up to be valuable to those around you.

What kind of LPs you want to target depends upon the size of the fund you are planning to raise. As a rule of thumb your anchor should commit 20-25% of the total capital. Further, you should have mix of financial LPs, Strategic LPs, FoFs and CVCs. Each one of them brings a different perspective on the table. Like we do a portfolio construct, we should also do a proper LP construct as far as possible and post that if there is any residual left we can we can take in some HNIs.

Efficiently securing LPs involves pinpointing those aligned with your fund's specifics—size, stage, sector, and geographical focus. Identify LPs with a clear investment mandate matching your fund’s thesis and those with a demonstrated interest in your niche. This strategic targeting not only streamlines the fundraising process but significantly boosts the likelihood of successful partnerships.

Present a strong narrative: 1. Develop a clear and compelling story that articulates your fund's proposition. 2. Explain why. People usually "buy" the Whys not the Hows. 3. Share specific examples of successful investments, and positive outcomes achieved. 4. Connect with LPs on an emotional level by sharing stories that resonate with their values. 5. Customize your communication approach to resonate with different types of LPs. 6. Keep your story clear, concise, and easy to understand.

A relationship with an LP is at minimum a 10 year relationship. To make it a good one, learnings will be passed both ways so you will each be able to grow together. Make sure you're going into these relationships with the right mindset - growth, and not just a transaction.