Fundraising as a VC vs fundraising as an entrepreneur
Fundraising as a venture capitalist is quite different than fundraising as an entrepreneur. For instance, the number of opportunities you need to open is not comparable, probably you will need 4x more investment opps in your CRM as a fund manager.?
As a VC you will receive many more NOs,? but they should be much less fatal than the rejections you receive in your startup financing process. And of course, generally the YESes also carry less weight.
And a potential LP that passes on the investment is not a "no" forever, but for this particular moment and/or fund.?Many LPs only invest after spending a lot of time (several funds even) getting to know the team better, evaluating their coherence and their numbers over time.
It may also be that the timing did not fit, that they do not have money or appetite to invest right now. So it's always good to ask them during the pitch, what is their current interest into initiating new relationships and investment opportunities and what needs to happen for them to take the decision to move forward.?
Embracing LP nurturing is essential, also when you are not in the investment phase, providing them with content, legitimacy of your thesis and expertise, and creating credibility for the future.
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In a startup, you are well served with about 70-80 open potential investor's opportunities, and the key is getting those 1-2 YESes that determine the success of the fundraising. Even a single term sheet can suffice in times of scarcity.?While a NO at a key moment, like just before going to sign at the notary, can trigger a cascade effect with other funds and tank your efforts.
In contrast, in a fund, each YES does not dramatically change the fundraising process (unless they are huge tickets from some anchor above 30% of the fund), and NOs don't kill you either. Beware, those NOs mentioned above are not NOs to a project, as would happen as an entrepreneur, but here the product is mostly you, your track record and the expectations you sell.?
Which leads to a somewhat overlooked part in fundraising, which is the psychological factor. Each and every new commitment implies a great personal responsibility. It's a bit different than when you talk to venture funds which clearly understand the risk they are taking – since you might be talking to friends and acquaintances and not be clear how much of their money they can lose without it hurting too much. Probably the feeling is similar to the one you get when you fundraise with friends, fools and family in the initial stages of the entrepreneurial journey.
Don′t take it lightly.
Entrepreneurship and Business Development in ESG, Energy Efficiency, SaaS and IoT.
1 年I am sure it is true, but you forgot to mention all the public money available to VCs in Europe with investors like EIB/EIF, CDTI, BPI France, etc... In some European VCs public money (both European and local) can account for up to 50% of the fund. Public institutions are more open to saying YES to good VC teams. So it is a hard job but not exhausting. And certainly, VCs in the US are very different from VCs in Europe.
Experienced Investor 3X Successful Exits | Driving Growth and Value Creation | Venture Capital Fund
1 年Great insights on the distinctions between fundraising as a VC and as an entrepreneur! The focus on nurturing LP relationships and acknowledging the psychological aspect is spot-on. The psychological aspect is often underestimated but plays a vital role in both scenarios.
Investment Expert & Entrepreneurial Leader | Driving Growth & Profitability
1 年In the world of venture capital, it's about building lasting relationships and showcasing your track record. Meanwhile, for startups, it's like chasing those golden yeses among a handful of prospects.