Raising a 1st fund, during a pandemic 101

Hey LinkedIn!

So raising a fund is hard, no matter who you are.

In this article, I've compiled the key lessons and tactics learned from fundraising for Conscience, an early-stage fund focused on the intersection of consumer and science.

I started raising for Conscience as a one-woman show, during a pandemic, with little to no LP network, no Ivy League school, no tier 1 fund, no family money or connections, blah, blah, blah. Basically, all the excuses people emphasize to not pursue their dreams. ;)

In fact, setting out on this journey probably sounded a bit like this to many people:

And we all know how that movie ends.

Here are 25 points on how to improve the odds of you successfully bootstrapping a VC firm, directly from the underdog herself.

Before we dive in, this article is for emerging managers that are well past the ideation stage (eg, fund thesis, deck, etc. all prepped and ready to go). There are no guarantees, and none of the 25 points mentioned here are easy. Also, what worked for me wouldn't necessarily work for you and your unique journey. Take what you want, leave what you don't.

1) Internalize that this is an endurance game. So, answer me this: how long can you endure?

There's no easy way to break it to you, but this will be a multi-quarter grind. Be prepared to operate at high energy levels and no income for at least 1-2 years. Make sure your personal finances are in order and you have the mental fortitude to pull this off.

Maybe building your fund means moving in with your parents for a while, doing some serious lifestyle adjustments, and fronting your life savings (yes, I had to do all of these things).

You will hustle harder than you've ever hustled in your life. This is not a passion project. This is not a side hustle. You are a founder and investor all in one.

Hopefully that didn't scare you, because there are 24 more points that are far more inspiring and happy. Just know what you're getting yourself into, OK?

War faces on.

2) It's a numbers game. As you're learning who your fund will resonate with and building your investor network, there are going to be a lot of folks that aren't immediately relevant to or not able to invest in your 1st fund.

That's fine!

Over time, you will get smarter about this process. The beginning is always the most frustrating, because your pattern matching skills and filters aren't fully developed yet.

Also, most people are going to pass, mostly for reasons outside of your control (eg, they're not doing emerging managers anymore, they're not doing 1st time funds, they only do $50m+ funds, etc).

Don't get frustrated. "No" is your friend. That answer provides clarity and if you actively seek feedback, you can improve. "Maybe's" and being ghosted are much worse than a "no". I'd take a "no" over a ghost any day.

Also, who knows! A "no" today could be a big check in fund 2. Lots of folks that passed on Conscience ended up circling back wanting to actively track for fund 2. These investors also ended up introducing me to more investors and booking follow-up calls to continue to build the relationship.

Stay high frequency and classy throughout the process. Let the "no" roll off and move on. Plenty of private capital floating around, again - numbers game. Generate those leads. :)

3) Quality warm intros are critical.

This is such an important point, I'll say it again. Quality warm intros are critical.

Drive warm intros from folks that really get what you're doing, can point you to the right investors, and backchannel with influence.

To drive warm intros, you must always be selling -- you never know where that person will take you, and as you're building this network from scratch, stay open minded and hungry.

I say *sell* because you've got to *earn* warm intros by demonstrating your performance, hard work, and thoughtfulness, NOT by asking for someone's rolodex and being entitled about it.

People are tight with their network, as they should be! It's their social capital. Show folks that you're worth making the intro.

That also means being professional throughout the process (eg, responding promptly to intros, booking a call, impressing their contact, and following up with the person who introduced you).

Dazzle these warm intros with what you're building. Remember, your performance in the call also reflects on the judgment of the person who introduced you.

I also 100% get that you can't be too fussy with who introduces you, especially as you're building your nascent network, but the quality and relationship of the referrer is also important. If you can swing for a stronger referrer to facilitate the warm intro, even if it takes a bit longer, try and do so. Their ability to influence via back-channeling is important. More on back-channeling later.

4) Some people will kind of suck in this process. Some will suck a lot more than others. This is life. They're not bad people (maybe), but these folks have a very special place in my iPhone notes section, my "shit list" or more delicately named, my "they can beg" list.

These are folks I'll never allow into my funds or portfolio companies for various reasons -- mainly because they were rude or ghosted. This list is just for you and your iPhone, not for others. Think of it like a fun burn book that keeps your energy levels up and allows you to regain your power in this process.

Give it a try -- mmm, didn't that feel good? Again, for internal use only to keep you in Xena Warrior Princess mode throughout the fundraising process.

*Insert epic war cry lulululu*

5) Qualify, qualify, qualify. This not only shows your confidence in the process, but it helps you adjust your pitch accordingly, and weed out folks that aren't a fit.

Relevant questions to kick-off the convo before you spend even a millisecond pitching your fund: Tell me about yourself. What's your typical check size? Timeline? Process? Fund size you typically engage with? Other funds / emerging managers you've invested in?

Don't go overboard with the questions, because that's annoying and not productive. Pick a few of your favorites and use your best judgment on what that looks like before diving into your pitch.

6) You have to set a timeline and stick to it. Do not show flexibility or weakness with this timeline. Share your timeline with prospective investors and hold everyone in the process accountable.

Caveat: be realistic. See point 1. This is a multi-quarter grind. Individuals may be able to make a decision in less than a week, but family offices and institutions need to spend several meetings with you before coming to a decision. Give them the space to run a proper diligence process, while honoring the fact that your life isn't about fundraising for an eternity and you need to get back to picking unicorns.

7) Information gathering before the meeting, and back-channeling after the meeting are crucial to upping your conversion rate.

This is another one I'm going to repeat: gather info beforehand, and backchannel after.

To gather information: find out as much as possible about the investor, beforehand.

Sample questions to engage the referrer before chatting with the investor: What are their deal breakers? What's most important to them? What elements of my pitch are less important to mention?

To backchannel: be sure to follow up with how the conversation went (immediately), and ask to politely to follow-up with the investor (but give this part a week or two). This will help you address concerns and keep your investor accountable to your timelines.

Pro tip: It helps to track all of these tasks and people in a massive CRM. I had to make my own system that worked for me, as over the last 6 months of fundraising, I am now nearing 400 new conversations with lots of complexities regarding next steps and how to optimally follow-up. It's a lot to track, and very few minds can do this without a CRM. So, take the time and be organized from the outset.

8) Have levels of reveals. Don't give it all up in the first meeting.

This was one of the hardest ones I had to overcome. I am so excited about what I'm building, it was hard to hold back the reigns on these investor calls, and not immediately jump into all the reasons, nuances of the thesis, and accomplishments.

This is not the move. Play it cool. Don't be overly eager.

At this point of writing the article, I'm realizing that there are lots of dating analogies here.

Anyways, stick to a few (literally, just 3) main talking points, and keep the conversation light. The purpose of the 1st meeting is to get a 2nd meeting. That is it.

Keep these 1st meetings to just 30 minutes (as you're also vetting your investor for their fit).

If you did a great job selling and the person wants to go to the next step (yay!) or the person isn't a fit (totally fine), politely end the meeting early. You did your job. Don't keep going once you've made the sell, and don't sink much more of your time if there isn't a fit there.

9) Leave 5+ minutes at the end to map out next steps and address objections. You can stop the conversation (in a natural spot) and say something like "hey, I noticed we have about 5 minutes left, may we use the remaining time to map out next steps?"

If you have time, or your spidey senses felt resistance in the call, a good question to ask may be: What are your main concerns with investing in the opportunity today?

Use your best judgment on how to use the remaining time. You want either (1) a clear next step or (2) a no alongside a clearly articulated objection. Clarity is key.

10) Generally speaking, there are 3 flavors of investors (I made this up completely):

a) Waffles: the waffly folks that wait until the very end of the process, where they may or may not write a check. Waffles are fine, just don't put a lot of energy into getting them over the line since they want to be the last check in. Circle back at the end with a "last call" email, and keep these folks warm via high-level, brief updates.

b) Ghosts: these folks randomly disappear from the process without the courtesy of a pass email, and yet somehow still have time to post incessantly on social media. Boooo. My least favorite of the flavors, and the #1 offense of folks on my "they can beg" list.

c) Drivers: these people are gold!!! I want to move mountains for drivers. They are royalty in the investor kingdom. They're pushing the process forward and taking you seriously throughout. Triple down on these investors. These will roughly be 10% of your funnel (best guess) but probably 90% of the folks that join your early cohort (another best guess). Your follow-ups to these individuals should be impressive updates (eg, new investors, portfolio mark-ups, notable co-investors, a big press release, etc). Remember, every touchpoint is your opportunity to sell.

Yaaaaskween.

11) Send a "last call" email. This is the ultimate Hail Mary and is not for everyone. Ideally, if timed and done right, this will drive folks to a decision quickly, you'll be flooded with new intros, your current investors will want to upsize their initial investments, and waffles will emerge with extra syrup.

This is the investor's last opportunity to join, and if they miss it, they miss it... FOREVER.

Why do they miss it forever? Because if you pull a stunt like this, you better be sure to follow through. This tactic is highly effective, but there's a time and place before you make this move. Use your best judgment. This is the point of no return.

12) Once you have an initial LP base, leverage those existing investors to drive even more intros! Have your "one and only" ask be for more introductions to aligned investors who will love and get what you're doing. End every update to existing investors with that CTA.

13) You'll be asked hard questions. You'll be challenged. Be up front and transparent with your gaps and how you're hedging. No one expects you to have all the answers or talent immediately available. When you're transparent with your investors, even if all the pieces aren't there yet, you win serious brownie points.

Note: It's also totally fine you don't have everything 100% figured out. You're a first time fund manager. People get it.

But also note: that is not an excuse to go in to calls not prepared and disorganized. Do your homework and learn as much as possible from books, programs (there are many now), mentors, and advisors. You have one shot to make a 1st impression.

14) Maintaining enthusiastic energy levels throughout the process is very important. Manage your energy and calendar far before you ever take a whiff of burnout.

How to maintain energy levels:

• Avoid booking back-to-back calls. Have 30 minute breaks in between. Leave gaps in your schedules where you can recover your energy for the next meeting.
• Try to move some video calls to a phone call so you can go for a walk.
• Have a calendar assistant or tool like Calendly with smart availability blocks.
• Cut out tasks and meetings that are less important / urgent ASAP. Stay focused.
• Exercise, eat healthy, and get plenty of sleep.
• Decline non-fundraising related introductions and learn to say no to requests.

There will be lots of people wanting to meet you as you're going through this process. Anyone with an ounce of empathy will realize what you are building is incredibly difficult, and will be amenable to you rescheduling at a later date, or you not being immediately responsive.

Don't worry about it, things will slip through the cracks during this process, and that's OK.

15) It's not just about engaging investors. It's important to keep the super-connectors engaged throughout the process. Include these folks on regular updates, book catch-up calls, etc. They should be in your CRM with actionable next steps. Treat them and their network with the upmost respect, and remember, you're always selling.

16) The most important inflection point in your raise will likely be your 1st close.

Get to that 1st close as soon as possible, even if it's a small close (eg, 10%).

This social proof will drive way more investor interest, and help you close out the rest at a faster pace. Plus, you will have money in the bank, and you are now in business!

17) Get noticed throughout the process with PR, content, podcasts, clubhouse, upstream events, etc. It's important to get your name out there! Investors track this, and there is oftentimes some very valuable inbound that comes as a result.

I'm probably the only VC not on Twitter, but it's a valuable channel to announce what you're doing and tweet at relevant investors. I received many texts from friends regarding investors on Twitter wanting to get in touch with emerging managers. I'm sure I missed out on some really great investors not being on there, but alas, that's the FOMO talking.

18) Land some brand name investors and exited founders as early as possible, regardless of check size. Leverage this credibility and their networks to drive more momentum in your raise. This is something I wish I did much sooner in the process, because it was so effective at driving meetings and getting other folks over the line.

As annoying as it is, name dropping really does drive the momentum. However, there are also a large group of investors who really DGAF. I respect that.

19) When you have some cash in the bank (either personally or from your 1st close), make a few competitive bets. You can even pre-commit to founders as long as you're transparent about the status of your raise, and timeline to wire the funds.

If you do this, be high integrity with founders in this process. Your founder reputation is one of the most valuable assets you have.

Having a portfolio within the fund, ideally with some traction, steers the conversation away from your previous track record, which as an emerging manager may still be quite nascent, to your current fund investments and rationale.

Again, that 1st close has incredible ripple effects throughout the raise. Try to get to that point as soon as possible.

20) Like relationships, chasing doesn't work.

Signal you're a hot to investors via content, backchanneling, and sending high-quality, concise updates as needed.

The greater your detachment from the outcome, the better this process will be for you.

21) Cut out a-holes (or more delicately, "complicated people") from the process ASAP. It's better to exclude these folks entirely than be begrudgingly married to them for 10 years. It's not worth the money and eventual headaches, lawsuits, etc.

How do you know who is complicated? Ask around. You should also be doing your own subtle reference checks on your investors.

22) Early believers should be taken care of. They believed in you before anyone else did, and made it possible for you to pursue your dreams.

Reward your early believers, whatever that looks like for you and them.

Hopefully, you can pay it forward and believe in another emerging manager first!

Caveat: try to avoid giving out MFN (Most-Favored-Nation) clauses or part of the GP stake to investors. It is a longer discussion on why or when this could make sense, but generally, if you can avoid this, do it.

23) If you can, you want to bring on investors with a 10/10 conviction level. High conviction folks can still poke holes, point out blind spots, and offer feedback, as they should, but they shouldn't stifle progress or be a wet blanket.

If you can avoid it, do not bring on sandbags (new vocabulary term, meaning, for folks that are closer to a 0/10 conviction and will bring destructive energy to your work).

24) Ideally, you want to bring on investors and advisors who can set you up for fund 2 and beyond. The best case scenario is you fundraise entirely from your LP base in fund 1 + your investors' network + a few, new strategics you've met along the way.

Besides saving you a lot of time doing the dog and pony show again, having an "insiders only" round will definitely help you seek silent vengeance on your "they can beg" list (muahahaha, half kidding).

25) Have fun with it and do your best everyday. Laugh. Be happy. Cry sometimes. Don't take yourself too seriously. Investors are people too - like you, they eat, sleep, poop, cry, fall in love, etc. Regular people stuff.

It's important to stay high energy and not get consumed during the lows. There are lots of ups and downs in this process, and your luck* can change tremendously day-by-day.

*A note on luck: the harder you work, the luckier you get. The process also moves like an exponential curve. Expect it will feel flat for a while, and then things will take off right as you're near the end of your raise.

Once you near the end of your fundraising process, you will then internalize that this is just the very beginning. Hopefully, this journey is the start to what will be a high impact and lucrative opportunity for you and your investors.

I wish you the best of luck on this crazy hard, but insanely rewarding endeavor!

Love,

AT