#185 Starting a VC Fund - Playbook Insights

Author

Doug Dyer
October 03, 2024

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We are always on the lookout for fresh content from firms and investors we respect!

Recently, NFX shared a post on starting your own VC fund (linked above). It was packed with great insights and takeaways. We break these down below.

We’ve written a lot about this topic in the past (see links below, including our paid upgrade / website, which has links to our playbook that covers starting a VC fund).

Now, let’s dive in to some of our favorite highlights from the NFX article. First, the table of contents:

  • Step 1: Raise the Money

  • The Pitch

  • Set Your Fund Strategy

  • Sourcing and Winning

  • Judgment

  • Helping: Becoming That Top 1% Investor

  • The Reason to Start a Fund

Top 5 Takeaways from “How to Start Your Own VC Fund”

Here are our top takeaways from the article:

  • There’s only one thing you need to be an investor: capital. That’s it. Interestingly, there are more LPs likely to take a chance on a first-time fund manager than you think. Data supports this decision. Since 1997, emerging managers have outperformed incumbents in terms of returns.

  • Why you? Why now? How are you going to make outsize returns?

  • Riding a wave is a good enough “why now” reason to start a fund. But the “why you” question should outlive any potential trend. Trends come and go; your judgment is forever.

  • Ground truth: most deals are bad, and great deals are rare. Remember your only job is to invest in great companies. That means being ok not investing for long periods of time if you don’t find them or investing in several companies at the same time if they are all great.

  • Helping: Becoming That Top 1% Investor. There are some areas where investors can be helpful to founders:

    • Create the right connections

    • Source follow-up investments

    • Understand large market trends

    • Help founders avoid extremely stupid mistakes (everyone needs a gut check once in awhile),

    • Help hire top talent

    • Help founders with mental health and when times are hard

    • Give much needed tough love or kick in the butt

We’ve spent thousands of hours investing in and building funds. We like to think we’ve learned a lot along the way and we try to share that each week with our readers.

Last year, we built our own playbook for starting funds. You can download this via our website linked above. In the meantime, we wanted to share a few of our own insights and framework on how we thought about these things:

  1. Investment & Fundraise Strategy - Define It

  2. Fund Model & Fund Budget - Build It

  3. Fundraising - Go Get It

  4. Fund Launch & Fund Ops - Go Do It

  5. The Playbook - Calendar & Key Steps to Execute

  6. Year-End Deadlines & Planning - Win with Checklists

  7. Rinse & Repeat - Writing Culture & References for Long-Term Success

Top Takeaways from The VC Fund Playbook

Here are our top takeaways from the playbook:

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