#8 Fundraising - Show Me the Money!

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Today’s Top 3:

• “It’s a numbers game. And a big number at that!!” @galeforceVC

• Use a playbook! There are tools, tactics, and processes (see below) to raise the capital to fund your unique investment strategy 

• Key steps: Know your audience, make a list, stack rank, qualify, and follow-up

Overview

So you’ve defined your unique investment strategy and built your fund model? Nice work! Now it’s time to raise capital for your fund! There are a lot of opinions out there on how to do this and we’ve seen many different approaches as LPs and CFOs.

At Airstream Alpha, we are asked about fundraising often! We often answer “remember, this is hard and takes time. If it were easy everyone would do it.”

This isn’t a unique insight from just us! Listen to Mark Suster @ Upfront Ventures, who has raised hundreds of millions as an entrepreneur and investor:

“The hardest thing about fund raising is how dispiriting it can be. The reality is that very early in your process you’ll hear “no” and it can set you back and make you think that nobody sees your vision or values your progress to date. You might hear 9–10 “no’s” in the early stretches of your fund raising process. It is CRITICAL that you not let this get inside your head.”

@galeforceVC also weighed in recently with a succinct summary on Twitter:

Stay strong, there’s a way to work through this with tools, tactics, and processes!

Know Your Audience

The first step is to know your audience and define them. Who is in your target audience? Do they typically invest in funds? If they do, what are common characteristics of these funds that are relevant to your fund, and how can you tailor your message accordingly? 

Most funds start with “high net worth individuals”, who are often executives at startups and corporations, and partners at established VC and PE firms, per our friends at Oper8r in their “LP Analysis” post. 

Many funds hope to ultimately raise “institutional capital.” As a LP, I enjoyed leaning on people that had been doing it longer than I had for perspective (LPs talk to each other a lot!). One of those individuals was Chris Douvos, who shared some unique insights via this Kauffman Fellows post. My two favorites from it: 

• Do not be too transactional

• Communicate your unfair advantage

Make a List

The investor universe out there is broad. You only have 24 hours in a day. How do you narrow the universe down to spend your time effectively, with individuals likely to invest in your fund or make the right connections to ones that will?

Back to Mark Suster, who shares his thoughts on the first thing to do before fundraising in this post. Here are our favorites:

1. Create a list

2. Stack rank opportunities

3. Qualify, qualify, qualify

4. Follow up. Be humble

Final Thoughts & Additional Resources

Fundraising is hard. However, challenges can be managed with the right tools, tactics, and processes! Know your audience and define them. Implement a process-driven approach to contact the right people and follow up. 

Want to read more insights / get some additional takes? Here are some additional favorites of ours:

• Elizabeth Yin @ The Hustle Fund shared extensive detail in two blog posts: “Things I’ve learned..” & “How I raised….”

• Winter Mead @ Oper8r has written multiple posts that touch on various components of fundraising here

Special thanks to David Perretz for his significant contributions to this article.

That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”