Fundraising for VCs: Achieving Success in the Pre-Seed Stage
Fundraising for venture capitalists is often compared to the fundraising process for founders. At the pre-seed stage, both funds and companies have nothing to show. Learn how to succeed in this difficult stage.
Elizabeth Yin 💛
Co-founder @hustlefundvc. Democratizing wealth via entrepreneurship. Entrepreneur-investor. SF Bay Area native. My email newsletter: https://t.co/HTK9QmFYJA
I was talking with a new emerging fund manager recently about his fundraising. He was surprised and floored by how his past investing track record didn't really matter to LPs.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
Weird right? Some thoughts >>
1) In so many ways, the fundraising process for VCs is quite akin to the fundraising process for founders.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
At the "pre-seed stage, both funds and companies alike have basically nothing to show. No brand. No customers. No product. No revenue. Etc.
2) Investors for startups and funds want to know how can you repeatably make money? What is the path to this?— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
The problem is that you have nothing to show on this new co -- even if you made money before -- it doesn't matter, because this is a new company & a new brand.
3) You don't get to take all the hard work you put into a past company to this new one. You have to start from scratch.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
Or at least -- this is how a lot of investors - both LPs and VCs - see it.
5) The other issue that emerging fund managers face is differentiation.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
Just like how startups often get told a space is too competitive, the VC landscape has 1000s of emerging fund managers.
So how do you stand out?
6) The reality is that it's just easier for a would-be LP to pass if they don't already know you, because it would take too long to understand how you're different from other funds unless it's clear in the first minute.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
The #1 way to stand out IMO is to create content.
7) Content lets would-be investors understand quickly:— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
-who you are
-what you believe in
-what sorts of things you invest in
-how you think about strategy
8) But I get it.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
Emerging fund managers (and startups) feel like they have no time to create content. I thought that too.
My hack here is to pick the medium that is quickest for you - just to get thoughts out there in < 20 min per day.
9) Some channels that I find quick:— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
All of these channels are pretty time-boxed or space constrained.
If you do this 20 min a day, you will generate a BOATLOAD of content that you can even organize into an FAQ on a document or a website.
10) FWIW, a lot of content generators -- whether startups or emerging fund managers -- have a much easier time fundraising than others.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023
A lot of our LPs came inbound from our content for funds 2 and 3.
It is worth it to put in the work.
11) It also shows that you have the ability to start to build an audience -- of customers for your startup or dealflow for your fund, which is a form of a go-to-market strategy.— Elizabeth Yin 💛 (@dunkhippo33) June 29, 2023