Venture capital isn’t exactly the old boys club that it used to be. While some women have focused on working their way up at large, established VC firms, many others have decided to raise their own funds. Over the past few years, we’ve seen a rising tide of women charting their own paths in venture, investing in the ideas they want to see built, and building the firms they want to see exist.
Venture firms in the U.S. with women founders were on track to raise more than $7 billion during the first three quarters of 2021—up 59 percent year over year, according to Crunchbase. At the same time, the number of female check writers grew just 3.5 percent since 2019, according to Pitchbook, and women still only hold 15.4 percent of general partner positions in venture capital firms. The numbers are up from previous years, but not up enough.
For women raising their own VC funds, starting a new fund is an opportunity to do things differently—to build a culture that feels authentic and back founders they believe in. For my female- and Latina-led firm January Ventures, that has meant ending the practice of warm intros and instead soliciting cold pitches. My cofounder Jennifer Neundorfer and I have built one of the most diverse portfolios in venture—out of 50 companies, 90 percent have a female founder, 53 percent have a founder of color, and 42 percent have an immigrant founder.
To celebrate the recent close of our $21 million Fund II, I’ve rounded up some of the best advice from leading female venture capitalists about how to raise a fund, and what mistakes to avoid along the way.
1. Demonstrate your track record and ability to win deals. It’s critical to demonstrate your track record when you go out to market. And there are more ways to do so than ever before—for example, through a proof of concept fund, rolling fund, angel portfolio, or scout checks. Jewel Burks Solomon, Managing Partner at Collab Capital, says you want to “demonstrate to potential LPs that you are a first call for great founders.”
Ali Rosenthal, Founder and Managing Partner for Leadout Capital, adds, “Clearly communicate how you will source opportunities and then demonstrate your ability to select. The former requires demonstrating an existing network or a specific fund strategy. The latter can be accomplished by exhibiting a proven track record.”
2. Build relationships early. Start building relationships with potential LPs well before your formal fundraise, advises Addie Lerner, Founder and Managing Partner of Avid Ventures. “Large LPs like to develop relationships for 6 to 9 months before investing, so it’s best to start the conversation outside of the more transactional context of a fundraise.”
It can also be helpful to bring on tech leaders and influencers as LPs. They can be faster to get on board in the early days, while you nurture your relationships with institutional LPs.
3. Invest in a CRM. Set up Customer Relationship Management (CRM) software so you can track all potential LPs and follow up promptly. Sara Adler, General Partner of Wave Capital, says that a CRM helps you think about fundraising like any other sales funnel, which makes the process more clear.
Soraya Darabi, Co-founder and General Partner of TMV says, “It’s never too early to build your CRM. You can leverage inexpensive tools like Google Docs, Air Table, or Notion to begin with, and then level up to an Affinity, Copper, or Salesforce. This is a business predicated upon relationships, and it’s up to you to maintain those relationships as thoughtfully and efficiently as possible.”
POLISHING YOUR PITCH
4. Nail your differentiation. Be able to explain what differentiates you from other VC firms in 30 seconds. Go back to the old school elevator pitch—Can you get your pitch across before your prospect reaches their stop?
“Finding strategic alignment with LPs is key to earning trust, but that takes time. One way to compress this is to be intentional about your strategy, and specialize where you have an edge.” says Hannah Chelkowski, Co-founder and General Partner of Blank Ventures.
5. Make your pitch authentic to you. “Everyone is going to have an opinion on what you should focus on, your thesis, the way your deck looks,” says Samara Mejia Hernandez, Founding Partner of Chingona Ventures. “It’s important to get feedback, but make sure you make it your own, even if you go against what others are doing.”
Candice Matthews Brackeen, General Partner of Lightship Capital, reiterates this point: “Know who your targets are, set goals, and be confident. You don’t have to bend to fit into someone else’s box.”
6. Customize your talking points. Understand the motivations and decision processes for different types of LPs. For example, family offices might be focused on the ability to invest directly in later rounds, corporate LPs might want strategic insights and, and VC funds might be more interested in early-stage deal flow. If you know what each group is looking for, you can focus your pitch on the most relevant points for that group.
7. Build a robust data room. Be able to back up your pitch with relevant data. This will make your pitch stronger and your follow-up more efficient.
“Find data room and DDQ templates from institutional investors and create your own supporting information document,” says Ella Goldner, Co-Founder of Zinc. “As you get asked new questions, you can add to and build on it.”
GETTING LP MEETINGS
8. Qualify your leads. Elizabeth Yin, Co-Founder and General Partner of Hustle Fund says that raising a fund is about finding the right fit with investors, and “it’s much better to try to qualify leads quickly—for better or worse—than to spend a lot of time trying to convince people who are only lukewarm interested to invest.”
Brackeen agrees and advises, “Don’t hesitate to ask LPs for their process early in the relationship. If you don’t fall into their timing, foster that relationship for subsequent funds.”
9. Ask other VCs for LP introductions. Ask other GPs for intros, especially ones a couple steps ahead of you or who recently closed their fund. If they aren’t able to make intros, they might be able to share intel on which LPs are deploying.
“Try to make sure that your introductions to new LPs come from another GP who they have invested in,” says Rachel Holt, Co-Founder and Managing Director at Construct Capital. “If you are already in process or started with a cold email, ask LPs in your first meeting who else they have invested in. If you know any of them well, ask them to put in a good word to the LP – this can provide credible ‘off reference’ validation.”
10. Turn commitments into more intros. Fundraises are all about momentum. Once new LPs commit, ask them to introduce one or two others who might also be interested. “For me, the best intros were from current LPs,” says Hernandez.
FINESSING YOUR FOLLOW-UP
11. Find an advocate within the LP’s organization. You need someone to give you the inside scoop. As Goldner puts it, “You need to understand where the LP is in their lifecycle to save you time. Find a person inside the organization (not the decision-maker) to help coach and guide you through the process. Make sure you understand how the process works on the LP’s side.”
12. Spend time with the prospects who are most likely to convert. Follow up with everyone, but prioritize the most promising potential LPs.
“Just like in business development or sales, it’s important to qualify a lead early in the process to avoid spending time with a potential LP who is unlikely to commit,” says Adler. “Once we were able to understand what profile of LPs were most interested in what we were ‘selling,’ it made our process much more efficient.”
13. Aim for consistency & predictability. Send a steady drip of fund updates, both to prospective and current LPs. You could share news about new investments, follow-on rounds raise, portfolio metrics, exits, and any other information that might help prospects with their decision-making.
Be persistent and keep communicating your wins to stay on their radar. Do what you say you will do, and keep demonstrating how you are following through on your strategy. Goldner adds, “Have a date for a close and commit to it, to avoid dragging and to build momentum.”
A FEW MORE HELPFUL HINTS
14. Find LPs you want to work with for the long haul. “Remember that you are choosing the LP just as much as they are choosing you! Treat the conversations as a relationship-building discussion rather than a one-sided pitch,” says Lerner. “Figure out if this LP is the kind of 10+ year partner you want for your fund.”
15. Find your tribe. Building a VC fund is hard work. Find people who believe in your vision, who will help you overcome challenges, and cheer you on through tough days. Darabi, who founded a community for women fund managers called TransactGlobal.co, puts it this way: “Join a community to help you meet other emerging managers. Don’t forget to give more than you take, and lean into the communities for emotional support in addition to resources and contacts.”
The good news for women starting VC funds: We’re in good company. More and more women are raising their own funds, and helping other women founders do the same. Your people are out there, and when you find them, they’ll share their insights and support—just like all the women I’ve quoted have done with me. Like I said, venture capital isn’t just a boys club anymore. Women aren’t just excelling in VC. We’re transforming it from the outside in.
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