What mistakes do venture capitalists make when raising funds? | by Mark Saster – News Couple
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What mistakes do venture capitalists make when raising funds? | by Mark Saster


A few weeks ago, I had the pleasure of speaking to Samir Kaji | In the Venture Unlocked podcast on a wide range of topics we think of as venture capitalists every day, including:

  • How to Build a Generational Business – Retaining the talent of partners and finding the complementary networks and skill sets businesses need to succeed over time.
  • The state of the project today and how COVID has squeezed 10 years of technological change into one accelerated year
  • The Human Psychology of Decision Making and One Book I Think Every VC Should Read
  • How do we make social network providers become true believers and why I think data rooms are where deals die

And much more. You can listen to the entire conversation above or via this link, but I also wanted to highlight one topic we discussed that I feel very strongly about, which is how I think enterprise sales and project fundraising are basically the same power. Let me explain.

A common mistake I see is that startups as well as venture investors spend too much time on top of funnel mining. why? Because it’s relatively easier to have a first meeting, meet each other, share stories, etc. than start narrowing down and doing the work to close the deal, or risk hearing no. But here’s the thing – it’s not just startups that do it. We all do it on this side of the table, too. LPs, VCs, everyone. We love first meetings! This is hard in the middle and bottom of the funnel.

In fact, I wrote a previous blog post titled “Why Successful People Focus on the Lower End of the Conversion Funnel.”

I advise first-time VCs (as well as founders) to have mid-funnel strategies to get from the first LP meeting to the end and to devote a disproportionate amount of time to this area (I tell more about this in the podcast starting at timecode 27:41). Like any corporate sale, you want to think from the buyer’s perspective and what they need to feel confident about the decision to purchase a share or ownership in your fund.

Here are the three rules I think of in any sale, whether it’s institutional sales or when trying to move liquidity providers into a decision, there are three keys that you should be able to answer:

  • Why buy anything?
  • Why did you buy me?
  • Why buy now?

Why buy anything?

When raising your first (or fifth or even tenth) funding, it’s all about establishing your primary target market and figuring out who’s in the market for what You are are they selling? While there is a wide range of liquidity providers and may hold initial meetings for months (and many venture capitalists do), there are likely to be far fewer potential stakeholders willing to invest in a fund. is yours size is yours Concentration, whose minimum or maximum check size corresponds to what you are looking for.

So I encourage first-time fundraisers to qualify, qualify, and qualify. Do the legal work to find people who specifically want to buy what you’re selling. Find everyone who has raised funds of a similar size and find out who supports them – this is your target market. Every other conversation will waste time, and like any startup, lost time is an existential threat.

Why do you buy me?

Well, you have found the targeted liquidity providers that are investing money in your stage. Now is the time to convince them why they need to invest in it is yours Fund, when they can invest in other funds with more returns or proven partners. And again, just like in enterprise sales, that’s it differentiation What makes you different and complementary to all the other funds in her portfolio? What is your unique selling proposition?

For Upfront, it’s all about Los Angeles. We invest 40% of our dollars in Southern California companies – and while that by definition means that the majority of our dollars are invested outside the region, that still makes us significantly different from the other 10 funds on Sand Hill Road that LP might be talking to. We are certainly not a “regional investor” but we have some comparative advantages in a large portion of our deals.

It’s critical to advocate for a consistent differentiator and here’s why: It clearly highlights whether or not you’re a good bet on this LP. If you do everything every other company does, in the same ways, why would they buy you? And yes – the constant highlighter means that not everyone will agree with your thesis but that’s fine. You don’t need everyone, you only need a few core believers, and having a tough “why buy me” presentation makes it easy to find and convert those leads.

“Why buy me” is also a good time to take advantage of references and outside people who can vouch for you, who can defend who you are and why it’s a good bet. Everyone likes to know that someone else has bought first, and liquidity providers are no different.

Why buy now?

This can be the most difficult of the three rules of selling whether you’re in enterprise sales (“Why buy this now when I can wait for you to get more traction, more logos, and more product features?”) or whether you’re raising Fund (” Why invest now when I can see how your first fund will turn out and get into the next?”)

This is all about creating scarcity and getting ready to leave, but doing it with a smile on your face. For Upfront, we raise funds of consistent sizes and have been fortunate to have fund-by-fund LP partners, whether in our A seed fund or our growth funds backing some of our most promising investments. This means there’s not a lot of room to attract new investors, and hopefully that’s true for first-time funds as well – they’re doing so well that the second fund is oversubscribed. Any customer, whether it is an LP or a buyer from a large organization, needs to know that there is an opportunity they may be missing out on.

You can hear more about these three rules and more in my conversation with Sameer – it was fun to do and I hope you enjoy it as much as I did.





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