After working with close to 300 private funds, I have observed what has worked for successful fund managers and what hasn’t worked. Here are some best practices!
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By Kingsley Advani
After working with close to 300 private funds, I have observed what has worked for successful fund managers and what hasn’t worked. Here are some best practices!
Goal is to get to Fund II quickly
Focus on getting to your Fund II within 12 months of launching Fund I
This will show momentum to prospective LPs
Raise less in your Fund I, not more
Better to close capital immediately and start deploying
Smaller funds have historically performed better than larger funds
Smaller funds, on average, close faster than larger funds
The illusion of a larger capital raise often takes much longer / never happens
The leverage for a larger capital raise typically comes from having a successful Fund I
100% upfront capital calls
LPs invest all of the money upfront rather than spreading it out over a time period
Avoid drawdowns if you can as they can be more complicated, incur follow up capital calls and disrupt getting to a quick Fund II
Continuously raise capital for 12 months
This gives you more time to raise capital from LPs
Unlimited capital raises allows you to accept capital from LPs 24/7
Leverage markups to raise more capital
Once you’ve started making in investments in companies and they ifstart performing well e.g. if Spacex does a 2x you can add in a paper valuation markup
Add in these markups to the dashboard to show LPs your progress
Same cost basis for all LPs
No matter when an investor invests in the Fund during the 12 months, they all enter at the same price
This keeps it simple and attractive to new investors
Leverage the existing markups to attract new LPs so if there are markups they can enter the fund already ‘in the money’
Focus on family and friends
These are more likely to initially convert than institutional investors
Give a 1 click checkout experience to LPs
Avoid sending PDFs / docusigns to investors
Make the investing experience fast and streamlined
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