I’d raised money for startups before. How different could it be? Just add a zero or two to the ask, right?
It turns out that raising money for a venture fund is a heck of a lot different than raising money for your startup… and certainly not any simpler.
You see, angel and VC investors are all pretty similar, when it comes right down to it: we want you to make us money. Show us good odds (by startup standards) to make a lot of money and we’re in.
Fund investors are far more complicated. Prospective Limited Partners (“LPs”) have a variety of motivations and each type of LP needs to be approached differently. Here are the eight different types of LPs I have encountered in the course of raising money for the fund DreamIt uses to invest in the startups we accelerate:
- Pipeline Fillers
- Economic Developers
- Fund of Funds
Acknowledgements: I’d like to thank my colleagues who contributed valuable feedback on earlier drafts of this piece including Skyler Fernandes (Simon Venture Group), David Teten and Katie Bluhm (ff Ventures), Sumeet Shah (Brand Foundry), Amanda Nelson (TCP Ventures), Jorge Torres (VenSeed) and Steve Berg (Antecedent Ventures). In case you are wondering, I’ve opted to list them in the order with which they responded to my request for feedback in the (likely misguided) hope that this will encourage them to answer my emails even more quickly.