5 lessons we’ve learned from building a venture fund from scratch • TechCrunch

This month, we do Five years of construction in contrast. Along the way, we’ve raised millions from some of the world’s leading institutions and have been fortunate to back startups like Ramp, Anduril and many more.

But just like the stories of the startups we come back to, this journey has taught us many lessons the hard way.

As we hit this milestone, I’ve been reflecting on our history and wanted to share some things I wish I knew five years ago.

The initial logo is important

One of my few regrets is that we didn’t go logo-hunting earlier. We didn’t chase hot companies that were raising rounds led by household name firms. Instead, we stuck to our knitting in Fund I, startups and teams we were confident in and sourced through our own infrastructure. I was under the impression that if we did what we said we would do right – lead rounds, great talent, bring a unique model to market – we would stand out.

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Turns out, when you’re building a venture firm from scratch (limited track record, never worked in a venture before, etc.), logos matter. They are important to potential LPs, who use them as a proxy for access; They matter to your peer set, who use them as a proxy for how sharp you are; And they’re important to founders, who will immediately go to your website and see if you’ve backed name-brand startups.

When starting a venture fund, you shouldn’t expect to figure out whether you’re a good fit for the role in 3 to 4 years.

Fast forward to today. Ironically, according to the Cambridge Associates benchmark, our Fund I is one of the best of its vintage year. But that performance took five years to blossom and that made raising Fund II more difficult. I once asked an LP, “Have you invested in any startups I’ve heard of?”

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This has long ceased to be a problem, but I have no doubt that logo-hunting would have saved us time in the early years.

Reputation is critical

In an industry where your reputation and brand are the most important part of building a firm, it’s important to start from day zero. The initial logo is one piece of the puzzle.

Invest heavily in building meaningful relationships with respected partners, founders and LPs. Send them relevant, high-quality deals for free; Become a Twitter friend; go to events; co-investment in companies; And cold email them and grab coffee. Do whatever it takes, because relationships are currency in more ways than one.

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For example, one of the primary ways LPs will evaluate you and your fund is to aggressively check references with their existing venture managers. They will ask if Partner X has heard of you, if they have worked with you, and if they will bring you into the deal.

It requires minimal brand awareness and ideally involves years of collaborating and producing great results. The best way to build your reputation is to send deals to investors that ultimately make them a lot of money.


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