When you’re focused on startup fundraising, you will need many different sources of capital. The same is true for an investor as well. But there’s still a lot of preparation involved with this type of pitch, and it doesn’t have to be mysterious or demanding in any way!
VCs get money from the same sources you do.
VCs have access to the same sources of funding as angel investors. They can raise money from limited partners or LPs. LPs are the investors who fund VC funds, but they’re not necessarily limited to investing in VC funds.
Raising a fund is a different type of pitch.
Raising a fund is a different type of pitch. You’re not pitching to companies that need your help, but you’re pitching to investors interested in investing with you. That means that the questions will be slightly different for each audience.
First, investors will want to see how you plan on making money from this fund. Even if you don’t have any current plans for investment (for example, if you’ve just launched your fund), there should be an idea about how it could turn into an income stream for yourself and/or other people involved with the business.
Investors aren’t looking for miracles they want something real that they can sink their teeth into and understand how it works before plunking down millions of dollars on it!
Second, they’ll want proof of success: do they trust your ability as an investor? Show them some numbers! If possible, try to show returns based on past investments so that they know what kind of returns could be expected under similar circumstances in the future.
The main difference is how.
The pitch is the main difference between a startup’s fundraising process and that of a VC. A startup pitches its idea to VCs; VCs don’t need to pitch anything. They are already proven players in the industry, whether it’s through their track record or network.
In addition, VCs don’t need to convince others of their value proposition: they’re already well known for having invested in successful startups before and can bring those successes into any discussion about future investments to demonstrate why it would make sense for anyone else to give them money now too.
Not all VCs raise third-party funds.
It’s worth noting that not all VCs raise third-party funds. Some take money from their own investors; others raise money from family and friends. Each strategy has advantages and disadvantages, but keep in mind that the decision to raise money from outside sources is an important one for any startup founder or CEO to make.
This is not an onerous, mysterious process.
Raising a fund is not an onerous, mysterious process. In fact, it’s basically the same as raising money in any other way! The main difference is that when you’re pitching to investors for your own business, you’re saying, (and if things go well, you do). When an investor pitches themselves as part of a greater fundraising effort, they say.
In both cases, many levels of due diligence are involved in deciding whether someone should entrust their money with someone else—in fact, that’s why VCs exist: because we bring our expertise and experience to bear on evaluating companies for investment opportunities.
Startup fundraising is not complicated. It’s all about building relationships, developing a brand, and telling your story. You need to do that in any fundraising process, whether it’s for yourself or an enterprise.