The Venture Fund Blueprint: How to Access Capital, Achieve Launch, and Actualize Growth

By Shea Tate-Di Donna and Kaego Ogbechie Rust

With the rise of emerging venture capital, there are thousands of new fund managers building their businesses without resources or direction. In The Venture Fund Blueprint: How to Access Capital

• Language: English
• Publisher: Houndstooth Press
• Release date: Dec 13, 2022
• ISBN: 9781544535975

Shea Tate-Di Donna

Shea Tate-Di Donna is a career venture capitalist, entrepreneur, product creator, and author. With more than a decade of early-stage high-tech venture experience, she has advised hundreds of emerging fund managers. Shea was part of the founding team at True Ventures, creator of Founder Services, and originator of Venture Productization.

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Table of Contents

Introduction

Chapter 1  Investment Thesis

Chapter 2  Fund Preparation

Chapter 3  Fundraising

Chapter 4  Limited Partner Program

Chapter 5  Portfolio Management

Chapter 6  Operations

Chapter 7  Fund Administration & Accounting

Chapter 8  Portfolio Composition

Chapter 9  Legal

Chapter 10  Longevity & Growth

Conclusion

Contributor Biographies

The Venture Fund Blueprint

How to Access Capital, Achieve Launch, and Actualize Growth

ISBN  978-1-5445-3595-1  Hardcover

ISBN  978-1-5445-3596-8  Paperback

ISBN  978-1-5445-3597-5  Ebook

Copyright © 2022 Curve IQ

All rights reserved. No part of this book may be reproduced or used in

a manner without written permission of the copyright owner

except for use of quotations in a book review.

First edition 2022

by Shea Tate-Di Donna and Kaego Ogbechie Rust

All individuals and fund names were used with their approval.

Disclaimer: This publication is for informational purposes and does not contain or

convey legal advice. The information herein should not be used or relied upon in

regard to any particular facts or circumstances without first consulting a lawyer.

Any views expressed herein are those of the author(s) and not

necessarily those of the relationships of the author(s).

Dedication

It is only with a diversity of intellect that we can create a variety of solutions and build our best future. We dedicate this work to those who dare to change the face of venture, finance, and investing.

Acknowledgments

Sincerest appreciation to the following individuals

for their invaluable contributions:

Julie Castro Abrams, How Women Invest

Raanan Bar-Cohen, Resolute Ventures

Phil Black, True Ventures

David Brown, Techstars

John Burke, PROOF and Angel Investor

Calixte Davis, Calixte Davis Design

Josh Felser, Climactic

John Gannon, GoingVC

Michael Gibson, 1517 Fund

Jennifer Gill Roberts, Grit Ventures

Tracy Gray, The 22 Fund

Kirsten Green, Forerunner Ventures

Charles Hudson, Precursor Ventures

Jim Jensen, Wilson Sonsini Goodrich & Rosati

Eric Krichevsky, RYLNYC

Scott Kupor, Andreessen Horowitz

Frances Luu, Storm Ventures

Patrick Mahoney, RW Ventures and Angel Investor

Julie Mauser, LifeSci Venture Partners

Matt McInerney, Township

Harsh Patel, Wireframe Ventures

Alison Rosenthal, Leadout Capital

Jason Rowley, Capbase

Roberto Sanabria, Expa

Michael Seibel, Y Combinator

Danielle Strachman, 1517 Fund

Adam Tope, DLA Piper

Eric Woo, Revere

Lan Xuezhao, Basis Set Ventures

Alan Yang, Towne Advisory Services

Elizabeth Yin, Hustle Fund

Timothy Young, Dropbox

Introduction

Introduction

We are lifelong learners, always striving to be our better selves and constantly pushing ahead to reach new heights. Naturally, when we set out to learn something new, we do the research, and we also talk to smart people. People who are of the highest caliber, are eager to share their finest techniques and best practices, and want us to benefit from their extensive experiences in order to optimize our collective resources.

We wrote this book for aspiring fund managers to in fact succeed. To win. To share with you our 10,000 hours of application, our best practices, and our lessons learned from people we respect.

During the past few years, we have had over 3,000 conversations with more than 400 fund managers. Our careers took us through True Ventures and Goldman Sachs in venture capital, early-stage ecosystems, the private and public markets, and finance. Curiously, the same important questions kept arising time and time again: How do I launch my fund? What do I need to get started? and Where can I find an example from another fund?

As we dug deeper, we realized that, when creating their own funds, fund managers simply desired access to exclusive information in order to save time, save money, and free themselves to do what they do best: find stellar deals.

Our book brings together tactical examples in a guidebook format for you to begin the journey of establishing your fund. It is intended to be a blueprint that is coffee-stained, dog-eared, and marked up in the margins by your desk. The real-world examples we provide in this book serve as step-by-step instructions, tips and tricks, and shared materials to use in real time.

We wrote this book for the next generation of newly minted venture capitalists with a diversity of intellects. Regardless of your starting point — whether you are a lifetime angel investor, venture apprentice, or seasoned startup operator — this book will assist you in smoothly navigating your fund launch.

We will usher you from idea to vision and strategy, then all the way to your first investment and much more. You will learn to launch and maintain a fund and gain insights on operations, fundraising, legal, and new-fund formation.

What comes next is a simple guidebook. We have organized this content into ten chapters:

1. Investment Thesis: Identifying your key differentiators and investment strategy

2. Fund Preparation: Creating an outline of timing and costs ahead of fundraising

3. Fundraising: Planning and prioritizing the timeline of your fundraise

4. Limited Partner Program: Corresponding with your investors and fiduciaries

5. Portfolio Management: Cultivating your portfolio companies to maximize growth

6. Operations: Selecting providers across your business and organizational planning

7. Fund Administration & Accounting: Assessing financial and accounting elements of your fund

8. Portfolio Composition: Reviewing common portfolio constructions

9. Legal: Starting your fund formation and deal documentation

10. Longevity & Growth: Positioning your fund for the future to build a long-lasting firm

At the end of every chapter, you will find appendices containing supplemental examples to bring you one step closer to your fund goals. You will have the necessary insight to smoothly launch and grow your firm. Do not stop there. Come back to this book when you need a refresher or after you have achieved your first fund launch and start delving into your second, third, or fourth funds and beyond. One step at a time, you will develop resilience to persevere through the hard parts and endeavor to create something that will endure.

Our best,

Shea Tate-Di Donna & Kaego Ogbechie Rust

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or visit https://www.venturefundblueprint.com

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Chapter 1  

Investment Thesis

Chapter 1  

Investment Thesis

Designing Your Strategic Vision

You should begin your endeavor with both a vision and a strategy. Your vision is your desired outcome, and your strategy is the collection of resources used to reach the desired outcome. Vision and strategy share an iterative and codependent relationship: the more you clarify your intended outcome, the more apparent your resources become. By continually refining your vision and strategy, you greatly increase your likelihood of success along your journey toward launching a fund.

Every fund manager has the same macro vision and the same macro strategy: — to operate a successful fund and raise capital from investors to invest in portfolio companies that generate a multiple return on investment. Given these broad, expected consistencies across fund managers, you must find a way to distinguish yourself from the pack. Your vision and strategy are critical components of establishing your fund’s differentiator and investment thesis. An investment thesis is an overall set of principles that you will use for your fund to make investment decisions. Your investment thesis should give your investors a better sense of your philosophy for investing and expected portfolio composition, while also revealing what gives you a competitive advantage that other funds do not have.

After you have asked yourself the key questions outlined in this chapter, you should be able to describe the three core components of your investment thesis, including (1) what you invest in, (2) what your competitive advantage is to understand, access, or own those investments, and (3) how this advantage benefits your performance and leads to returns.

New Fund Manager Questions

The following series of questions will help you clearly define your vision and strategy as a new fund manager. Each question will help form your investment thesis, which is the set of principles that you will use to make investment decisions.

Step #1

Goal: Set Your Vision

What is your fund’s specific focus? Are you targeting a specific region, market, sector, stage, or business type? Will you focus on investing in industry-changing companies, or companies focusing on fintech, insurtech, real estate tech, agtech, edtech?

What role will your fund play in the space in which it operates? Will your fund aim to disrupt an existing industry or bridge a market gap?

What do you want your fund and firm to be known for in the market? What are the guiding principles that your fund offers to investments, such as technical expertise, quick turnaround times to invest, support, availability, diversity of intellect, coaching, or connecting portfolio companies to partnerships/recruiting/investors?

What fund or firm do you most respect?

What are the goals of your investors? What quantifiable return on invested capital will you obtain for investors over the fund’s lifetime of approximately ten years? Will your investors aim for access to co-investments or access to direct portfolio company investments?

What does success look like for you in two years? In five years? In ten years?

If you have made prior investments and plan to make similar investments, answer the following three questions for each:

How did you source that investment?

Why did you invest?

Once you invested, how did you add value?

Step #2

Goal: Define Your Strategy

Background

What are your strengths and interests as an investor? Are you process-focused; an expert in your field; or known for high-level support, quick turnaround times, availability, coaching, or connecting portfolio companies to partnerships/recruiting/investors?

If you do not have a traditional venture background, what is your alternative illustration of investment ability and long-term track record, such as a foundry fund, advising, angel investing, or Founder networks? What is your related investing track record? Have you successfully made related investments or seen great returns? What is your prior experience?

Do you have permission to disclose your prior track record to potential fund investors and the ability to update said track record in the future? Do you have access to track record data and the ability to have a reference confirm such data?

What experience can you draw from to inform your investment decisions?

What special insights have you gained from your experiences? Have you identified a gap in the market, an untapped region, or an opportunity for an improved process?

What are your team dynamics? How do those dynamics help you to work as a functional and efficient unit? How long have you known each other, how well do you know each other, have you invested together, and how do you make decisions?

Do you have any reservations or doubts about launching a fund? Are there any reasons that you should not do this?

Competition

Who would be your fund’s competitors, and what differentiates your fund from them, such as brand, reputation, personal relationship, and expertise? Who might receive investor capital instead of you?

Are there specific funds that came before you, on which you would model your approach? Who do you see as the market leaders on performance, brand, team, and relationships with portfolio companies?

Why does another fund like yours need to exist? What metrics demonstrate that your advantage is appealing?

Outlook

What macro challenges do you believe portfolio companies face in the market, and why would your firm be best positioned to assist? What are some pressing issues portfolio companies need your help with, such as challenges recruiting locally, challenges with operational support, or challenges accessing capital?

How long do you expect to raise your fund? Note that it often takes a first-time fund manager 12 to 18 months¹ or longer to raise an initial fund, while the majority of fund managers never go on to raise a second fund at all.

What impediments, roadblocks, or obstacles do you foresee in the first three years, such as a lack of salary while fundraising, a smaller first fund than anticipated, or overwhelming contribution of personal net worth into your fund?

How will you pay for expenses incurred prior to raising your fund? How will you make payment if your fund does not get raised?

Investor Base

How many investors do you intend to target based on the average minimum check size expected?

Who are your target investors, and what are their relative advantages and disadvantages, including high net worth individuals, family offices, fund-of-funds, endowments, foundations, universities, public or private pension plans, insurance and financial services companies, investment partnerships, governments and/or sovereign wealth funds, strategic corporate investors, consultants who act as gatekeepers, or other institutions?

How will you gain access to those investors? How will you leverage your existing relationships and your network to raise your fund? Will you work with placement agents that charge you a fee based on the percentage of new money raised and may help find interested investors?

What is your expected diligence process on investors, and what is their expected diligence process on you and your firm, which is the act of evaluating potential risks and fit?

Will you have an anchor investor? If so, will the anchor investor receive preferred terms such as a reduced management fee, reduced carried interest, or preferential co-investment terms?

How many investors do you intend to target? What is your expected close rate or percentage?

What is the minimum investment amount for investors based on the minimum amount of capital needed to make the fund viable?

What will motivate your investors to invest in your fund and close in a timely manner, such as returns projections based on your previous returns or track record, capital preservation, diversification, industry knowledge, or ownership opportunities?

Do your prospective investors’ expectations match your investment thesis? Note that high net worth individuals may have more condensed timelines than institutional investors.

What challenges might your potential investors face? Will your potential investors require a certain level of communication and transparency with you?

Portfolio Companies

Which sector(s) will you invest in, such as AI, SaaS, life sciences, fintech, security, retail, or hardware? Will you invest in multiple industries? Will you be industry agnostic?

Which