I probably say this every other newsletter issue: I hate recipes in Venture Capital. Venture Capital is complex, it’s a business that is dependent on impossibilities becoming realities. It takes a lot for a Limited Partner to participate in the madness. And it’s probably not a 5-step recipe that will convert a Limited Partner to back your fund.

But then how should Emerging Managers think about their strategy of guiding interested investors towards becoming committed Limited Partners?

Over the last years I got to observe, back, speak to, and also interview a few of those GPs who seem to have found something within themselves, their Limited Partners, and their fund strategy, that repeatedly resulted in LP commitments.

I have seen some GPs oversubscribe their fund within a few weeks, some spending 2 years on the road and in airplanes, some taking every dollar they were offered, and some reach their fundraising target according to their hopes and plans.

Today I want to share what I have observed in these Emerging Managers that helped them convert Limited Partners and also want to share from my perspective as an LP on what type of relationships LPs value.

Fundraising is as much about storytelling as it is about performance. Crafting a narrative that resonates with LPs is what sets great managers apart.

On Wednesday, November 12 at 2P ET, Sydecar and I are hosting our second pitch workshop, back by popular demand. In this small-group session, we will guide an interactive discussion designed to help emerging managers sharpen their pitch and communicate with clarity and conviction.

The live Zoom session will be off the record and conversational, offering space to exchange feedback, workshop your story, and learn from real examples.

Ideal for:

Apply here for this workshop

Volume #38:

Whenever I interview Emerging Managers who successfully raised their fund, I always formulate questions that get at how the GP managed to:

Why? Because with every question I ask, I slowly but surely get to peel layers off that reveal to me the self-awareness, level of intentionality, and the types of relationships the GP has with themselves and the people they partner with.

Creating momentum is not about artificially trying to set things into motion. It is using your gifting in the most advantageous way towards a goal that shoots upwards.

Some people create momentum by utilizing their gift to develop their online presence. Some people create momentum by meeting with their local community of institutions and allocators. Some people create momentum by tapping into relationships they built at their previous jobs. Emerging Managers go about creating momentum very uniquely to their gifting and past experience.

The simple truth for both GPs and LPs to keep in mind is that all Emerging Managers need momentum, but not all create momentum equally.

But the one thing that is more difficult than creating momentum, when it comes to fundraising in Venture, is to keep momentum.

So, how should Emerging Managers think about creating momentum and then keeping it? This is of course where your pipeline process comes into play. How do you manage the relationships that you are building with potential and then existing LPs? How do you guide potential LPs through the process from the initial meeting all the way through the DD process to a commitment?

What’s your communication cadence like, when do you provide access to the data room, when do you follow up with LPs if they don’t respond? What LPs do you give more time, what LPs do you know need more face-to-face conversations vs others?

These are all questions that require the Emerging Manager to question how they want to go about building relationships with Limited Partners.

And here is another truth: it will be frustrating at times. Some LPs will move slower than you need them to. Some you will invest time in that won’t convert to a check. Some you will invest time in that will invest in subsequent funds, but not the current one.

There is no recipe to avoid you wasting time.

And with the frustration of constantly building and sustaining momentum, will come the temptation to give into your frustration. This temptation can manifest itself in various ways, i.e.:

There is a story in the Old Testament, which documents the journey of the Israelites out of slavery into the Promised Land. I want to use this story to extract a principle that best describes the type of relationship Limited Partners desire with Emerging Managers. It’s a story against extractive processes and a story for invitational leadership.

Please keep in mind, I can’t speak for all Limited Partners.

The story goes as follows:

After the Israelites spent years in slavery and captivity in Egypt, Moses leads them out of Egypt and towards the Promised Land. During their journey through the wilderness the people complained about lack of food and water, and God provided them with bread from heaven and quail for meat. For water, God told Moses to strike a rock with his staff and water flowed out for the people to drink.

The Israelites had to wander the desert for forty years. In the last year, as they were getting closer to the Promised Land, the Israelites were thirsty again. God told Moses to speak to a rock to bring forth water for the people.

But Moses took his staff, and just like the first time, struck the rock, this time twice. Even though Moses struck the rock, instead of speaking to it, the rock still brought forth water. but Moses’ disobedience of striking the rock despite being commanded to speak to it, resulted in Moses not entering the Promised Land.

What happened? Why did Moses strike the rock even though he has seen God stick to His word in every previous occasion?

Moses fell to his temptation to exercise force vs invitation. He used his staff, not his voice. It’s a story that shows the temptation of power when invitation, or our voice, really is the medium that quenches the thirst and needs of the people around us.

The goal for this newsletter issue is to not make a theological argument, but to draw wisdom out of the story into our own lives. So often I encounter Emerging Managers who beat the rock in their LP CRM-process. They’ve had it. Walking through the desert for 40 years with people that are difficult to be lead.

So they end up leading an extractive process rather than a process of understanding and invitation. They end up using their staff rather than their voice.

Their extractiveness oftentimes manifests itself in how they approach the introductory call and the relationship thereafter. This means to learn very little about the Limited Partner they are talking to, but talking more about themselves and their fund.

As an Emerging Manager you oftentimes will be entering a role that functions somewhat as a shepherd of people. You will have to intentionally guide prospective LPs through a process that ideally ends within a commitment to your fund by the LP. And especially once committed, you will have to steward the collective of Limited Partners that chose to back you and your fund.

This type of shepherding takes an enormous amount of energy, intentionality, patience, and many more words than your staff. This is about relationships.

What I am not saying is that you shouldn’t be strategic. Quite the contrary, I want to encourage you to be MORE strategic. I want to encourage you to reflect on your current LP CRM process and strategy. How are you approaching your LP funnel. What steps are you having LPs walk through. When do you follow up with who? What makes someone a prospect to invest in your fund, how do you prioritize, and who, and when?

The other thing I would like to encourage Emerging Managers with is to ask themselves how they are uniquely positioned in building meaningful relationships with Limited Partners.

Do you have a strong local collective of institutions and allocators, like John Zeratsky mentioned in his last interview with me? Who are potential LPs that would appreciate you spending more unguarded time with them?

“Not Bigger Barns - Bigger Tables” is a motto for my wife and I. Even if the harvest is big, we don’t want to position our life in such a way where I can store more, but life in such a way where I can share more.

The table is where people come together, where you listen to stories, see one another for who you are, and have needs met.

The barn is where excess is stored. The is a time for a barn, but sometimes the barn is already big enough.

How can you build a table for the Limited Partners that are interested in backing you, or that you already have a committed relationship with?

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