All of you out there raising your first fund. This blog is for you. 👊.
Recommended listening while reading:
- “I have waited a lifetime
- Spent my time so foolishly
- But now that I found you
- Together we’ll make history”
Raising a first-time fund. The struggle is real.
The endless LP meetings, did you do well in the meeting? Will they give you an answer? (definitely, probably not). You know in your gut your firm needs to exist. You will work with great founders to solve big problems for your investors and the betterment of the world. But the LPs, rightfully so, want some proof points. And reality sets in – you are new. There isn’t any proof with this specific strategy yet. Sometimes it feels like you just need someone to take a leap of faith. Well, I have some good news for you – First Time Funds do happen. A lot.
We dug into our proprietary dataset and analyzed over 10,000 successful fundraises from around the world. To make sure the analysis is relevant and informative to current entrepreneurs and VCs, we limited our output to fundraises that:
- Successfully raised with a final close (we may do another piece on the failures).
- Had a final close within the past 20 years (1998-2017).
- We excluded the long-tail of funds after their 20th successful fundraise as they did not meaningfully impact the results and this improved formatting so you can read the charts.
Here’s what we discovered
Over the last 20 years, nearly 40% of VC fundraises were first-time funds. We’re not exactly sure if this is encouraging for first-time funds or discouraging for your eventual ability to raise fund 2, 3, and 4. But regardless of turnover, first-time funds are an important piece of the asset class.
And if we look at only the past 5 years we see an increase in firms focused on investing in early-stage companies. Nearly 30% of all VC fundraises have been first-time early-stage funds.
But, as expected, your first fund is typically going to raise less capital than your next fund. In terms of dollars raised, over the past 20 years, a first-time fund raises about 24% of all capital raised.
So, if you’re on the fundraising trail, specifically for a first-time fund. I hope it is encouraging that there is a very healthy market of LPs for your first-time funds.
And first-time funds are – dare I say – commonplace?
You’ll get there. It does happen. And you can do it.
Were you surprised by these findings? What questions just popped into your head? That one. The question you’re thinking about right now.
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