This week's newsletter features insights from an emerging fund manager on the tools used to raise capital for the fund and what to include in a fund's data room. Also, Russ Heddleston of DocSend shares advice on being a solo founder vs. having co-founders, plus an update on last week's startup fundraising metrics. Currently fundraising founders, check out the upcoming Spring Edition of our Pitch Deck Teardown event co-hosted by Freshworks for Startups and a panel of top-tier VCs.
Emerging fund trends & tech tools
Having gained experience as both a founder and an investor during his career, Max Flietmann, creator of VC Stack, shares his insights on emerging funds trends and the tools he's used in building a fund.
What should emerging fund managers consider when it comes to a tech stack?
Max: How you want to build out your tech stack is a critical decision for emerging fund managers to make mostly because you won’t have time to spend on this. You can’t afford for these operational items to burden you.
First, the tools you’ll need as an emerging fund manager typically fall into two areas:
Tools that can make a difference for your fund performance. This includes tools for proprietary deal flow, portfolio value creations, or tools used for sourcing deals that no other fund has.
Tools that improve operational work. This includes managerial things like fund admin or LP reporting.
Second, there are a few different approaches to choosing your tech stack:
Best of breed approach. This is where you’ll use the best tool available within a certain category. For example, you’ll use one tool for deal sourcing, one for LP reporting, and one for sending out your pitch decks and data rooms.
One size fits all. If you’re looking for a one size fits all tool, the choices are a bit limited, but there are some available with additional functionality. Benefit here is managing less tools and probably less of a cost.
Resource availability. This is where emerging managers must ask themselves, ‘what resources in my fund can I dedicate to operational needs?. If your budget is limited, I would focus on using tools that bring you the most value as an investor, like choosing investments and helping founders. And then as your fund grows, you can consider tools that help with things like reporting.
What are tech stack must-haves for emerging fund managers?
Max: I always use the ‘best of breed’ approach when choosing tech tools. I take a look at what is really important for me and my fund to be successful, and see what tools I need to achieve that. These are some of my favorites:
Attio. This is a great tool for relationship management. It’s a modern version of a CRM, tailored specifically to Venture Capitalists.
Affinity. This is another great option for a CRM, if you’re not a fan of Attio. A tool like this is so important to have as an investor, because you will build such a huge network, but that comes with a lot of responsibility to make sure you’re following up on emails quickly.
DocSend. This is an industry standard. It’s critical to have detailed insights into your pitching and financial documents and to see exactly how, where, and when LPs are engaging with your content.
What’s included in your VC pitch deck and data room?
Max: What I think is necessary to include in your VC pitch deck is very similar to what I used to include as a founder. Besides, of course, the pitch deck, your data room should include more information on your fund. Specifically, legal documents, your own track record, research on the market you’re investing in, how you’re planning to build your fund, if you have a deal in the pipeline, etc. I would focus my pitch deck around five things:
Portfolio construction and thesis. What am I looking for and how many deals do I want to make? What is the expected outcome?
Deal flow. Where do I generate proprietary deal flow that other investors don’t have?
The team. Ultimately, people invest in people. So I would focus on persuading my limited partners to invest into me as a person.
My fund’s USP. What makes my fund unique? There are, I don’t know, 20,000, 30,000 VC funds globally. There has to be something that makes my fund different and stand out from the crowd.
References. Most emerging fund managers have already invested in a company or have made a deal, so I would try to include references to show that I’m doing a good job as an investor.
Every document in your data room should be a check mark for the investor, and the more check marks you get the closer you are to bringing them on board.
For more of this Q&A with Max, read the full post in which he shares something surprising he learned as an emerging manager and his tips for new emerging fund managers.
Pitch Deck Interest Metrics Update
All three Pitch Deck Interest Metrics fell last week after rising together the week before. Investor interactions fell 2.76%, Time Spent per deck went down by 3.7%, and Founder Links Created dropped 9.71%. Here's the full analysis of last week's activity.
Recommended Reads
Start up solo or bring on a co-founder? 4 factors to consider
If you are starting up a company or currently running your startup all by yourself, here are four things by Russ Heddleston, co-founder of DocSend, to consider when bringing in a co-founder (or not).
The team at Failory digs into how to determine what type of investors are a fit for you, how to navigate negotiating term sheets, and how to prepare your pitch material.
An emerging firm relies on Dropbox and DocSend to securely manage their operations and raise capital from LPs
The Director of Investor Relations at the emerging fund shared that his firm needed a more secure way to share sensitive financial documents with potential limited partners (LPs) in order to raise their fund I initial investments. Here's how:
If you’re a founder looking to fundraise, come get your pitch deck investor ready with a free review by our team and a chance to be featured in our live Pitch Deck Teardown event with Freshworks for Startups, plus a panel of top-tier VCs.
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