5 innovative fundraising methods for emerging VCs and PEs

Approaching institutions to raise capital for your venture capital or private equity fund is relatively transparent, but what if you’re targeting family offices and high-net-worth individuals? I see five innovative new methods for raising capital that emerging managers such as Versatile VC are using, which I’ve ranked in roughly descending order of popularity:

  1. Join online communities and virtual conferences where investors participate.
  2. Use a platform that helps other investors access your fund.
  3. Generally solicit under the 506(c) designation.
  4. Launch a rolling fund.
  5. Crowdfund from retail investors into your general partnership.

Will Stringer, CEO of Chisos, feels most family offices won’t respond to cold outreach. “You need to build a true relationship with family office investors or other general partners that can make warm intros to family office decision-makers,” he says. “Family offices, more than any other allocator, rely on trust. [It’s] not always the case (and always changing), but today it’s still the majority.”

When you’re raising capital for a fund, you’re fundamentally selling a luxury good, which is seen as more valuable because it’s scarce. That’s part of the secret of the hedge fund industry’s success in gathering assets.

The obvious solution therefore is to get in touch with your friends who have earlier raised or pitched to the family offices. You may also find professional intermediaries who are willing to make an introduction to family offices.

That said, the five methods I outline below may be faster and more efficient.

Join online communities and virtual conferences where investors participate

To meet other VCs (some of which may become LPs), among your options are Confluence, Gen Z Mafia, InnovatorsRoom (European focus) and TechAviv (Israeli focus). To find others, see: How to find the right online communities. I maintain a proprietary database of the communities I’ve found most valuable, which I share with other members of the Versatile team.

These venues allow you to efficiently get in front of many pre-qualified investors and follow up with those who seem like a tight fit. Unsurprisingly, the best online communities are limited strictly to LPs. Ideally, you’d partner with an anchor/friendly LP who can pass the word on your fund to other potential investors.

In general, at virtual conferences, I recommend first fill out your online profile with all possible keywords and your photo. Side-channeling is powerful and is the equivalent of going into a corner at a conference and talking privately. Look up the profiles of all the people attending a conference or in an online community and send the relevant folks a customized message introducing yourself.

This is one of the primary advantages of virtual events versus traditional face-to-face conferences, where people do not conveniently wear a hat with their LinkedIn profile visible.