1/ As it approaches my fifth year as an LP, with most of that time spent supporting first time & emerging fund managers via the ECF programme, I looked into the most common reasons why I didn’t progress with VC proposals 👇 #VentureCapital
2/ Team – Typically, sticking points are focused on an incomplete or under-resourced team for the step up to managing institutional LP capital, where there isn’t a relevant history of working together, or there is too much key person risk (we do not back solo GPs).
3/ Value Add – Every prospective Manager says they have it, but only a few can articulate & demonstrate how their value proposition to founders is differentiated. Why would a founder take capital from you over others? Just stating that a network can be leveraged is not enough.
4.1/ Investment Strategy – The broadest area listed, with this typically including a lack of focus be that on sectors or stages, a lack of access to high quality or differentiated deal flow, a Manager unable to outline why they are best placed to execute on their focus area..
4.2/ Fund models which do not appear to draw on macro or historic investment data, no understanding of the enterprise value which needs to be created to provide a positive return for LPs. Can you explain how and why you’re expecting to beat the market?
5/ Timelines – If we are at the beginning of our process and private capital has been raised but is yet to be closed, timelines may not align. The structure of the ECF programme means we must be a first close investor.
6.1/ Track Record – An interesting consideration for first-time fund managers. We see a varied group of individuals looking to raise funds with there typically being some investment or operational background present..
6.2/ Prospective managers need to be able to demonstrate relevant experience that aligns with the fund’s investment strategy and that as a team they collectively have the skills required to manage an institutional fund. Deployment of capital is useful.
7/ Conflicts – Partnerships with other firms, preferential treatment to specific relationships, wishing to follow-on into previous investments or running multiple funds at any one time which interact can all be areas of concern.
8/ Terms – Less common due to supporting fund managers early in their thought process and more a point of discussion. If you are raising your first fund and not charging vanilla terms, there has to be a very good reason.
9/ Private Investor Traction – Again, not a particularly common area due to the ECF programme’s role in the market but some early conversations with other potential LPs are always useful and having an understanding of who invests in the asset class.
10/ Feedback – We see a large number of proposals in all shapes, sizes & managers at different stages of their journey, & provide feedback accordingly. Feedback isn’t just a checklist to progress. Consider it and think about why the points have been raised
11/ Raising a first time or emerging fund which invests solely in early-stage UK companies? The ECF programme may be a good fit - british-business-bank.co.uk/ourpartners/en… #VentureCapital #BBBECF
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