7. November 2012–
This is the second instalment of our how-to guide to launching a VC fund from guest contributor Pietro Bezza (pictured below). He is the Managing Director at Connect Ventures and has experience launching his own company. Here he gives us his next five tips - from finding funding to structuring a VC...
6) Build your own investment thesis
We firmly believe that as investors it is important to have at all stages of the fund life - a sound investment thesis. It is more than the mere sum of various investment criteria. A sound investment thesis helps to establish strategy and goals of the fund and it represents a founding “philosophy” of our approach to investment. We are committed to evolve our investment thesis in respect to the market evolution
We have founded Connect Ventures based on five key points:
- Marc Andreessen’s idea that software is eating the world
- Networks of highly engaged users are the basis for long-term value
- Modern startup methodologies reduce capital requirements and lead to faster, scalable growth
- There is a European early-stage funding gap
- Europe produces world-class technology companies
7) Find the funding
You can bootstrap a company, but you can’t bootstrap a fund. Raising capital is the essential step for any fund, as without money to invest a fund simply can’t operate.
In raising a fund, it’s best to find an “Anchor Investor”. The Anchor Investor is the first investor who believes in your project, helps you fine-tune the structure and sets the terms of the fund for the subsequent investors. Without an anchor investor, it’s hard to have a fund.
At Connect Ventures we have the De Agostini Group as our Anchor Investor and, together with our own money, we made a first fund closing in January and started operating right away so that we could be in business, more easily build our brand, boost our deal flow, and support further fundraising with our ongoing track record.
Since that time, we’ve signed on additional investors and we have a few more that are in process to join us.
8) Set fund structure
Corporate structure is more elaborate when starting up a venture capital fund than a typical business.
A fund is different in governance, in corporate framework, and in the legal agreement among investors and fund managers. These issues can vary by jurisdiction, form, and setting. Investing is a regulated activity and it requires legal, fiscal and regulatory best practices. Fortunately it is standardized enough that everyone can learn with a bit of dedication.
So we researched, benchmarked, simulated, chose, and finally executed the Connect Ventures Fund, as:
- a UK Limited Partnership
- a Limited Partnership agreement, designed to define the fund’s operation and to align interests amongst fund investors and the fund management team
- a management company, set as a small collegial partnership composed of Bill, Sitar and myself, where the three of us form the investment committee
9) Establish a Brand
Whilst the fund structure is a “one off” task, establishing a brand is an everyday activity. Building a well-acknowledged position in the tech startup ecosystem is important for many reasons, but mainly helps us let everyone in the industry know which values and what culture we bring with us as at Connect Ventures. We try to be accessible, entrepreneur-friendly, hands-on, and transparent.
10) Execute, validated learning, iterate
This is our everyday philosophy. We keep working hard on our learning curve in order to improve as a team, as supportive investors in our portfolio companies, as fund managers, and as active members of the startup ecosystem.
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