Behind the Scenes at a VC Fund, Part 3: Fund Structure, Fundraising, Investor Relations, and FAQs by Leo Polovets and Susa Ventures

TL;DR - While funds usually last ten years, the first 2-4 years companies can make new investments and the rest they mentor companies and may have follow-up investments.

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Topic Tags - VC Fund, Fund structure, How Funding Works

Questions answered:

  • How are VC funds structured?

Summary:

  • GPs are the fund’s day-to-day managers. These are the people who make startup investments. They can be thought of as the middlemen that connect LPs’ capital to the founders who need funding for their startups.
  • Funds typically last for ten years.
  • The first portion of that decade – typically 2-4 years – is an active investing period where funds make new investments.
  • Most funds make 20-40 investments during this period, with a typical investment being 1-2% of the fund’s total capital.
  • Most seed funds reserve a portion of their fund for follow-on investments. This is the portion of a fund allocated to follow-on investments rather than new investments.
  • Fundraising usually happens every 2-4 years for most funds, in conjunction with active investing periods. The goal is to have one fund’s active period begin immediately after the previous fund’s active period ends.
  • Fundraising involves building a pitch deck and having a compelling story about why your fund partnership is a good one to back. Once the pitch deck is ready

Follow-up Links:

How to raise funds at VC