Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
Targeting investors for your fund and getting buy-in is a key step in raising a fund.
Potential investors include family offices, high-net-worth individuals (HNI), and angel investors.
Larger institutional investors such as pension funds, are typically not interested in unproven fund managers and rarely go below $50M funds.
Institutional investors look for a prior track record and have minimum investments that would put their investment above a limit on how much of the fund their investment takes. This is typically around 20%.
You could engage a placement agent whose fee is usually in the range of 2 to 3 percent.
You can also use meetings with investors before the fundraise to see how the market will respond.
The key to launching the fund is to secure an anchor investor who will allow you to use their name.
This gives the fundraise momentum as the initial funds are secured.
The most common question will be about past performance. If you have led funds in the past, then you have a track record to present. If not, then if you invested as an angel investor in numerous startups, then that too could give you a performance record. Be sure to highlight any investments that resulted in a successful exit.
If you were an operator of a company with a successful track record, that could be used as well.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.
Let’s go startup something today.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.