How to Launch a VC Firm

The venture capital industry is transforming, with new managers reshaping fund launches and operations. Drawing from data of 600+ successful fund launches through VC Lab, a clear pathway has emerged for launching new venture firms, with the average first-time fund size around $12MM.

Key steps to launching a venture firm:

• Craft a Distinct Thesis
• Test with Trusted Confidants
• Validate Market Interest
• Approach Known LPs
• Demonstrate Deal Flow
• Formalize Commitments

What is a VC Fund Thesis?

A VC fund thesis is the strategic foundation defining your investment strategy and differentiation. The winning formula follows: "[Fund Name] is launching a [$x MM] [Stage] venture fund in [Country/City] to back [Geography] [Sector/Market Companies] [with Secret Sauce]."

Key components of a strong thesis:

• Clear market opportunity
• Defendable edge
• Realistic fund size
• Logical investment strategy
• Proven deal flow sources
• Relevant background alignment

How to Test Your VC Fund Concept

Testing involves validating your thesis with twenty trusted confidants before significant fundraising efforts. The goal is achieving a 20% positive response rate, meaning 1 in 5 confidants express genuine interest in investing or making meaningful introductions.

Target confidants should include:

• Successful entrepreneurs
• Professional investors
• Industry experts
• Experienced VCs
• High-net-worth individuals

Creating a Compelling VC Fund Pitch Deck

After thesis validation, create a clean, professional pitch deck with white backgrounds and concise slide titles. Essential slides include Title, Thesis, Team, Value Add, Market, Track Record, Pipeline, Allocation, Returns, Liquidity, Economics, and appropriate disclaimers.

Securing LP Commitments and First Deals

Successful first-time managers typically secure their first close within 6-8 months. Run parallel processes for LP engagement and deal sourcing, focusing initially on family offices, high-net-worth individuals, and former colleagues. Secure at least 10% of target fund size in PACTs and additional 10% soft circled before formal closing.

Final Steps to Your First Fund Close

Focus on converting soft circles to hard commitments, preparing documentation, setting up operations, and maintaining deal pipeline momentum. Many successful firms start with a smaller first close (around $12MM) and continue raising capital while making investments.

Conclusion

The path to launching a VC firm is now well-defined and accessible, with proven methodologies and support systems available. Success depends on developing a differentiated thesis, thorough validation, professional execution, and disciplined process management, typically achieving first close within 6-8 months.

For more detail on this subject, see How to Launch a VC Firm by Decile Group, the leading platform for modern venture capital.

https://decilegroup.com/articles/how-to-launch-a-vc-firm