The Science Of Building A Venture Capital Fund


Over the past decade, venture capital has undergone a remarkable transformation. What started as a boutique industry dominated by former founders has blossomed into an institutional asset class brimming with aspiring professionals. Consequently, venture investing is no longer just a craft, but a career. For those just starting out, generating good returns can feel like an art, but building a platform that extends beyond a single fund is more of a science. In search of the formula for building a long-lasting, industry-leading venture capital fund, I sat down with Winter Mead, a former institutional LP and co-founder of venture fund accelerator Oper8r.

Allison Baum Gates: How long have you been investing in VC funds?

Winter Mead: I began investing in VC funds over a decade ago as part of the private equity team at Hall Capital Partners. I doubled down on VC in 2014 when I joined Sapphire Ventures (formerly SAP Ventures) to invest exclusively in VC funds across the U.S., Europe, and Israel. Based on that experience, I wrote a book geared toward first-time fund managers called How To Raise A Venture Capital Fund, and co-founded a company called, Oper8r, which helps emerging VCs become institutional fund managers through an education and community-based cohort program supported by over 150 LPs.

ABG: Why should more institutional LPs be investing in new managers?

WM: Emerging managers have historically outperformed, which presents a compelling investment opportunity for LPs. Emerging managers are nimble experts in early-stage VC, and the good ones implement valuable strategies, address new gaps in the market, or target specialized areas of value creation.  LPs are usually investing in VC to access new market opportunities and transformational technologies that are solving big problems, so that should certainly be attractive to them. Furthermore, LPs who focus on new managers will find many smart, accomplished investors, and those who are flexible will be able to build great relationships early so they can capture real value in their portfolios. 

ABG: What do you think is preventing emerging managers from raising from institutional LPs?

WM: I have noticed three core challenges for emerging VC managers. First, they don’t know what they don’t know. Building an institutional VC firm is difficult. It takes time and there’s a lot you need to know and learn (hopefully quickly) as you’re building your firm. Getting this firm-building information requires years of experience. Most emerging managers will make lots of mistakes and pay expensively for those mistakes. 

Second, new managers tend to have fewer LP relationships in the beginning. Good VCs tend to have extensive founder relationships, but fewer LP relationships that are required for scaling your firm. 

Third, many new funds don’t have insight into how institutional VC firms scale. While it’s easier than ever to start a fund in the current market environment (I alone probably see up to five new funds per week), scaling a fund still takes significant effort, resources, and knowledge. 

ABG: How are you filling this gap through your platform?

WM: Oper8r is a cohort program that combines education, mentorship, and community to help build and scale the next generation of outperforming emerging managers. I’ve been building relationships with great investors for the last decade, and through Oper8r, I am getting introduced to even more investors with great potential. Many of these investors are already on the right path and are demonstrating early signs of success, and the goal of Oper8r is to accelerate their success. Selectively, I also advise VCs on a bespoke, asynchronous, sprint basis given the timing sometimes does not work for joining the Oper8r program.

ABG: What role do you think new innovations like special purpose vehicles (SPVs) and rolling funds should play in helping new managers get off the ground?

WM: SPVs (which I refer to as a “blurry vision” strategy) and rolling funds enable more investors to build track records. These investors may decide at some point that they want to be professional VCs, at which point they will scale up their VC firms and investment strategies. This is where Oper8r becomes most relevant — helping bridge that gap between great investor and professional VC or fund manager.

ABG: What advice do you have for emerging managers that are trying to build relationships with institutional LPs? 

WM: Three pieces of advice. One, try to start building the relationship with an LP in a non-pitch environment, for example, through an educational program like Oper8r. Two, understand what motivates institutional LPs. This differs widely across LPs. Ask the right questions and listen carefully when talking to LPs, or else you may end up wasting a lot of time that’s better spent elsewhere. 

Finally, most institutional LPs are busy. Many are part of small teams, and every day, they are just keeping their heads above water. Because LPs also prefer to invest in lines, not dots, have patience and an objective perspective when you are building these relationships. Twelve months of due diligence for an institutional LP investing into a VC fund is like a week or two for a VC investing in a great startup. Many times, these institutions are meant to last forever (cue The Sandlot!), so while you want to close your fund yesterday, the LP is looking for value in the confines of managing risk to ensure the continuity of the institution for many, many years to come. 

ABG: What is your biggest focus for the next year?

WM: As part of the founding team at #openLP, I focused on cultivating more transparency in VC, especially between VCs and LPs, andI continue to learn how to best bring constructive transparency to the VC. Being a great VC is multi-functional, especially for smaller firms. You have to be great at fundraising, firm-building, fund management, and even providing professional services to startups, as well as investing, of course. Oper8r is fully committed to the mission of helping emerging VCs become great fund managers. 

This conversation has been edited and condensed for clarity, and is part of a series: VC at a Crossroads: Change or Be Forgotten. The full interview series can be found here.

If you are an institutional Limited Partner investing in VC funds and you are interested in increasing access to the industry, please get in touch at allison@sempervirensvc.com.



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