Make a first fundraiser
Managers are not afraid to start with a very small fundraiser that will appeal to other investors.
When he raises an investment fund, whether it is his first or subsequent ones, the manager sets a fundraising target. It displays a target amount that would allow it to fully accomplish its investment strategy, without denying its ambitions. Often his investors will even ask him for a hard cap, so that the manager does not fall into delusions of grandeur. The target lift will certainly be lower than the hard cap. In addition, the manager will set for himself, without informing his investors, a floor, a minimum sum to invest without harming the overall strategy.
The objective must therefore be a point of equilibrium between the hard cap and the floor, the floor the viable minimum and the hard cap a reasonable ceiling. Whether he reaches the floor, the objective or the hard cap, the manager must be able to execute his strategy, adapting it to the amount raised. If it only reaches the bottom, the manager may have to limit his capacity for reinvestment or follow -up , or even reduce his average ticket to respect a minimum number of investments. With the hard cap, he will be able to consider a greater number of follow - ups.
The manager will still have to be careful not to upset his strategy in excess or misery. In excess, he will be tempted to aim too big: his fund would no longer become seed , but Serie A or B, when he has neither the networks nor the skills to play in this category. Conversely, he should not venture into small files that he would find difficult to evaluate because he has not succeeded in raising his floor.
Do not fear starting small
However, neo - managers should not worry about not being able to raise at least the floor. Not only is capital abundant on the markets, but the manager also has a period of twelve to twenty-four months between the admission of the first and last investors. Achieving your goal on the first trick is a feat. Few managers, even the most attractive, can claim to finalize their fundraising objective in a few weeks. Even if they would reach a high amount, they would push to go to the hard cap.
Neo - managers must take advantage of this long period to succeed in their fundraising. They benefit from twenty-four months between the first and the last. Including the period of the road show, they can count on three years to convince. There is therefore nothing serious if the first closing meets only a small fraction of the objective. Managers arrive at their goal at the end of the race, when their first closing was only 10 or 15% of it. By making a first closing , they will have triggered a movement.
The arrival of the first investors will call for air for the following ones. The latter will be reassured in many respects: on the one hand, a handful of investors have already validated the manager's value proposition. Their analysis will be facilitated, perhaps even biased, by this cohort. On the other hand, the following know that they are investing in an already established structure: they will not be the only ones to invest, their dilution objective will be all the easier to achieve. Finally, they will be won over by the fear of loss. The manager can insist that the investment window will close soon.
In order to attract these first investors, qualified as early bird , the manager can lure them with more attractive investment conditions. He must be grateful for the risk taken by his early birds . This recognition will result in benefits that subsequent investors will not have access to (carry, management fee , opportunities, etc.).