How to Find Limited Partners: Leveraging Your Network - VC Lab (2024)

Launching a VC firm can be a demanding undertaking. New fund managers face many challenges, including fundraising and finding new LPs. Even with a vast network of investors, fundraising can prove to be a challenging task, so the process can become more arduous without deep-rooted connections in Venture Capital.

Difficulties can arise as many LPs prefer to stay anonymous and do not publicly share their investment status’, objectives, or activities. In our ‘How to Find LPs’ series, we guide new fund managers to leverage and expand their networks. This article will briefly outline ways to leverage your existing network and offer some ways to gradually grow your connections within Venture Capital. When doing so, it would be advisable that fund managers care to avoid general solicitation.

• Leveraging Your Network
• Connectors
• Events and Conferences
• Cold Outreach

Leveraging Your Network

• Utilizing Personal Networks: Engaging with GPs, founders, friends, and family is often the primary source of fundraising for new VC firms.
• Determining Fund Size Through Networks: The extent of funds raised through inner networks often significantly dictates the total fund size, guiding the overall fundraising strategy.

To run a successful fundraising campaign, it is recommended that you and your partners engage with your network of GPs, Founders, friends, and family. Typically, this will be theprimary source of your fundraising effortsif you have a vast network. We find that the amount you can raise from your internal network is asignificant determinant of your total fund size. Therefore, we advise that youmultiply your hard commitments from your inner network by a factor of 10to find your optimal fund size. Refer to VC Lab’s freeNetwork Evaluation Templatespreadsheet for guidance on estimating your ideal fund size.

Connectors

• Importance of Industry Connectors: Identifying and collaborating with well-connected individuals in the venture capital sector can exponentially increase access to potential investors.
• Engaging with Connectors: Building relationships with industry connectors can lead to fruitful introductions and partnerships, enhancing fundraising efforts.

One of the best ways to meet new Limited Partners is byutilizing existing relationshipswithin your firm to those who canconnect you to potential investors. Connectors are typicallywell-connected individuals within Venture Capitalwho canopen their networksto enable you tofundraise efficiently. They can become one of yourgreatest assets when fundraising.

Connectors allow you to leverage andadd more nodes to your networkandexponentially increase your ability to meet and raise capitalfrom Limited Partners. These can beFounders, otherVenture Capitalists,Limited Partners, and anyone who can connect you to a pool ofHigh-Net-Worth Individuals(HNWIs) that are willing toinvest in the asset class.

Events and Conferences

• Networking at Industry Events: Participating in key venture capital conferences and events can complement and enhance fundraising activities.
• Pitching Strategies at Conferences: Utilize these platforms for more than just networking; they’re opportunities to pitch effectively to committed and potential LPs.

Events and conferences are arelatively good way to expand your network. However, your primary use of venture conferences is usuallyto pitch to your LPswho have madesome level of commitment. Though conferences such as Slush, TechCrunch Disrupt, South by Southwest, and RAISE can be a great medium for pitching LPs, it would be a sub-optimal strategy to attend them for thesole purpose of finding new LPs.This is a costly mistake made by some new fund managers and can divert them from their fundraising efforts. As stated before, a large bulk of your investors typically come through 1st and 2nd-degree connections you have as well as your close acquaintances, so this can be your initial area of focus.

These conferences willplay a part in your fundraising process, though it will be much later when you have found a significant amount of LPs and are in theprocess of pitching. When you have substantial interest from LPs, you can refer to our ‘How to Pitch Limited Partners’ article, which shines a light on this process and guides you in pitching these LPs.

Cold Outreach

• Effective Cold Outreach Strategies: Regularly expanding your network through targeted cold outreach is a proactive way to discover new investment opportunities and backers.
• Targeting Suitable Investors: Focusing on HNWIs and Family Offices, who are typically more receptive to investing in new VC firms, can yield more fruitful outcomes.

Even when you are not fundraising, you canaspire to expand your networkandbuild new relationships. Cold outreachcan be an effective wayto do this and is utilized by some of the most seasoned Venture Capitalists. The caveat is that running a cold outreach campaign can be meaningless unless implemented correctly. In your cold outreach, you can target HNWI and Family Offices, as typically, they are the most suited investors for new fund managers. This is outlined in our article “The Best LPs for New Fund Managers“. Typically, large institutional investors and endowments do not invest in new fund managers who manage small funds. Therefore, it is un-optimal for you to focus your efforts in building long-term relationships there.

When focusing on HNWIs and Family Offices, you can be very particular in whom you target and your messaging as to not generally solicit. Remember that the goal here is to build long-term relationships and not advertise your fund to the masses. As previously mentioned, LPs can be very illusive and hard to find on the internet.

To master the process of finding new LPs and converting them, refer to our other guide in our How to Find LPs series on ‘Conducting Cold Outreach.’

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