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Stage 4 of 6

Fundraising for a first fund

Raising a first fund is the longest stage and the one most launches underestimate. It is usually raised from people and institutions who already know the team, before it reaches investors who do not.

Typical time: Commonly twelve to twenty-four months from first meetings to final close, and often longer.

Who backs first-time managers

The first money usually comes from people who know the team: former colleagues, executives of companies the team has worked with, family offices and high-net-worth individuals. Institutional investors that back new managers often do it through dedicated emerging-manager programmes, funds of funds or consultants that run them.

An anchor investor commits a large share of the fund early, often in exchange for better terms such as lower fees or a share of the GP’s economics. A seeder may also fund the management company. Both can make a first close happen; both cost something, and the terms are worth negotiating with counsel.

The materials

Expect to prepare a short pitch deck, the PPM, a track record schedule investors can check, case studies of past deals, team biographies and references. Institutional investors will send a due diligence questionnaire (many use the ILPA DDQ) and ask for a data room with the documents, the policies and the providers’ details.

Before any marketing, confirm with counsel what the offering exemption allows you to say and to whom, and how the adviser marketing rules apply.

Keep the process moving

Track every investor conversation, what each one needs to decide, and when their committee meets. Setting a target date for the first close gives investors a reason to finish their work.

Checklist: fundraising

  • Build the investor listStart with people who know the team; then programmes that back new managers.
  • Prepare the deck, track record and case studiesEvery figure checkable against your records.
  • Open a data roomDocuments, policies, provider details, team references.
  • Answer a standard DDQ in advanceMany institutional investors start from the ILPA DDQ.
  • Confirm marketing rules with counselWhat the offering exemption and adviser rules let you say.
  • Decide on an anchor or seederAnd what you will give for it.
  • Set a target first close dateA date gives investors a reason to finish.

Terms worth knowing: Anchor investor, Placement agent, DDQ, ILPA, First close, Final close, MFN clause, Side letter.

Recent first funds in the news

Closes and launches of managers’ first funds, from our reporting.

All fundraising news

Talk to someone who has done it

Tell us what you are launching and what you need. We will introduce you to lawyers, auditors, tax advisers or a manager who has raised a first fund. Free, and we take no referral fees from anyone.

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This guide explains how fund launches commonly work. It is not legal, tax or investment advice: rules differ by fund, investor and place, and change. Speak to your own lawyers and tax advisers before you act.