.png)
The venture capital industry is experiencing a significant transformation, with new managers reshaping how funds are launched and operated. While traditionally dominated by established firms, the democratization of venture capital has created unprecedented opportunities for emerging managers to enter the market. Based on data from over 600 successful fund launches through VC Lab, we've identified a clear, repeatable pathway to launching a new venture firm.
The six critical steps to launching a venture firm are:
- Step 1: Craft a Distinct Thesis — Define your edge with a compelling format: "[Fund Name] is launching a [$x MM] [Stage] venture fund in [Country/City] to back [Geography] [Sector/Market Companies] [with Secret Sauce]."
- Step 2: Test with Trusted Confidants — Share your thesis with 20 people you trust and gather their honest feedback to refine your approach.
- Step 3: Validate Market Interest — When approximately 20% of your confidants express investment interest after iterations, develop a comprehensive pitch deck.
- Step 4: Approach Known LPs — Begin focused pitching to limited partners within your existing network for initial fundraising momentum.
- Step 5: Demonstrate Deal Flow — Secure an attractive potential investment to showcase your thesis in action when speaking with engaged LPs.
- Step 6: Formalize Commitments — Lock in hard circled commitments and initiate a structured closing process, preferably utilizing PACTs.
Today's environment particularly favors specialist managers who can demonstrate unique value in specific sectors or geographies. The average first-time fund size has become more accessible at around $12MM, allowing managers to prove their thesis before scaling to larger funds. This guide outlines these six critical steps that have helped hundreds of new managers successfully launch their firms, drawing from the proven methodology that has yielded:
- 65% of new firms launching outside the US
- 29% female General Partners
- 88% focus on pre-seed/seed stage investments
- Typical first close in approximately 6 months
Whether you're an experienced operator considering the switch to investing, or an investment professional ready to strike out on your own, this comprehensive roadmap will help you navigate the journey from concept to first close. We'll explore each step in detail, sharing real-world examples and practical insights gathered from hundreds of successful fund launches.
What is a VC Fund Thesis?
A venture capital fund thesis is the core strategic foundation that defines your investment strategy and differentiates your firm from the thousands of other VC funds in the market. Think of it as your fund's DNA - it should clearly articulate who you are, what you're investing in, and most importantly, why you're uniquely positioned to succeed in your chosen focus area.
Based on data from over 600 successful fund launches through VC Lab, we've identified a proven thesis framework that resonates with Limited Partners:
The Winning Thesis Formula
"[Fund Name] is launching a [$x MM] [Stage] venture fund in [Country/City] to back [Geography] [Sector/Market Companies] [with Secret Sauce]"
Let's break down each component with real-world examples:
- Fund Name & Size: Your identity and scale (e.g., "$12MM" - the average first-time fund size)
- Stage: Investment focus (typically pre-seed/seed for new managers, where 88% of emerging managers focus)
- Geography: Both base of operations and investment territory
- Sector/Market: Specific industry or technological focus
- Secret Sauce: Your unique advantage or insight that gives you an edge
What Makes a Strong Thesis
The best fund theses combine multiple elements of differentiation while maintaining logical consistency. For example, if you're focusing on AI startups, having technical expertise or industry connections in that space strengthens your thesis. Key elements of a compelling thesis include:
- Clear market opportunity
- Defendable edge
- Realistic fund size
- Logical investment strategy
- Proven deal flow sources
- Relevant background alignment
Common Thesis Mistakes
Even experienced professionals can stumble when crafting their fund thesis. Here are patterns to avoid:
- Being too broad ("We invest in great founders")
- Lacking genuine differentiation
- Misaligning fund size with strategy
- Overlooking proof points
- Failing to demonstrate deal access
The data shows that 65% of successful new managers launch outside the US, often focusing on underserved markets where they have unique insights or networks. This geographic differentiation, combined with sector expertise, has proven to be a powerful thesis foundation.
Your thesis should be both ambitious enough to excite LPs and realistic enough to be executable. Remember, you'll be living with this strategy for the next decade, so it needs to authentically reflect your passions and capabilities while addressing a clear market opportunity.
How to Test Your VC Fund Concept
Testing your venture capital fund concept is a critical step that many aspiring managers skip, leading to months of wasted effort. The most successful emerging managers validate their thesis with trusted confidants before spending significant time on fundraising materials or approaching institutional investors. At Decile Group, we've seen this validation process dramatically increase the success rate of first-time fund managers.
The Power of Twenty Confidants
Through launching over 600 VC firms, we've found that targeting twenty trusted confidants for initial feedback provides the ideal sample size. These confidants should include:
- Successful entrepreneurs who could be potential LPs
- Professional investors who understand the market
- Industry experts in your target sector
- Experienced venture capitalists
- High-net-worth individuals in your network
Structuring the Feedback Process
When approaching your confidants, follow this proven framework:
- Present your thesis in a casual, conversational setting
- Ask specific questions about the market opportunity
- Gauge their interest in potentially investing
- Document their feedback and concerns
- Iterate on your thesis based on patterns in responses
Pro tip: Keep your initial pitch brief - about 5 minutes. This forces you to focus on the most compelling elements of your strategy and allows more time for valuable feedback.
The 20% Rule
One of the most reliable indicators of a strong fund concept is achieving a 20% positive response rate from your confidants. This means that 1 out of your 5 confidants should express genuine interest in potentially investing or making meaningful introductions. Based on data from VC Lab's 600+ launched firms, this 20% threshold correlates strongly with successful first closes.
The testing phase is more than just validation - it's an opportunity to refine your strategy and build early momentum. Many successful fund managers find that the relationships developed during this phase become crucial to their eventual first close, with confidants often becoming anchor LPs or valuable referral sources.
Remember: The goal isn't to get universal approval but to identify and address critical feedback while confirming there's genuine interest in your investment strategy. Your thesis will continue to evolve, but having this strong foundation significantly increases your chances of successful fundraising.
Creating a Compelling VC Fund Pitch Deck
Start by validating your investment thesis - aim for 1 in 5 people expressing interest in investing when you pitch it. Once validated, create your pitch deck using a clean design with white backgrounds and concise 1-2 word slide titles.
Required slides for your pitch deck:
• Title - Establish professional credibility through clear presentation of fund identity and key contact details.
• Thesis - Present a focused investment strategy that clearly defines your fund's unique market position.
• Team (Part 1) - Showcase the Managing Partners' expertise and complementary skill sets that drive fund success.
• Team (Part 2) - Highlight the extended team's capabilities and strategic value to portfolio companies.
• Value Add - Demonstrate proprietary advantages and support systems that maximize portfolio company growth.
• Market - Illustrate the compelling market opportunity and timing for your investment strategy.
• Track Record - Present successful investment cases that validate your team's execution abilities.
• Pipeline - Outline representative deals that align with your investment thesis and strategy.
• Allocation - Detail investment structure and portfolio construction methodology across stages.
• Returns - Project realistic performance metrics based on market analysis and execution strategy.
• Liquidity - Map expected fund outcomes through multiple scenarios and timeframes.
• Economics - Outline competitive fund terms that align GP and LP interests effectively.
• Thank You - Reinforce key fund differentiators and provide clear next steps for engagement.
• Disclaimer - Address regulatory requirements while maintaining professional presentation standards.
Keep the content of every slide aligned with and supporting your core thesis. This structure provides a proven foundation - refine based on LP feedback as you begin pitching.
Remember that your deck should effectively communicate your story both in presentations and as a standalone document that LPs may review independently. Focus on clarity, professionalism, and demonstrating your unique value proposition.
Securing LP Commitments and First Deals
Securing LP commitments while simultaneously building a promising deal pipeline is perhaps the most challenging phase of launching a VC firm. Based on data from over 600 VC firms launched through VC Lab, we've found that successful first-time managers typically secure their first close within 6-8 months of focused fundraising efforts.
Early LP Conversations and Pipeline Building
The key to successful fundraising is running parallel processes for both LP engagement and deal sourcing. Your initial conversations with LPs should focus on those closest to you - often family offices, high-net-worth individuals, and former colleagues. These early discussions serve multiple purposes:
- Testing your pitch and refining your message
- Building momentum through soft commitments
- Gathering intelligence about LP concerns and preferences
- Developing credibility through consistent engagement
The Power of First Deals
Having a compelling first deal in your pipeline can dramatically accelerate LP commitments. According to VC Lab data, managers who secure an attractive first deal typically reduce their fundraising timeline by 2-3 months. Here's how to leverage early deals effectively:
- Use deals to demonstrate your thesis in action
- Show LP's concrete examples of your value-add
- Create urgency through time-sensitive opportunities
- Validate your deal flow sources and network
Managing the Closing Process
Managers should secure at least 10% of their target fund size in PACTs and an additional 10% soft circled before beginning the formal closing process. VC Lab recommends using PACTs to streamline this phase:
- Set a clear first close deadline
- Convert soft commitments to hard circles
- Establish minimum check sizes
Pro Tip: Many successful first-time managers close their initial fund in tranches, with a first close of 10-20% of their target fund size.
Common Pitfalls to Avoid
The path to first close is rarely linear, but certain mistakes can significantly delay your progress:
- Spending too much time with non-serious LPs
- Over-relying on "maybes" from potential LPs
- Not having clear minimum check sizes
- Failing to create urgency in the closing process
Remember, fundraising is a marathon, not a sprint. The key is maintaining momentum while building both sides of the equation - LP commitments and compelling deals. Focus on converting your strongest relationships first, as early commitments create the momentum needed to attract additional LPs.
Success in this phase requires persistent follow-up, clear communication, and the ability to run multiple processes simultaneously. Most importantly, stay focused on your thesis and don't compromise your investment strategy just to secure commitments. The best LPs invest in managers who maintain discipline and clarity of purpose throughout the fundraising process.
Final Steps to Your First Fund Close
The journey to launching a venture capital firm is both challenging and rewarding. Through VC Lab's experience of helping over 600 firms successfully launch, we've found that the final steps to closing your first fund are often the most critical. A well-executed closing process can set the tone for your firm's future and relationships with LPs.
The key elements that successful emerging managers focus on during their final closing phase include:
- Securing hard-circled commitments from lead LPs
- Using standardized documentation like PACTs to streamline closings
- Maintaining momentum with potential deals
- Setting clear timelines for capital calls
- Establishing professional fund administration
Here's a practical framework for action as you move toward your first close:
Near-Term Actions (2-4 Weeks)
- Follow up with engaged LPs to convert soft circles to hard commitments
- Prepare closing documentation and subscription agreements
- Set up banking and back-office operations
- Finalize at least one potential investment to discuss
Medium-Term Priorities (1-3 Months)
- Continue building your deal pipeline
- Expand LP conversations beyond your initial network
- Set up your fund operations infrastructure
- Begin planning your post-close LP communications
Remember that your first close is just the beginning. Many successful VC firms start with a smaller first close (often around $12MM based on VC Lab data) and continue raising capital while making investments. This approach allows you to build credibility through actual deals while attracting additional LPs.
The path to launching a VC firm is well-documented, and resources like VC Lab's accelerator program have helped hundreds of managers navigate this journey successfully. Whether you're aiming to close $10 million or $100 million, following these proven steps while maintaining high ethical standards through commitments like the Mensarius Oath will position you for long-term success in venture capital.
Conclusion
Launching a venture capital firm has become increasingly accessible, with proven methodologies and support systems guiding new managers to success. The path to launching a fund is well-defined whether transitioning from angel investing, spinning out of an established firm, or entering VC from an operational background. Key success factors include developing a differentiated thesis, validating your concept through testing, creating professional materials, securing compelling deals, and managing a disciplined closing process with committed LPs.
The most successful emerging managers typically focus on specialist strategies with smaller fund sizes, allowing them to build track records quickly, maintain LP alignment, and generate stronger returns through specialization. By following proven steps and leveraging available resources like accelerators and professional services, while remaining focused on a unique thesis and building momentum through early wins, talented investors can transform their vision into reality. Programs like VC Lab have demonstrated that following a structured approach can help new managers reach a first close within 6-8 months.