The Hard Part(s) of Raising a Fund

InvestEurope, Paris (October 2018) left to right: Jean Bourcereau, Ellie Cachette, Thomas Kristensen

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​This post is one of many upcoming stories around raising a fund, managing venture capital and trends within asset management 

Often I am asked what is hard about raising a fund, or congratulated for putting on such a big effort (my fund is $1BN) or given jest about always being on an airplane but what’s hard about raising a fund isn’t what I thought would be hard at all. 
 
My situation is also a little bit different than the average “fund” in which I’m mostly referring to venture capital funds, as I am Fund-of-Funds. I am more upstream working with larger checks and larger investors. I also see it all: I see the dirty tricks, the lies managers tell themselves, the crafting of spreadsheets which mean nothing, and the back-channeling between fund managers to try and get an outcome they want. I see the sh*t talking to make one’s fund seem better and the flood of TV interviews while your startups are rotting and creating hype to get investors to put money in before the truth comes out. I also see (and know what it’s like) to be piled in bills, all credit cards maxed and yet still staying up until 2am to mentor your investments. See also Managing Venture Capital Relationships. 

From the good, the bad, the ugly I have seen every corner of both venture capital and finance as a whole and from what I’ve experienced here are some of the (surprisingly) hardest parts of raising a fund:
 
Everyone Thinks They Can Bring Value to a Fund---Until They Can’t  
Most ambitious persons attracted to working at a fund love having a VC vest, corporate credit card and being schmoozed by royal families and global banks. Who wouldn’t? No matter the role you are hiring for its incredibly hard to find the right people who can be trusted and the higher the person’s compensation package the longer the honeymoon period can drag on. I have not mastered this yet, however, I have noticed a trend:

• Person promises the world and exaggerates skillset to join fund
• Everything is dandy and jovial
• Mistakes start to surface, its blamed on “learning curve”
• Mistakes repeat themselves
• A Pledge of loyalty is proclaimed
• Some action happens that provides clarity on both sides: person has to either quit or be terminated
• If person has to quit its immediate and their ego is so profoundly bruised (reality is not fun) that a backlashes onto the team
• If the person is terminated, most coworkers are shocked and the employee will almost certainly shake the fund down for as much $$$ as possible before they’re out the door

 
My advice: since this is my first fund I don’t have repeatable data nonetheless I would say no matter how much you like a person (as a human) the fund’s performance and duty should always come first. If this person is not improving or helping the fund (even if they are not yet harming it) you have to let them go as fast as possible. 
 
The Food—Either Always Hungry or At an Airport
As a professional executive I am not new to knowing that a business dinner is not actually “eating dinner” but when you start raising a fund it takes thing onto a whole other level because you are (a) always talking in person or on the phone (b) on an airplane (c) in a taxi (d) on a stage or in a meeting of some situation where its rude to eat even though you finally can eat (see “a”… not talking). My advice for this is simple—start pretending you’re an astronaut. I have mastered the art of packing my own snacks, taking snacks from airport lounges (thanks KLM!) and meticulously planning how to eat. I am the master of dried soups, nuts, and any form of protein allowed on an airplane. It’s important because much of the time you are simply doing un-natural things and your body and brain need calories! It’s impossible to be in back-to-back meetings only to realize the 37 minutes in the taxi to the airport is the only time you can actually touch your food. I could write a book on this topic alone but after going to sleep hungry in many hotel rooms over the last two years (especially in Europe where things tend to close or not deliver) here’s what I’ve learned:

• Always bring an empty bottle to fill with water at the airport and fill it there. It’s easier and you stay hydrated
• Never assume you can just “grab” dinner at whatever hotel you are going to. Your flight might be late, the hotel kitchen closed, it’s a city that doesn’t serve food that day whatever. Bring enough calories for hotel dinner or even order food a few hours in advance and have it waiting at the front desk or in your room. If there’s fresh food available when you get there? Great! It never hurts having extra food
• Keep airplane snacks even if you don’t like them. If you are starving you will appreciate them and it helps to have something on you

 
All Potential Investments Lie 
No matter where you are on the foodchain all potential investments are lying right now about progress (startups, VC funds etc). This one bothers me the most. I’ve seen VC funds tell others they are further along with my fund and diligence than they are, I’ve seen VC funds ignore me then email my board saying we owe them a bank wire (when they haven’t signed documents or are “missing” something vital and are doing such tasks try to wiggle around it). See also, Prepping for Technical Diligence. I’ve also seen VC funds say they passed on me as an investor when we passed on them. On one hand I respect the whole faking it until you make it, I get it, but the lying that goes around venture capital can be way too much and I often feel like an island of reality check, reflecting truths to any fund which crosses my seas. Lying is also prevalent in finance as an industry. This makes my job (and your job) hard to raise money when 20% of energy is going to be cleaning up or clarifying little lies and big lies and you will always be offset by some sort of drama at the absolute worst timing ever. My advice here on that topic

• Keep detailed notes around who you meet and when. In my first WEEKS of building our fund a small $10MM VC who I didn’t like at all, spread a rumor about me--however I was able to produce a spreadsheet with data points and the other funds I met as backup. This report eventually evolved into one of our earmarked VC Dashboard Reports which we publish quarterly and have now met with over 300+ VC funds to date so it was an early blessing in disguise but annoying
• If you hear a rumor about someone, reach out to them directly instead of “spreading it.” I had a VC fund we’ve invested in once spread a rumor about another VC fund we invested in and when asked, they said they weren’t sure if it was true. If it weren’t true then why say something? I made both firms have a phone call and kiss and make up. I felt like a teacher making two kids in a sandbox play nice. It stopped the rumors in track (because they were also false) but again was annoying and a waste of time

 
Timezones Are a Bitch 
Perhaps it’s more challenging for my fund because we are fully global but when you are raising money you usually can’t choose where the investors are from and they usually have multiple homes or offices. Keeping traction is very important so often sleeping more than 6 hours or a flight or something else can throw you off an investors orbit. You don’t fully grasp the importance of timezones until you’ve lost a few deals or things keep going wrong and you can’t understand why—its timezones. Be mindful of the person you are trying to persuade or the critical members on the team and email them at a time friendly to them, not you

• Email the person preferably between 7:00-11:00am. If it’s too late in the day the quality of response will go down and maybe bumped another day, if its in the middle of your night, you could also struggle to response timely
• Start your day with those currently on your timezone or those more urgent and then work through (For example don’t email New York, Then London, then San Francisco if you are in Europe… start Europe, London, New York, San Francisco). Everyone’s work day starts on their morning. Batch timezone replies appropriately

 
People Who Can’t Apologize Can’t Be Trusted
This goes for employees, consultants, investors, startups or anyone. I have seen enough to know that a person who cannot say they are sorry does not mechanically know how to take responsibility and someone who cannot take responsibility should never be in your ecosystem. This is hard to pick up while raising a fund because no one likes making mistakes so I try to see if a person ever takes responsibility, even in telling stories about past mistakes. If nothing is ever a person’s fault, run. 
 
Lack of Confidants 
When you are a startup founder you have lots of other startup founders to talk to even if their products are different. When you are a VC fund manager you have many other VC fund managers to talk to (although they gossip so the risk is high there). Yet when you are a fund-of-funds, or in a fundraise or have certain filings with the SEC etc… its TOUGH. You CAN’T talk to many people about your problems or vent easily as it could quickly be hyped and destroy your fund or even cause problems with regulations. This makes Advisors and Partners even more important although that takes time and trust to build up. There are also the nuances of how numbers are financially ran or how a fund is calculating its decisions and a lot of the most interesting things you want to discuss, you won’t have anyone to discuss it with! This is also hard too when 95% of your time is verbally or in another way communicating with investors, so in the 5% you do have for venting, your heart and brain have so much to say one on hand and on the other you won’t have the energy or person to say it to. On the flip side, some of my closest confidants were around for Day 1 are now on my Board of Directors…confidants are built in layers. Invest in this early on. 
 
Being a Woman Makes It Harder 
​Being a woman and raising a fund is incredibly hard because its already hard and then you add all kinds of nuances like, investors pretending to be interested just to be around a pretty lady. Investors being concerned about pregnancies and when / if that might happen. Trying to actually plan one’s birth control around fundraising is impossible. Having routine sex during a fundraise is also impossible for either gender but harder as a women due to security reasons #Metoo. People won’t take you seriously. To this day, even with fund’s we HAVE invested in, many have to learn to not going running to my male advisors--that I am indeed calling the shots. The amount of discrimination and bullshit you encounter as a woman is off the charts and then you add periods, cramping, sitting on 12 hour flights wondering if you brought enough tampons? No thank you. The one thing I would have changed (if I could change it) would be raising money as a woman. I would be male just for fundraising in a heartbeat and I’ve even found sometimes bringing along a male to meetings helps. For how much harder it is as a woman I can’t say it’s fun still the one advantage is being constantly underestimated. This also means that while every amazing thing you do will be measured in half, it also means you can pull off pretty remarkable things while not a single man sees it coming. And perhaps I am a bit jaded on this topic as I’m a female General Partner who has survived raising money as a female founder, and serving as a female vice president and been through many of the stages of company growth, I can say a lot of my team that has been with us since the early times is female. I still have hope that eventually the world will be rebalanced gender wise and having the secret powers that come with femininity will prevail. 
 
My fund has a different story of origin because we did six months of research first, worked with large banks to solve product-market-fit, designed what the fund-of-fund needed to be THEN fundraised so I’m not exactly sure when our fundraising started, however, all funds eventually have to fill gaps or their whole fund and this requires grit, meetings and a lot of flying around the world. In the end, its been the smallest things which were the most challenging and simple roadshow survival. In general avoid the freaks, bring snacks and keep it moving. See also You Will Get Tired of Seeing My Handwriting (founders tale).
 
ABOUT ME
Founder at heart I’ve spearheaded startups, consulted for VC funds and now the fearless leader of a global fund-of-funds investing into early stage venture capital funds. If you have an interesting VC fund or would like to know more send an email to ELLIE (at) CACHETTECAPITAL (dot) com.