One year after starting a VC fund, here’s what I learned
I’ve been a venture capitalist for a year, and this is what I learned.
Real talk: Being an emerging fund manager isn’t a walk in the park.
For those of you who are new here, I’m Co-Founder and General Partner at Overlooked Ventures, a $50M Fund that invests in startups with one or more historically-ignored founder(s). This is my first fund ever, but before starting a VC fund I founded (and exited) a company. You can learn more about me here.
Starting in May of 2021, so far Overlooked Ventures has accomplished the following:
- Bank of America joined as our first institutional investor
- 2600+ inbound startup funding submissions
- 8 investments
- $12M in LP commitments
The role of a venture capitalist is a lot like that of a founder. You spend your days pitching, meeting with potential investors in the fund, and going over financials & term sheets. But the best part of being a career venture capitalist is meeting with founders and backing the next generation of entrepreneurs.
Some assume that VCs sit around tweeting all day and refreshing TechCrunch. However, being an investor is a full-time job. In fact, being a first-time fund manager is MORE than a full-time job.
I’ll start by speaking about my privilege. I exited my first startup, which has given me the money and resources to be able to become a venture capitalist. Bootstrapping a company until the acquisition has also allowed me to understand startups as a founder, build a network of venture capitalists and limited partners, and angel invest (i.e. show my investing track record). And although I have these resources, I run Overlooked Ventures like a startup.
Yeah, you read that right. Emerging fund managers have to be scrappy too. Our team is all distributed, we use no-code tools like Airtable & Notion, and automate where necessary. To get Overlooked Ventures off the ground, I had to put in my own money to get started. And so far, we haven’t paid ourselves all that much in the last year. Why? We’ve prioritized deploying capital to founders.
The life of a venture capitalist
You can split the duties of a venture capitalist into two categories:
- the LP side: anything that has to do with securing commitments for the fund and working with current limited partners.
- the founder side: anything that has to do with investing in founders and working with portfolio founders.
Let’s start with the limited partner side of things. I’ll skip the necessary preliminary steps for meeting with LPs and accepting fund commitments such as creating a deck and working with an attorney to prepare the right documents. Being completely transparent — I don’t understand the taxes and some of the legal docs and every meeting with accounting stressed me out. That’s why I consult the professionals.
I spend a lot of my days in meetings with limited partners. These meetings are often limited to a quick 30-minute pitch and often go smoothly (and they can even be fun!). The hard part is the pre-meeting prep and post-meeting follow-ups. Working with institutional investors presents a whole other set of responsibilities, like due diligence. Once an LP commits to your fund, it’s necessary to host LP meetings and send monthly updates.
On the founder side, there are also lots of meetings. But this is the really fun part. Unfortunately, it’s not just all meetings and there are tasks that take a lot of time like reviewing all founder applications. Both of us at Overlooked Ventures review every founder funding submission separately and make a decision to politely pass or ask for a meeting. If we disagree, we hop on a call and talk about it.
If we both decide to politely pass on the startup, we take the time to write out our feedback and send an email to the founder with helpful resources.
It doesn’t stop there. Once we both agree that a startup looks like a great investment, we have to do the following time-consuming things:
- Sending follow-ups from the meetings
- Reviewing the decks again
- Second meetings
And once a startup joins the portfolio, we make it an effort to go above and beyond for the founder(s). Just a few of the things we do for the startups that we back:
- Meetings/group texts with founders regularly
- Help with preparation for the next funding round (deck review, investor intros)
- Boots on the ground: interview candidates, help with marketing strategy, sales, and other tasks
- PR help (intros to reporters, strategy) and social sharing
In addition to our work with founders and limited partners, there’s a lot of behind-the-scenes and ongoing admin work such as
- Community engagement
- Keeping up with capital calls
- Accounting, reconciliation, taxes, legal
What challenged us
Doing something for the first time isn’t a walk in the park. Yes, there are some parts that come naturally, however, not everything is easy. Full transparency, it’s taking us longer to raise a fund than we thought. Being first-time venture capitalists with no prior VC experience has put us at a disadvantage.
And although we didn’t have a long history of venture capital experience before starting Overlooked Ventures, we know what it’s like to be scrappy. We know what it takes to build a successful startup. Don’t just take out word for it, the data shows that investing in an emerging manager’s first fund gives investors higher returns than if they were to invest in a new fund managed by an established fund (Prequin).
Why people pass
Just like we believe feedback is important in the VC-startup relationship, Overlooked Ventures welcomes constructive feedback from limited partners and peers to help us grow. Here’s what we’ve heard from those who passed on investing in the fund:
- Too specific
- Not specific enough
- No prior experience as VC
- Location isn’t narrow enough
- Timing isn’t good
- Fund size is too big
Forging for the next year ahead
After hundreds of meetings and tons of advice later, I’ve learned a lot about running a venture capital fund. We’re refining the Overlooked Ventures thesis to better reflect our fund’s mission and purpose. A year later, we understand the market, our deal flow, and where we can provide value even better.
Overlooked Ventures invests in early-stage companies with one or more historically ignored founder(s). Fund I is a $50MM pre-seed/seed-stage fund investing in tech and tech-enabled startups building for humanity, wellness, and industries lacking innovation.
The biggest difference with our new thesis is our change from industry-agnostic to specific startup industries: humanity, wellness, and industries lacking innovation. But what does that actually mean?
Wellness: startups that are creating technology and products to improve health.
🧠 mental health
👩🏾⚕️ healthcare tech
Industries lacking innovation: startups that are building solutions for industries in need of a change — think unsexy markets.
🚧 construction tech
🧑🏻🌾 agtech & farmers
Humanity: startups building to improve humanity, the lives of humans, and the world we live in.
💝 death tech
👵🏽 age tech
🌎 climate tech
🏻🏾 inclusion tech
After we refined the thesis. I saw this post from VC, Brianne Kimmel and was like shouting YES! She gets it.
Most importantly, we are committed to backing overlooked founders at the earliest stages, building billion-dollar businesses, and solving problems for the world we live in.
We are a venture capital fund.
We are not just a way to check the impact box or fulfill a DEI quota.
By writing this post I hope to show aspiring VCs and emerging managers that it’s okay to hit roadblocks and learn as you go.
The important thing is that we’re doing the work. 💥
And ignoring all distractions in the way. ✌️