5 lessons learned from building a venture capital fund from scratch • businessroundups.org

This month we are building for five years Contrary. Meanwhile, we have raised hundreds of millions from some of the world’s top institutions and have been fortunate enough to support startups such as Ramp, Anduril and many others.

But like the stories of the startups we support, the journey has taught us some lessons the hard way.

I’ve been thinking about our history as we hit this milestone and wanted to share a few things I wish I had known five years ago.

Early logos are important

One of the few things I regret is that we didn’t start looking for logos early. We were not chasing hot companies collecting rounds led by well-known firms. Instead, we stuck to our knitting on Fund I, leading rounds in startups and teams that we believed in and sourced through our own infrastructure. I felt that if we did exactly what we said we would do – lead rounds, support great talent, bring a unique model to market – we would stand out.

As it turns out, logos matter when you’re building a venture business from scratch (limited track record, didn’t work in venture before, etc). They are of interest to potential LPs, who use them as a proxy for access; they are important to your peer set, who use them as a proxy for how sharp you are; and they matter to founders, who immediately go to your website to see if you’ve supported branded startups.

Fast forward to today. Ironically, our Fund I is one of the best of its vintage, according to Cambridge Associates benchmarks. But that feat took five years to come to fruition, and it made raising Fund II more difficult. I once had an LP ask, “Have you invested in startups I’ve heard of?”

It’s long since ceased to be a problem, but I have no doubt that logo hunting would have saved us time in the early years.

Reputation is crucial

In an industry where your reputation and brand are the most important parts of building a business, it’s critical to get started from day zero. Early logos are just one piece of the puzzle.

Invest heavily in building meaningful relationships with respected partners, founders and LPs. Send them relevant, high-quality deals for free; become Twitter friends; going to events; co-investing in companies; and cold email them and grab a coffee. Do what it takes because relationships are a currency in more ways than one.

For example, one of the main ways LPs rate you and your fund is by aggressively checking references with their existing venture managers. They will ask if partner X has heard of you, if they have worked with you and if they want to involve you in deals.

At the very least, this requires name recognition and ideally involves years of working together and producing great results. The best way to build your reputation is to send deals to investors that end up making them big bucks.