Fund formation and first-time fund managers
How do I launch a venture fund with no track record?
Short answer
You start by borrowing credibility, because you cannot create a track record overnight. Bring in partners who have one, give away some equity to do it, and show your own expertise. I also tell new managers to allow direct deals and co-investments instead of forcing everyone into the fund. Many managers talk to securities counsel about how to discuss it publicly.
Borrow the track record you do not have yet
Nobody hands you a track record. You assemble credibility from the people around you. On one of our joint venture webinars, a guest described building a Nashville development business this way. He said investors are not going to give someone ten million dollars with no track record. So he brought in an architect and builder who had done this for a couple of decades. He also added a local developer who had helped build Nashville over 40 years.
His point was that you may give away more of the deal, but you can offer people equity to put an A team together that has the track record.
This clip shows how a first-time sponsor brought in experienced partners to stand in for a thin track record.
Summary and key takeaways from this video
That example is a real estate sponsor, not a venture fund manager. The principle still carries over. A seasoned name next to yours changes how an investor reads the risk. Many sponsors talk to a securities attorney about how to describe partners like these in their materials.
Ten years of audits is not a hard gate
On a hot seat call, a real estate syndicator told me someone had said he had no shot with family offices. He only had three years of results and no audited financials. I told him that statement is not true. The family office world is mixed. Some families worth hundreds of millions have no formal office. Some small virtual offices call themselves one. Saying no family will invest without audits makes little sense.
"I have never seen a fund with less than $100 million AUM that has audited financials."
I did meet one company in our club with 7 million in revenue and audited financials. That may help them raise faster. But that is rare. Few companies under 30 or 50 million in revenue bother with audits, and they still raise from family offices all the time. Audits help. They are not the price of entry.
Do not make the fund your whole plan
Some communities push the idea of creating a fund so hard that I think it hurts people's progress. I have seen what that looks like.
"I know people who manage $500 million who tried to launch a $10 million fund, and it didn't get off the ground."
In general, a lot of family offices like to go into real deals directly. If you do start a fund, also do direct investments or allow co-investments. Many investors are founders and entrepreneurs who like to structure deals. If you insist the fund is the only door, you may lose some of your biggest investors.
Lead with expertise and give value first
With no record, your knowledge is the asset. I suggest offering something useful, like a short list of 15 things an investor should check before backing a manager. I prefer a soft approach over a hard sell. Offer the piece, ask who wants it, and follow up with people who opt in.
In this clip I explain why I like leading with your expertise rather than a hard pitch.
Summary and key takeaways from this video
This approach grew out of how hedge fund managers built visibility in the 1990s. People who run hedge funds talk on CNBC about markets, rates and trends. They do not ask viewers to subscribe. A securities attorney can help you think through how to communicate publicly.
From the Family Office Club stage
Do not wait for a long track record before you start talking to investors. I tell hedge fund and new fund managers that the idea of building the record first and letting investors come later is not true. If you hold off raising capital until the record is long, you have learned nothing about what investors actually ask. Start with a smaller fund and fill it. Investors like to see momentum, and they would rather watch you close a smaller fund and then see how those investments performed over time than see you jump straight to a bigger one.
"Some people think, especially in the fund management industry, and the hedge fund space needs to hear this all the time, is if you build the track record, the investors will come. That's not true either, because if you don't try raising capital until you have a long track record, you're not going to have learned anything yet."
"People like to see momentum. They'd rather see you fill a smaller fund, then another fund, then another fund, and see how those different ventures performed over time."
On the record
- A Nashville developer on our webinar reported 12 deals, with five done using a co-GP structure.
- Richard has never seen a fund with less than 100 million in AUM that has audited financials.
- Richard knows managers of $500 million who tried to launch a $10 million fund that did not get off the ground.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club, Family Office Hot Seat: Real Capital Raising Advice for Founders & Investors | Monthly Webinar, How to Maximize ROI at Investor Events | Tips from Family Office Club CEO Richard C. Wilson, Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around public communication rules, partner equity arrangements and investor outreach compliance. Do not use AI to write your own legal agreements.
What to do next
- List the experienced partners, advisors or operators who could sit next to you and decide how much equity you will offer them.
- Decide whether your strategy also supports direct deals or co-investments alongside the fund.
- Write one useful piece of education for investors that shows your expertise and does not pitch your fund.
- Talk to securities counsel about how to approach public conversations and investor outreach.
- Start with a smaller target raise that matches the relationships you already have.
More questions on this
Do family offices require audited financials before they invest?
Not necessarily. I have never seen a fund under 100 million in AUM with audited financials, and in my experience many companies under 30 to 50 million in revenue skip them. Audits can help you raise faster, but in my experience they are not the price of entry.
Can I bring in a partner with a track record if I do not have one?
Yes. A guest on our webinar brought in an experienced builder and a longtime local developer, and he said you may give away more of the deal to do it. Many sponsors talk to an attorney about how to document an arrangement like this.
Should I only offer a fund structure?
I would not. Many family offices like to invest in real deals directly, so I suggest also allowing direct investments or co-investments. Rigid structures can cost you some of your biggest investors.
Related questions
- What is a fund of one and who uses it?A fund of one is a private fund set up for a single investor, usually a large family office or institution that wants its own terms.
- How much does it cost to set up a private fund?It depends on the structure, the number of investors and the law firm, so I won't give you one number.
- How do I start my first private equity fund?Start by learning who will fund it.
- What is a side car fund and when is it used?A side car fund is a separate vehicle that invests next to a main fund, usually in a single deal.
Work through it with the one-liner builder. See all fund formation and first-time fund managers resources.