Raise capital for a new fund is always difficult. But should you give preferential economic benefits or other benefits to a seed investor who materially commits to the fund?
These “VCs for Investment Management Companies” are also known as GP Investors or Fund Platforms. According to DocSend, “About half of the VCs in our survey had an Anchor LP for their fund, and the average percentage that an Anchor LP took into a fund for the first time was 25%. . The prevalence of anchor LPs among start-ups and more established companies in our data suggests that securing an anchor investor can be crucial in signaling a company’s credibility to other potential LPs.
However, it is very difficult to obtain data indicating whether these anchors have received preferential conditions.
It may ultimately depend on the timing.
“In the hedge fund world, fund platforms are common and therefore more transparent,” Ha Duong, investment director at Ocean Investment, a Berlin-based single-family office, told me. “In the adventure, I did not see many fund platforms.
A number of companies provide infrastructure for emerging VCs including Capria, Draper Venture Network, Oper8r and Recast Capital and can provide capital or assistance in raising capital.
However, this ecosystem is much more built in the areas of private equity and hedge funds. Examples include Archean Capital Partners, Gatewood Capital Partners, Lafayette Square, Nesvold Capital Partners, and Reservoir Capital Group. Some family offices also make these investments on an ad hoc basis. Like some VCs: LuneX.com notes that this is a dedicated blockchain and cryptocurrency fund that partners with a Southeast Asia-based VC, Golden Gate Ventures.
A GP investor brings significant advantages:
- Significant initial capital, generally shortening the long fundraising process considerably. This can be especially useful for founders who do not come from a wealthy background and may not be able to forgo income during an 18 month fundraising period.
- Credibility. This is proportionate to the credibility of the investor concerned. Everyone will assume that the GP Investor has exercised extensive due diligence.
- Assistance in business development, marketing, risk management and governance.
- Possibility to access LPs that need significant assets under management (AUM) before considering you.
- Back office, in some cases.
There can also be significant downsides to working with a GP investor: