So many of us might think about starting a venture fund.
Perhaps we’ve worked in startups, or in equities, or even management consulting, and the allure of being a VC speaks to us on some level.
Sure, it can lead to status and wealth, but more importantly, it’s an opportunity to unlock potential and shape the future.
But survivorship bias is real.
For every one VC we hear about raising successfully, we don’t hear about the other 99 who tried and failed.
Case in point. Adeo Ressi’s VC Lab accelerator — which essentially aims to turn wantracapitalists (roll with me here) into venture capitalists — receives over a thousand applications to each of its cohorts, accepting about 200, and anticipating that about 10 will graduate, which requires completing a first close of a venture fund.
That’s about 1% success rate.
Raising Capital is Hard
Something both entrepreneurs and VCs know is that raising capital is hard.
It’s harder when you have no prior track record as a VC.
And it’s even harder when you’re raising capital in a country where VC is almost non-existent, to invest in a yet unproven tech startup landscape.
But that’s exactly what Blackbird VC founder Niki Scevak — who I caught up with for our podcast Venture Backed — did back in 2012.
War of Attrition
The Australian-born son of eastern European migrants of Slovenian, Polish, and Ukrainian stock, Scevak met with 522 prospective limited partners over two years, with 96 saying yes to the firm’s $29M Fund I.
Contrary to what I thought, Scevak says it was the perfect time to raise a fund.
“It was a cup of water in the desert moment — people came to you enthusiastically and that was the time that a lot of the best global tech companies were getting started”.
Among them were some of Blackbird’s first investments — Canva, Safety Culture, and Culture Amp — investments that have helped the fund go on to deliver $10BN in returns, recording a net IRR of 56% and becoming one of the best-performing firms in the world (top quartile VC funds generated an IRR of 23% over the same period according to Cambridge Associates, which puts Blackbird well within the upper echelons of the industry).
On raising capital, Scevak gave sage advice. “It’s not about convincing LPs, it’s really about surfacing believers”.
It’s about finding investors who think your mandate is compelling, as opposed to trying to strong-arm your way to a yes with an arsenal of sales and influence tools.
Of course, that requires a compelling mandate to begin with.
On lacking VC experience, Scevak said it’s about persistence.
“It’s definitely better if you are already successful and you do already have that network, it’s a lot easier to start a venture capital firm, so it was difficult in the beginning but once the snowball started rolling it all came together.”
Scevak did however have some startup experience, founding what he calls a failed real estate search engine called Home Thinking, and limited experience making angel investments upon founding the Startmate startup accelerator in 2011 — a program he initially ran two days a week that quickly drew traction.
Success Slaps You in the Face
“Success is best described as slapping you in the face and from the very first step of Startmate it was just very clear there was a great need a great opportunity and everything happened very quickly.”
And things haven’t slowed down.
A decade later, Blackbird has raised five funds, closing its fifth fund — a billion-dollar fund — in late 2022, while Startmate has run numerous cohorts over its decade-plus long existence.