Published on February 16, 2024

Reflections on Raising a Microfund

Published by Edwin Ong

Reflections on Raising a Microfund

Last week, I fumbled an introduction to a potential LP. It was not fun.

For context, I’m a new graduate working with Asian Hustle Network (AHN) Ventures to raise their first microfund. While I can’t speak to the experience of my partners, fundraising has been difficult for me–in large part because there aren’t many resources teaching you how to do it, especially if you are a new graduate without a network of rich contacts to tap.

A few months back, I had offhandedly told Jerry that I’d write a reflection piece for Unistart on fundraising after we finished fundraising, but the incident last week has put me in a more reflective mood, so I figured I’d ride this motivation and write this article now!

I’ve personally secured $130,000 in capital commitments so far. So hopefully, that provides some legitimacy to whatever I’m saying. At the same time, please take whatever I say with a grain of salt, YMMV. Anyways, here are my lessons learned.

When contacting someone you’re familiar with, make sure to ask for intros and referrals.

If you’re like me, there isn’t that much money flowing around your first degree connections. Therefore, you have no choice but to go second degree, and the only way any second degree connection will ever give you money is with a warm introduction. This also opens up outreach to first degree connections who you know can’t invest. If they can’t invest directly, they can still help connect you.

When contacting a person you’re not familiar with, consider asking for advice/input first instead of money.

This is how I screwed up the introduction. Asking for feedback is a much lighter ask. It flatters the person making them more likely to accept, and also gets them invested (without any financial investment!) Once people are invested mentally, getting them invested financially is much easier.

Most people will not invest.

I’ve gotten capital commitments from 5 people and have contacted at least 50. Rejections suck, but you’re going to have to get used to them, since they make up the majority of the results.

The most common reasons LPs give me for rejection are: 1) no capital to deploy 2) wanting more control over the process.

Keep in mind that I am raising primarily from individuals who are generally unfamiliar with VC. Also keep in mind that the stated reasons may not be the real reasons.

People will contribute the minimum.

I think a part of this is that we are unproven, but I would assume that any new graduate raising is in the same boat. As such, I wouldn’t expect check sizes more than the minimum, especially if you’re raising from individuals. Another lesson you can take from this is that there should be some thought behind setting your minimum.

People ask a lot of questions.

Intuitively it makes sense that people will ask a lot of questions when it comes to their money, but this isn’t really salient until you experience it firsthand. The most common questions I get asked are: “how do you judge startups”, “what kinds of companies are you planning to invest in” (I suppose Asian-founded isn’t a satisfactory answer), and “what is your fundraising and investment timeline”.

Having a track record really helps. If you don’t have one, partner with someone who does.

I don’t personally have an investment track record, but one of my partners does. In fact, he has a pretty stellar track record (7.5x MOIC). I don’t think I could raise a single dollar without his track record. If you can’t find a partner with a track record then you’ll have to build your own. A good way to build a track record is to start angel investing. You can start angel investing without having large sums of money by investing through syndicates and investing in your friends’ startups.

I hope that you were able to get some value out of my thoughts. If you are also raising and your experience matches or goes against mine, I’d love to hear about it!

To get in contact with Edwin, please reach out to him on Linkedin.

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