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Several investors pointed out to me this week that it’s not all that hard to start raising a VC fund. Almost anyone could do it; there aren’t any qualifications you need. The key skill is being able to convince people to give you money.
Deploying and managing a VC fund is another story. But that comes later down the line.
There are what feels like a record number of first-time VCs out raising at the moment. I heard several guesstimates that there might be 100 at it right now. Europe’s startup ecosystem is growing, and as it does, the number of VC funds based here is also increasing.
With more funds, come more people working for them — some of whom might eventually decide to start their own thing. With more startups, come more experienced founders and operators who’ve seen their VCs be helpful and unhelpful. Some then decide to invest themselves and try to do a better job.
Not all of them start funds by themselves but those who do tend to fall into two categories, says London-based investment firm Isomer’s founder and managing partner Joe Schorge, who’s invested in several emerging managers.
Some are solo GPs because they want to be. And others are solo GPs because they couldn’t find a partner.
I’d argue that there are several other ways to class solo GPs: those who have an ‘edge’ — and those who don’t. And, as one of my lunch companions put it: German men raising SaaS-focused funds — and those that aren’t.
A lot of these solo GP funds look very similar. Many are raising $10m funds to invest $100k-200k cheques at pre-seed or seed alongside other funds. If their first fund does well, many will hope to raise a bigger second fund — but $10m seems to be the highest realistic amount for many to target for that first fund.
Isomer’s Schorge doesn’t think the proliferation of solo GPs is a bad thing and says investing in them is comparable to backing early-stage startups. You know a bunch aren’t going to work out but you want to get in early with the ones that do.
Solo GPs are great, says Reece Chowdhry, founder of the UK’s biggest pre-seed fund, Concept Ventures. They have great networks, they’re hungry, quick and they really care.
And they need to be, points out Maria Rotilu, solo GP at one of the latest micro funds to announce a first close, Openseed. The management fees on a $10m fund are barely enough to live on, so “if you don’t get returns on carry you’re screwed”. (I’ve met solo GPs who’ve moved back in with their parents in their 30s to save on rent.)
That hustle is great for founders and LPs. But is it helpful for other VCs? Many solo GPs don’t lead deals, Chowdhry points out — and the ecosystem could do with a few more funds that do. But there are exceptions, such as Germany’s Gloria Bauerlein, Finn Murphy and Max Claussen, to name a few.
When Concept Ventures closed its £50m fund in 2022, Chowdhry expected to lead around 50% of deals. To date, it’s led 85%, he told me at SuperVenture.
If you’re a solo GP, let me know what you make of the above. If you’re an early-stage VC investing alongside solo GPs, let me know your take. And if you’re an LP, how many solo GP pitches do you hear a month? I’m all ears.
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Read the orginal article: https://sifted.eu/articles/vc-fund-investor-solo-gp/
