Closing a Limited Partner

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

In raising funds, the VC fund manager needs the ability to close Limited Partners.

Here are some closing techniques to consider:

FOMO

The Fear of Missing Out is one of the most often used techniques for closing.

To use this, the fund manager must demonstrate how other investors are coming into the fund.

It's best to create some scarcity by showing the current capacity left in the fund and then comparing it to the interest from the investors.

To do so, calculate the interest and committed funds to show the fund is potentially oversubscribed.

For example, the fund is raising $50M, and has $40M invested so far.

Show the interested and committed funds at $25M.

This shows there's more interest than fund capacity.

Deadlines

Break the raise into rounds or tranches and run deadline campaigns.

When the fund reaches two-thirds of the capacity of the round, then declare a deadline in six to eight weeks.

This forces investors to make decisions or risk missing that round.

Incentives

Offer incentives to investors who come in by a certain date.

This could be warrants, advisor shares, fee discounts, preferred returns, or follow-on investment opportunities.

Consider these techniques to help close the fund round.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let's go startup something today.

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