Implications Of How A VC Is Funded: Diverse LPs
In my post, How A VC Is Funded, I listed four way in which VCs obtain capital to invest in startups. Each of these four sources of capital has slightly different implications for entrepreneurs.<p>Fundraising Cycles
Investments made in a VC fund by a diverse group of limited partners are integrated in closed end funds. As a result, VCs who raise money from a diverse group of LPs have to go and raise capital from limited partners every 3-5 years. Money is raised, the fund is closed, the capital is invested and then another fund is raised.<p>As a result, entrepreneurs can be affected by where the current fund is in its lifecycle. If you receive an investment from a VC when they are raising another fund, the VC will likely be slightly busier than they would otherwise be. Fundraising is a very time consuming process for VCs, making them very busy. This doesn’t mean that they won’t have time for you, it just means that their schedules will be more complex and they will be slightly harder to reach.<p>However...