An emerging manager’s not-so-secret superpower

How a thoughtful choice of foundational software & services can enable first-time investors to invest & operate like the full VC team of yesteryear

This piece was written in collaboration with Halle Kaplan-Allen of Automatter. Halle helps new entrants to venture capital create leverage and efficiency through automation technology and process design. For angels seeking help with operationalizing and positioning to raise their first fund, please DM me (Winter) on Twitter or apply for support here.

Emerging managers have to become a master of much…

Many emerging managers have to do it all when it comes to building their firm. This includes fundraising, sourcing/picking/winning deals, supporting founders, learning new management skills, administrating, brand-building, and building (and monitoring) their portfolio.

To simplify these tasks, there are hundreds if not thousands of tools that could provide some level of incremental value to emerging investors and VCs. But the more tools you add, the greater the chance you will create data silos that will hurt productivity. In more cases than not, you are better off with fewer tools and learning how to use the killer feature.

…So choose tools that best fit your strategy

Choosing tools is not a one-size-fits-all exercise. Rather, the strategy an investor is pursuing can determine which tools to use. When putting together the operational “tech stack” for your fund, you should definitely consider several factors, such as:

• Optimization: Which tools work best for your specific investment strategy and structure

• Pricing: How pricing can change over time from first-time customer to repeat customer

• Engagement: How do your founders interact with these tools, and is it a good user experience for them

• External dynamics: How well do the service providers get along

• Integration: How well do the software tools integrate e.g. accounting + fund admin, or billing + accounting, etc.

Today’s tools are optimized for building early track records

As a new investor who’s just starting out organizing deals to build a track record, your tech stack may look very different from someone who is managing a traditional VC fund. Today, there are more ways than ever before to participate in private investing: from angel investing to leading a syndicate to managing a Series LLC fund.  These types of VCs have risen on the back of several market trends, including:

• A new generation of investors who view autonomy and business-building as something more important than a “steady” paycheck

• Founders who want value-added investors, especially at the earliest stages of company growth

• Founders wanting emerging managers on their cap tables because they offer empathy and diversity

• Emerging managers, including solo capitalists, securing competitive allocations versus institutional investors to lead rounds

• Traditional and new LPs investing in emerging managers and becoming more integrated with the investment process, demanding more transparency, and seeking flexibility in what they invest in across VCs’ portfolios

• Disintermediation of the traditional “lead VC” -- meaning the traditional role of “lead investors” has transformed into an investor managing networks of scouts, deal partners, and value-add LPs

As the venture market continues to increase in complexity, innovation and better fund infrastructure solutions are required to manage investments successfully. GPs need tools that help them understand and leverage their investors, investments, and networks to optimize their investment strategies. If you are a “solo capitalist”  who’s just starting to build a track record, we’ve put together a suggested tech stack for when you are just beginning.

Solo capitalists who streamline earlier can scale faster

Operational Function: Sample Partners

Education: Coolwater Angels

Fund administration:* Carta, Assure 

SPV administration:* AngelList, Sydecar, Assure

Deal Marketing: Email, Docsend

Customer relationship management (CRM): Affinity, Airtable, Streak

Investor relations: Visible.vc, Mailchimp, Docsend

Portfolio management: Quaestor, Visible.vc

File management: Dropbox, Google Drive

*Administrators can cover legal, banking, tax and compliance. It is possible to seek outside banking (First Republic Bank), legal (Acceleron), tax and/or compliance advice when using an administrator. 

A thoughtful operations strategy positions you for long-term success

Given the myriad number of resources, tools, and services available to first-time fund managers, it's important to have a strategy for building a tech stack that will deliver the most value to you and your unique strategy. We know that the process requires an up-front investment of time and requires ongoing management - as you embark on that journey, please don't hesitate to reach out to me or Halle for guidance.

Additional resources:

What’s your VC’s Tech Stack? by Blue Future Partners

Tech Stacks to Scale a VC Fund Efficiently by Erica Amatori

What’s Your VC Tech Stack? by David Teten

The Emerging Manager Toolbox by Halle Kaplan-Allen