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Raising Capital for a Venture Fund: A Lesson in Humility and Empathy

Nate Lentz
February 5, 2013

We just issued a press release announcing that we have completed fund raising for Osage Venture Partners III.  Having closed on just under $66 million, we beat our target of $60 million and surpassed the size of OVP II by more than 50%.  It feels great!  We continue to execute the strategy we have pursued for the last five years of being an early-stagemid-Atlantic fund focused on enterprise software.  By the time we ended fund-raising, we had five investments in the fund and a sixth under term sheet.  Thanks to all of the institutional and individual investors who put their faith in us – we are committed to do our best to prove that this was a smart investment.

Venture investors should have to fundraise if for no other reason than to recognize how hard and how frustrating the process is for every entrepreneur that comes to us looking for capital.  Fundraising for entrepreneurs can be an exhausting, humbling experience, and for many it may not have a positive outcome.  Thus it is healthy for us as investors to taste some of the medicine that we as an industry often dole out.  Fund raising is about an educated, focused search for the needle in the haystack.  At OVP, we reached out to hundreds and talked to dozens of funds, had follow-up meetings with many of them, and at the end of the process ended up with a handful of well-matched limited partners with whom we are really well aligned and very pleased to have as part of the Osage family.  We were reminded that persistence – lots of persistence – and confidence in your mission are key ingredients to a successful outcome.  So in looking back, I hope my fund raising experience will make me a better person for entrepreneurs to engage with.

Here are some of the lessons learned that I hope will translate into my own interactions with companies seeking capital:

  • Sometimes, to be accommodating or polite, we take meetings with companies that are low (and perhaps, if we are being realistic, no) chancers.  What seems polite in the short run is unfair in the long run.  We should not take meetings where the sector or stage or structure is already an apparent deal killer.
  • We try always to read the materials ahead of time and typically ask our entrepreneurs not to go through the “book.”  We want a dialogue, and so should the entrepreneur.  If we disagree with what is being said, we should let the entrepreneur know in real time.  You can’t convince me if I don’t let you know I am unconvinced.
  • We should always start on time, and have decision makers at the table.  It takes a lot of preparation, practice, and courage to pitch a venture firm, and the least we can do is be sure you are speaking to the right people.
  • We should never leave you thinking we had a good meeting when it was not, and should provide open and honest feedback throughout the process.  That will help you prepare for the next meeting, either with us or another fund.
  • Distance matters.  The farther we ask you to travel, the higher the bar should be for our initial meeting.  An in-person meeting is much more difficult for a Boston company and is much more of a commitment than an in-person meeting with a team from downtown Philly.   We should consider this.
  • And, finally, we should be empathic but not commiserate.  It is not really helpful for us to tell you that this is a hard fund-raising environment – it turns out that this might be less about making you feel better and more about self-comfort.  We all know that entrepreneurs are intrepid mountain climbers, and they don’t need VCs to tell them how steep the climb looks.

So – entrepreneurs, if we meet with you, we believe that there will be a good fit to justify a meeting.   We will be prepared.  We will try to give you feedback.  We will enter the meeting with a strong belief in the talent and opportunity of this region.  We will continue to believe in the value and need of enterprise software.  We will continue to believe that without great entrepreneurs there is no venture capital and that it is you, the entrepreneurs, who drive the venture ecosystem, not us.

At Osage Venture Partners, we are pleased to have several years of capital to deploy, a great market in which to deploy it, and tremendous entrepreneurs starting and building companies even as I write this.

Great companies, great teams, and great entrepreneurs – we look forward to chatting.