Discussion: Does the fund make the VC or VC make the fund?
It can be said that the VC makes the fund, although the relationship is more complex than that.
For VCs, there are two key factors that matter until the late stage:
- Attracting the best founders to choose you; and
- Choosing from the best founders who do choose you.
Other aspects, such as deal flow, are important but serve as inputs. Deal flow is necessary to attract top founders, but it alone is not enough. High IQ and pattern recognition are valuable, but they are just filters. Ultimately, the ability to make good investment decisions is crucial.
Therefore, the success of a VC largely depends on the individual involved.
So how does a “great” fund contribute to this success?
There are four key ways:
- Brand: Having a strong firm and individual brand can signify quality, although the emphasis on brand may be overstated.
- Collective Decision Making: Collaborative decision-making can mitigate risks in early-stage investing.
- Collective “Closing”: Having multiple partners express interest in a founder can be persuasive in closing deals.
- Better Fund Optimization: Optimizing investments in later rounds can significantly impact returns and fund performance.
