The demand for access to the venture capital asset class and startups has boomed in the past decade. With it came an explosion of new VC firms founded to fund cutting-edge innovation.
The same entrepreneurial spirit that created the unicorns of today is also shaping the venture community. New venture investors from diverse backgrounds are starting their own funds to invest in the next big opportunities. They define opportunity differently than their predecessors did. They are bringing much-needed investment to historically underrepresented founders and regions.
But the process of building a lasting firm is incredibly difficult. Fund managers need to navigate how to start, manage, and build enduring venture firms. Each new firm must tackle a similar set of challenges that includes fundraising, networking with LPs, setting their investment strategy, portfolio construction, setting up service provider relationships for fund admin, legal, tax and audit, entity formation, team building, and branding.
Barriers to building a venture firm
We’ve talked about the operational difficulties of creating funds and SPVs. The single biggest barrier for most first-time funds is the struggle to close. According to the NVCA/Pitchbook 2021 Yearbook report on venture capital, the number of first-time funds that closed hit a seven-year low in 2020. More established firms took the majority of funding. On the journey to figure out firm operations and investment planning, fund managers face a number of institutional barriers:
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Lack of accessible, trusted guidance:Despite the explosion in venture investing, knowledge is still kept behind closed doors. There are no centralized resources or turnkey solutions for forming a firm. First-time fund managers are forced to reinvent the wheel.
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Lack of specialized knowledge: Building a fund requires picking up many different fields of knowledge—legal, administration, tax, compliance, and HR, among others—all while building an investment thesis and LP network.
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Expensive and inefficient processes:The number of engagements and systems required to form, close, and administer a fund is overwhelming. Every new VC is forced to stitch together a network of service providers, custom spreadsheets, and workflows. These ad hoc processes are inefficient and may miss important information or milestones.
For each fund manager who has overcome the obstacles necessary to close a new fund, there’s another fund manager whose vision was blocked by these barriers to VC.
We’re excited to announce Carta Edge, our new hub to empower fund managers with institutional knowledge, professional service, and powerful platform automation.
Carta Edge helps fund managers to focus on what they are most passionate about: investing in world changing founders. As a first-time fund manager using Carta Edge, you can:
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Get the guidance you need:Save time searching for operational mentorship and reinventing the wheel. Before you get started, you can use the Carta Edge Playbook and The First Close podcast to find strategies and make a plan. When you form your fund with Carta, we guide you through the process of building your firm.
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Focus on investing, not operations: You want to spend your time planning your investments, making industry connections, and building your firm’s brand. Carta’s team and platform will take care of your SPV or fund formation and administration.
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Work with one trusted vendor:Our experienced fund admin team, easy-to-use platform, and network of trusted vendors will enable you to launch your firm with some peace of mind.
Institutional barriers are blockers to progress. Over the past decade, new digital technologies have enabled diverse founders to solve increasingly complex and urgent problems. With Carta Edge, we want to do the same for venture capital by unblocking a new, diverse generation of investors, so they can focus on supporting visionary founders.
Get started with Carta Edge.
DISCLOSURES: This communication is on behalf of eShares, Inc. dba Carta, Inc. (“Carta”). This communication contains general information only and Carta is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This communication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.
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