Real Talk on Fundraising for a Small Fund (Charlie O’Donnell)

Charlie O’Donnell on what raising a small venture fund is actually like.

Why it was kept

The passages Kyle kept, filed under Build a Fund: sourcing his own deals at First Round (Backupify was his own idea, built by someone else), a family office that turned over, an endowment that came in once it saw the momentum, hating fundraising itself, finding big pools of money as the job, being a far better investor than fundraiser, and sharing deal flow with his LPs at no extra fee.

As Kyle captured it

• Read Real talk on fundraising for a small fund by Charlie O’Donnell Build a Fund
  • When I started leading deals at First Round, I sourced investments in 8 companies.
  • Backupify was actually my own idea built by someone far more capable than I was to see it through.
    • I actually really like looking for these ideas; businesses that I would want to exist but then you find someone much more qualified to make it happen
  • A large Family Office that had invested prior turned over its staff. The new point person seemed intent on bringing in new managers. He told me they would consider “next year’s fund”, which didn’t make any sense because I wasn’t raising an annual fund. He said they’d consider any “special situations” funds I was doing—at which point I realized that he had never even looked at the deck and had zero intentions of doing any real diligence.
  • When the endowment saw how much I had raised up until that point, which wasn’t helped by the fact that most of my other investors were individuals who couldn’t write a third check, they decide to add a new stipulation—a minimum close. It was a frustrating development because I was counting on them to be a part of the first close. They wanted to make sure I was “viable” and I assured them that I was by far the scrappiest GP they new. They didn’t really look through the numbers—they just invented a number they thought was where viability was and set it.
  • I’m very rarely surprised because I’m always thinking about what could be. That’s why getting a no from an investor doesn’t really bother me—because I’ve already thought about the fact that it’s a possibility. Plan for the worst, and hope for the best
  • When I shared with them that in the last year I had gotten in a whopping three months of fundraising because of everything that had happened, I realized that I was too small for them to have been paying attention to me. They didn’t know anything about my mom and my personal situation.
    • Understanding what you mean to people is really difficult because you probably won’t usually like the answer
  • Honestly, I hate Fundraising. It’s not the telling my story or that of the founders I’ve backed. I love that part because I’m excited about my story. I hate the process of finding people to work with based on one and only one criteria—how much money they have. **It’s nothing I ever want to value someone for, despite my very practical need to do that. **
  • Finding big pools of money is something you will very much need to do if you want to be in venture. It’s not just about investing. So much more of it is about connecting to money than I ever thought it would be and that’s the most disappointing thing about it.
  • The funny thing is, I think I’m a hundred times better investor today than I have ever been. I’ve seen multiple cycles, dealt with so many different types of founders, seen so many models, and while I still have so much more to learn, the idea that I was any good when I hit four out of my first eight deals out of the park is a joke.
  • What I do know is that I’ll never stop working hard for my investors, I’ll be as transparent as I can be, and I’ll do whatever I can to help them get where they want to be in their own investing.
  • That’s why I share my deal flow with them free of any additional fees and carry. **That’s also why we do educational classes on VC best practices. I’m here to make money for them, but if I can make new and better investors, too, that’s just as rewarding. **Future Investors of America Investing 101 2.0