The Basics of Setting up a Fund

1. Investment Thesis

  • We support pioneers of the new Sustainability Era, by analyzing the latest scientific research, giving us early insights on market trends and outsized long-term performance.

2. Structure

  • What types of companies, number of companies, and ownership percentages of each company?
  • How will you scale fund investments? e.g., change your initial check size over time, adjust future follow-on investment amounts, allocate more capital based on milestones?
  • What is the minimum amount of capital you need to raise for your fund model to work?

3. Team

  • How many general partners?
  • Will general partners commit capital? e.g., on average 1–3% of the total fund size
  • Do general partners have a network to aid in fundraising or dealflow? Is it a requirement?
  • Will you have additional investment professionals, principals, associates? Will you have an investment committee for advice or final decisions? Will they have a share of profits (e.g., carry) in the fund?
  • Will individuals be hands-on or hands-off with portfolio companies? Will individuals join company boards?
  • Do you share the same ethos on acquiring businesses, scaling, and exits?

4. Legal/Operations/Service Providers

  • Legal — Engage a law firm for fund formation, deal document review, and regulatory requirements. Will you split work between your formation lawyer and dealflow lawyer? Can your lawyer defer fees until you’ve fundraised? e.g., 90 days
  • Fund Administration — Hire an administrator for cash reconciliation and accounting. Which expense management tools will you use to track daily spending?
  • Banking — Appoint a bank to hold your business accounts and deposits — ideally requesting a specific point-of-contact for emergencies, so a standard Chase account may not be a fit.
  • Other later costs to consider — Travel expenses, tax consulting, office space, designers, and recruitment agent fees (if an agent is used)

5. Start Some Investing

  • Can you begin investing via angel investing, consortiums, or syndicates? e.g., AngelList, Republic, CircleUp
  • Can you create an SPV (special purpose vehicle) to underwrite a single investment? e.g., Carta
  • Can you perform a small initial close of capital to make a single investment? e.g., friends and family capital plus general partner commitments

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Kaego Ogbechie Rust

Kaego Ogbechie Rust

224 Followers

CEO at KHOR Consulting, helping companies build business plans, pitch decks, and streamline their operations. Email: kaego@khorconsulting.com