Paige Finn DohertyFounding Partner, Behind Genius · Founding Partner at Behind Genius Ventures

the advantages of starting a new fund

27 Feb 2024 · 1 min

Watch on YouTube

0:47

In this segment of the YouTube video, the speakers discuss how a newly launched venture fund should approach portfolio construction. They emphasize that a new fund begins with a clean slate and should aim to invest in roughly 20 to 30 fresh portfolio companies, even if some overlap with existing investments occurs. The conversation highlights the limitations of fund‑of‑funds structures, noting that unless a new vehicle is created for a distinct set of managers, the high correlation among existing managers prevents the fund‑of‑funds from establishing 30 entirely new relationships every two years. The speakers also point out that endowments and foundations tend to wait for follow‑on rounds, and general partners (GPs) typically limit themselves to making only one brand‑new investment every 12‑18 months when starting a new program.

The way your portfolio will when you launch your next fund. Mm-hmm. You basically start with a clean slate. Mm-hmm. And you might cross over in a couple of your investments, but you're really gonna look to do 20 to 30 new portfolio companies. Even with fund of funds that raise multiple vehicles, it is, unless they raise a vehicle for a different set of managers, there's usually a high correlation. So they're not able to, like, we can't do 30 brand new relationships every 2 years.
Oh, right. So, so it's like they've probably waited on follow-on for most fund of funds. Correct.
Consider it, and especially endowments and foundations, things like that. And I think, I think that GPs don't like grok that at a level of, unless somebody's a start— starting a brand new program, they're gonna say they might only do one new investment every 12 to 18 months.