Matt Blomstedt of SpringTime Ventures

Keys:

1. Tap into your 1st, 2nd, and 3rd degree network to cast a wide net when looking for potential investors to build support before your search becomes more targeted.
2. Set deadlines and create a sense of urgency to quickly build momentum and get LP commitments.
3. Communication is key when fundraising and managing your fund. Even if a lead goes cold, foster that relationship and stay in contact.

Once you’ve laid the groundwork for your first fund — building your network, identifying your secret sauce and motivation, developing your thesis, and modeling your fund — how do you move forward?

I got into the nitty gritty of fundraising with Matt Blomstedt of SpringTime Ventures to counsel first-time and emerging fund managers.

Matt came into the venture world following 10 years in the energy sector managing over $1.4B in mergers and acquisitions.

After moving to Colorado in 2015 and getting immersed in the tech startup scene, he got to know several entrepreneurs, investors, and accelerators in the region.

Matt quickly identified a lack of seed capital in the area and decided to connect energy executives, private equity investors, bankers, and lawyers to early stage tech investing.

In 2016, Matt founded SpringTime Ventures with his three partners — Rick Patch, Jeff Gardner, and Rich Maloy. SpringTime Ventures has grown to seed passionate tech startup founders solving big problems in the Rocky Mountain region and beyond.

Finding Leads

Wouldn’t fundraising be so much easier if LPs walked around like this?

Unfortunately for funds, potential sources of capital are not readily advertised. While you could pay for access to growing LP databases on platforms like Pitchbook or Preqin, there’s no guarantee your cold email gets through.

Funding could come from experienced investors and angels, but you don’t want to miss out on the sources you may not think of at first, like friends, family, or former colleagues. How do you source potential investors for your fund and get meetings with LPs?

Go back to your network. The fundraising process can be a networking game of who knows who, which makes it even harder for first time managers without a track record.

During their first raise, SpringTime Ventures tapped into Matt’s close personal and business contacts in the energy industry as well as the long term relationships with local entrepreneurs and investors in his partners’ networks.

At first, SpringTime set up meetings with as many people as possible in order to build support and cast a wider search for investments. Through this process, they established within the community that they had a strong team, good strategy, and enthusiastic support.

Forging support in the community not only validated their idea, but it helped their network grow. Eventually these meetings also helped their search become more targeted to find investors with matching profile characteristics.

A major part of this process is getting referrals and intros. Someone always knows a person, so tap into your 2nd and 3rd degree network.

Use the skills of persuasion taught in a book like Robert Cialdini’s Influence to get people to believe in your fund.

Since you don’t know where a potential LP could come from, don’t hesitate to reach into different buckets: institutional LPs, angel investors and high-net-worth individuals, industry players, etc. Instead of targeting LPs directly, find the appropriate types of individuals and find out whether they could be an LP.

Tip #1: be creative and organized with your networking, especially during this pandemic.

• Since networking has gone virtual, Lunchclub has been a very useful site for meeting new people. Be sure to track and manage these relationships through a CRM like Airtable.
• In addition to your long term fundraising goals, set short term networking goals to stay motivated. For instance, your goal could be to send 5 emails or intros per week.
• Expand your network through other forms of communication like blogs and podcasts.

Getting to Yes

Now that you’ve got the meeting, how do you get the commitment? Even with highly interested people, Matt said, getting them to to sign and say “yes” is tricky.

During your first raise, you’re no different from the startups you intend to invest in — full of potential but untested with increased risks. In a way, you need to perform the same sales job that a startup does. You have to get them to say yes before you even ask. This means building trust, momentum, and relationships.

Tip #2: send high quality deal flow to potential LPs.

Send high quality deal flow to thesis-aligned potential LPs. In doing so, you build a relationship and reputation for sourcing and delivering. If they invest in what you send them, they may be ready to trust you to make more good deals.

Remember: every situation is abundant. There are plenty of opportunities for investments to go around, so make the effort to share and connect with others. Manage your deal flow and referrals on a tool like fiifi, which tracks inbound and outbound deal flow from your network automatically.

SpringTime Ventures’ first raise took about a year and included six closes.

After the conception of the fund and identity in the latter half of 2016, Matt and his partners developed their story, hit the road, and finally got enough commitments for a first close at the very end of 2017.

They had five subsequent closes through the next twelve months, including their final close in December 2018.

How did they get it done? One way to build momentum is to quickly garner support without a prime focus on commitment size. Not many investors want to be the first to dive in.

Get quick commitments — even if they may be smaller than your target minimum — to create a fear of missing out, encouraging other LPs to sign on.

Although SpringTime had a stated minimum, they had a wide range of commitment sizes. “If people were excited and wanted to be a part of it,” Matt said, “size of commitment wasn’t a problem. We wanted to build momentum and have great people involved.”

Another way to close investors is to set deadlines. Be clear about when your closes are and justify your timeline. Not only does this create pressure on you and your team to meet certain goals, but it also places a sense of urgency on LPs to commit.

For instance, if you’re already set and ready to invest in X, Y, and Z companies, LPs need to jump on board before they miss out. The train is running and we can’t stop it now. Since most investors are risk averse, you need to create an environment where it’s risky to not invest.

SpringTime Ventures set dates and structure early on in the fundraising process allowing them to guide LPs towards the finish line.

As Matt explained, their final close was so important because they had the urgency of a deadline in addition to a growing track record from their first close. In the last 6 weeks of their raise, SpringTime‘s fund doubled in size.

Tip #3: when the going gets tough communicate more, not less.

During a unique time like this pandemic, be a pillar of confidence for your LPs.

“We are extremely thankful to our investors who trusted us from the beginning. We can’t do what we do without their support, and pride ourselves on great communication with our LPs,” Matt said.

Over the last several months, this has meant communicating even more. In addition to understanding how the pandemic has affected their investors to varying degrees and giving advance notice on capital calls, SpringTime has shown LPs that they’re confident in their investments and prudent with their capital.

Moving On

When fundraising, in addition to being a strong networker, you will have to hustle and grind through hundreds of meetings for up to two years.

However, you and your team only have so many hours in the day. How do you know when to move on from a prospective LP and focus your efforts elsewhere?

“A quick no is the second best thing to a yes. People sitting on the fence are tough.”

It’s important to back off and give space when needed, but it’s even more important to keep communicating and updating all prospective leads going forward until they decline the opportunity.

This could mean putting them on a drip campaign and managing communications with a CRM. At the end of the day, it takes time to build the sort of trust needed between a GP and LP. It’s crucial to keep fostering these relationships regardless of the initial outcome.

For SpringTime Ventures, many of those cold leads warmed and said yes before the final close.

In the end, you have to be persistent. You’re going to be told no a lot, but Matt advised emerging managers, “Don’t give up. Stick to your vision. Do what you say you’re going to do.” Keep an even head through it all and take care of yourself and your team.

Our next article is going to be on managing your fund as a business and looking to fund II and beyond. Stay tuned!