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Why Knowing a Fund’s Stage Matters Before You Pitch

Why Knowing a Fund’s Stage Matters Before You Pitch

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Vasily Alekseenko
October 28, 2024

Why Knowing a Fund’s Stage Matters Before You Pitch

Founders often pitch to VCs without realizing that timing is everything. The stage of a fund determines their priorities—some are hunting for new investments, while others focus on follow-ons or exits. By understanding where a fund is in its lifecycle, you can avoid wasted efforts and pitch to VCs who are truly ready to invest.

Let’s reference a recent LinkedIn post on How VCs Calculate Their Average Check Size to see how check size and fund stage intersect. Understanding these factors can help you target the right partners.

Stages of a VC Fund and Why They Matter

VC funds typically go through five stages, each with unique goals and activities:

Fundraising Stage
Duration: 12-18 months
Focus: VCs are busy securing capital from limited partners (LPs) and may not yet be investing actively.
What You Can Do: Look for recent fundraising news or press releases; if a fund has just closed, they’re likely moving to the deployment phase.
Investment/Deployment Stage
Duration: 3-6 years following the fundraising close
Focus: Actively seeking and deploying capital into new deals.
What You Can Do: This is prime time for pitching, especially if your needs align with their average check size. During this phase, funds call on committed capital, making them more likely to support new companies.
Value Creation/Portfolio Management Stage
Focus: Monitoring investments, providing guidance, and deciding on follow-on investments for promising portfolio companies.
What You Can Do: Ask about follow-on capital allocations. If a fund allocates a large percentage for follow-ons, they may be more selective with new investments.
Harvesting/Divestment Stage
Duration: 3-5 years after the main investment period
Focus: Funds aim to exit successful investments through IPOs, acquisitions, etc., to return capital to LPs.
What You Can Do: If a fund is primarily in the harvesting stage, they’re less likely to engage with new investments. Reviewing their recent exits can offer clues about where they’re focused.
Liquidation Stage
Focus: Final exits and closing out the fund.
What You Can Do: By this stage, a fund has closed out its active investments. New investments are highly unlikely, so it’s best to approach newer funds.

Practical Steps to Identify a Fund’s Stage

Since funds don’t often advertise their exact stage, here’s how to get a sense of where they are:

Check the fund’s age. Most VC funds have a 10-year lifespan, so if a fund is nearing this, it may be in the later stages.
Look at recent portfolio activity. If most announcements are follow-ons or exits, they’re likely in the harvesting phase.
Review public communications. Updates or insights from fund managers often hint at whether they’re actively seeking new deals.

Takeaway: Timing is Everything

Knowing the stage of a VC fund helps you pitch smarter, aligning your ask with their goals. By targeting funds in the deployment or early portfolio management stages, you’re more likely to find a receptive partner.