What I look for in the funds I back (and my commitments as an LP)
Hi, my name is Ben Ehrlich and I am the general partner and co-founder of First Momentum Capital (i.e. FMC). I started FMC as a first-of-its kind fund of funds dedicated to backing the next generation of great venture managers.
At FMC, I spend my time looking across a broad spectrum of new, early-stage venture set ups. These take many forms and go by even more names: emerging managers, micro funds, first time funds, and rookie VCs. I do so in order to allocate into the best managers and help them on their journey. To guide managers on how I think and what I prioritize, I have distilled what I look for into this list. I hope you find it useful:
Some experience as a capital allocator. Though I look at first time managers, I do not back first time allocators. An allocator could be an angel investor, former founders, business unit leader or former VC at an established firm. However, there are others that could meet this criteria.
A proven track record of results. If you are an angel investor, this one is easier to prove. If not, show me the tangible ROI of something you allocated capital to, grew and delivered on.
A compelling fund thesis. When I back a fund, I view it as putting capital towards a vision for how the world could and should look. Take me on that vision with you and help me see the world the way you see it.
If we check those boxes, the next set of criteria are a clear answer to the following three questions:
What am I buying? As a fund-of-funds, I am looking for a portfolio that diversifies my exposure. This means that I am looking for funds that can get me into unique deals. I need to understand what type of companies will be in the portfolio over the coming years.
Why choose you? Backing emerging managers is about backing the person. Show me what edge or angle you have that is going to make you successful. Where does your deal flow come from? How do you capitalize on it? Why do founders want to work with you?
What is the upside case? The other points in this memo could apply to a lot of types of VC firms, but this question is particularly important to FMC because I am looking for outlier funds. Our portfolio strategy requires that I find massive winners. That is why I like smaller funds led by emerging managers with a thesis that, if proven true, will alter the world.
Alongside the above, I make the below commitments to you as an emerging GP. Through my experience raising funds and supporting enough emerging managers, I know how hard a process it is. As such, here are my promises:
I will respond to your emails within a week.
I will define clear next steps at the end of every meeting we have.
If you aren’t a fit, I will tell you and deliver written feedback as to why.
If you could be a fit and I need to see more, I will tell you and deliver written feedback as to why.
If you are a fit, I will be a low-friction LP and will do everything in my power to make your fund a success.