Since September 23, hordes of startups have begun advertising their plans to raise funds. On AngelList alone, more than 1000 companies have done so. Angel investors have started leading syndicates on the site. And venture funds themselves, including Betaworks and Foundry Group, have committed to investing in companies which engage in general solicitation on AngelList.
The lesser-known side of the new laws going into place is that venture funds themselves (and private equity funds, and hedge funds, ) can also generally solicit. So far none have to my knowledge. Today, a small New York firm is breaking the seal: ff Venture Capital has announced it will finish out the remaining month of fundraising for its next fund through general solicitation.
One of the biggest things making it so difficult for small venture funds to raise capital is the ban on general solicitation, wrote John Frankel, founding partner of the firm. From his blog:
The ban has long hindered funds and firms from letting anyone know that they are raising capital, and from sharing their historical performance, infrastructure, and capabilities. As a result, capital has flowed to players with brand and ego, based on tales around pretty much anything other than return on capital (or even return of capital).
The firm is raising its third fund, FF Rose Venture Capital Fund, with a target of between $30 million and $50 million. It has been in the market with this vehicle for almost a year.
It’s no secret that VC money has been hard to come by for all but the largest, brand-name funds in recent years. That’s because most funds that aren’t in the top five have posted lousy returns. With general solicitation, firms with respectable returns can advertise exactly what their past funds have earned for investors. Frankel touted ffVC’s post funds’ gross IRR, which has topped 30 percent.
But what about all those burning hoops to jump through?, the theoretical reader asks. Isn’t general solicitation ridden with rules and forms? The short answer is “not yet.”
ffVC gets to avoid those because the rules have not been officially put into place. Anyone who launches general solicitation now will be grandfathered into whatever rules are eventually decided on. That’s because the SEC decided to extend its comment period until November 4. VC firms who want grandfathered in should get soliciting now.
- ff Venture CapitalEarly Stage Venture Capital Firm
ff Venture Capital (ffvc.com) is an institutional venture capital investor in seed-stage companies. Since 1999, our Partners have made over 160 investments in over 60 companies. ffVC has about sixteen employees based in New York and extensive resources focused on helping seed/Series A companies become industry leaders.
We work intensely with our companies, aiding in strategy, hiring, positioning.