Before You Start a Fund, Write a Few Cheques of Your Own

I recently spoke with a friend who wants to start an impact fund. Sustainable travel, femtech, healthcare, tech. UK and Africa. She worked at a VC firm, saw the deal flow, and did the market research. She knows the language.

She hasn’t invested in a private company before.

I've been on a version of this path since 2020, so I told her what I wish someone had told me. I'm sharing it here because I suspect she isn't the only one thinking about it.

Before you ask anyone else for capital, test your thesis with your own.

It doesn't need to be a big number. I suggested £5,000, split into five £1,000 cheques over time. Only use money you can afford to lose, because some of it probably will be.

At this stage, the returns matter less than what you learn. You have to find the companies yourself. You have to sit across from a founder and decide whether you believe them. You make the call with half the information you'd like, and then you wait years to find out if you were right.

Watching other people do this from inside a firm is useful. Doing it with your own money feels different. It also gives you proof points. When you eventually sit down with prospective LPs, you don't want to be using their money to find out whether your thesis works. You want to show them the decisions you've already made and what those decisions taught you.

I started a syndicate in 2020. I've since invested in around 35 companies, and I learned almost all of it by doing. My first investment failed. My second one made the money back. The real lesson was that I made a decision, lived with it, and improved for the next.

Your first cheque will feel uncomfortable. That's normal. You will never have perfect information, and not every company will work out. What you're building is the discipline to make a considered call, learn from what happens and adjust your thesis as you go.

You can care deeply about sustainability, women's health or any sector where you believe capital can do some good. I'd encourage it. But LPs will still ask one question before anything else. What return can I expect for taking this risk? Holding on to your impact thesis doesn't let you dodge that question. You need to pair it with a clear view of how these companies grow, sustain themselves, and produce a financial outcome.

It helps you understand what you're signing up for. A fund usually lasts 10 to 12 years. You spend the first three or four deploying capital, then support the portfolio and return money. Investors trust you with their capital for over a decade and need to believe you can see it through.

This was my most expensive lesson.

About two years into the syndicate, we started raising a fund. We had a track record and deals I was proud of, but we didn’t have an LP network. We had put my energy into building the portfolio and very little into building relationships with the people who might back a fund. We struggled but raised capital to invest in companies like Chowdeck, Lemfi, and Moneco.

If I did it again, I'd build both in parallel from day one. A conversation with a potential LP is worth having long before you need their money.

Good deals rarely land in your inbox by accident.

A lot of ours come from founders finding us. If you search for Africa/Diaspora syndicates, HoaQ shows up. That came from years of being consistent about what we stand for and saying it in public. Founders now come to us because of it.

The rest comes from relationships. We co-invest with syndicates and keep in touch with founders for years, including those we initially passed on. We host a monthly event. Nothing seems significant month to month, but over years it builds your pipeline.

If running a fund feels like a big leap, that's because it is. Joining an existing syndicate is a sensible first step.

It gives you access to deals and other investors to learn alongside. You can make your first few investments through it and start building a record without taking on the full responsibility of managing other people's money.

That's what I suggested to my friend. Find a syndicate whose thesis overlaps with yours, check the minimum ticket, and use it for those first five cheques.

If you want to be a capital allocator, the path is simpler than it looks. Start allocating capital. Start small, and start with your own money.

Nothing in this piece is financial advice. Investing in early-stage companies is high risk, and you should be prepared to lose all the money you invest.