There are more venture capital firms than ever, and the number continues to climb. If you’re starting one of these new VC funds, standing out from the crowd and building a strong portfolio from the start is critical. For small funds with limited resources, this can be a challenge.
We sat down with Eric Reiner of Sinai Ventures to learn how he’s built a unique and successful VC firm.
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Focus on your differentiator
Eric’s first tip: be yourself. You don’t have to do things exactly like a big firm to be successful. In fact, Eric and his partner, Jordan Fudge, started Sinai Ventures so that they could be different. To set themselves apart from other firms, they focus on offering something many firms can’t: quality time with founders.
“The more I speak to other VCs and understand how they run their business, especially on the portfolio value-add side, the more I notice it’s intentionally low touch. It’s chatting maybe once a quarter about how the business is generally doing. We like to build deeper personal relationships. We go to their offices and spend a lot of time with them.”
Leverage your network
Remember: founders talk to each other.Use this to your advantage. As Eric explains, “a new fund without marketing resources must rely on its reputation within the founder community to get the word out.”
Sinai ensures that all founders—even ones they don’t end up investing in—have an exceptional experience. They even track referrals from founders they’ve passed on. “This shows that our process, even when the conclusion is to pass on an opportunity, is positive for the founder and one they would want their founder friends to go through. We’ve been introduced to some great teams this way,” says Eric.
Partner (don’t compete) with bigger firms
Don’t be threatened by other firms.Eric recommends looking at big firms as potential partners, not competition. “Our preference is to co-invest and co-lead with them,” Eric explains.
Partnering works because each firm brings something different to the table. “The large VC brings prestige and name recognition that only a firm that’s been around for more than five decades can bring.” Sinai, on the other hand, brings quality time. “We coach the founders and make introductions to other people they could learn from.”
Slow and steady doesn’t always win the race.A benefit of being a small firm is that you can move fast. While bigger firms can get tied down by processes and multiple stakeholders, Sinai Ventures makes decisions quickly. “I think we’ve excelled in our ability to be bold and move fast on investments.”
As a VC, you’re basically trying to anticipate which companies will be successful in the future. This means you can’t just invest in trends that are popular today. Eric explains, “VCs always need to be thinking about pushing boundaries and finding new product market fit.” Don’t be too risk-averse just because you’re running a small fund.
Find efficiencies wherever you can
For small VC firms, time is money.Since most of Sinai’s business comes from talking with people, Eric and Jordan try to save time everywhere else. That way, they can focus on their core competency: high touch founder relationships. One strategy that saves time is using Carta for fund admin.
Like many VC firms, Sinai used to spend hours putting together reports and working with a traditional accounting firm. Carta’s experienced team and real-time data eliminated most of that manual work. “There’s a noticeable difference since we started using Carta. Likely, it’s five to eight hours a month. That’s more than a dozen meetings with new founders that we can have now.”
To learn more about how Sinai Ventures uses Carta, download the case study above.
DISCLAIMER: Any opinions, analyses, and conclusions or recommendations expressed in this article are those of the author(s) alone and do not necessarily reflect the views of eShares, Inc. dba Carta, Inc. (“Carta”). This article is not intended as a substitute for professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor.