Venture capital is a flexible and convenient way to achieve one’s financial goals. Starting your business, investing in the development of prospective projects, or challenging the current business realities – a venture capital firm allows you to achieve all of that.
At the same time, starting such a company raises the question: Where to start? How to ensure the fund’s success? How much money do I need?
Leyla Karaha, one of the founders of the Equisscore fund, shares her experience on this journey.
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Co-founded Catalyst Noir to support aspiring underrepresented tech founders, a social innovation crowdfunding platform for women entrepreneurs. Founder of YourY Network, an inclusive space for global social entrepreneurs and changemakers to connect and collaborate. Techstars community leader.
Starting a VC Fund: Reasons Behind Equisscore
Leyla Karaha: “We are passionate about helping women founders have access to funds to scale their business. That’s why we are opening this fund. We spoke to many of our peers regarding possible pitfalls, collected the information regarding the reasoning behind the fund, its jurisdiction, and other relevant questions.
We want to support women founders. We also want to help startups that are impact-driven to have access to the fund. Worldwide, only 2% of funding goes to women founders, and we think that’s unacceptable. That’s why we are raising our funds. Hopefully, fingers crossed, by December, we’ll be able to raise enough funds so we can start investing in females.”
Diversity at the fund’s core
Leyla Karaha: “We want at least 51% of our funds to go to women, but we also want the rest of them to go to men. And our sweet spot is when the teams are mixed gender, because that means the diversity is really powerful. The way men see the world is different, and the way women see the world is different. When the two come together, it’s magic.”
How to start a venture capital firm: Equisscore scope
Leyla Karaha: “Equisscore’s scope is sustainability and impact startups. But we are open to AI, health tech, especially women’s health tech, because women’s health is so underfunded. So that will be really amazing to invest in more people.
The startups should be on the seed stage when they are ready to scale to the next level because our check size will be between 250 thousand and 750 thousand. They should have a product-market fit by then and be ready to scale.
The fund is also open to collaboration and new members. Just follow us on LinkedIn, and we also have a webpage – equisscore.com.”
How to Start a Venture Capital Fund: Key Steps to Take
There are several steps that you need to define before starting a fund. You need to:
Define the jurisdiction.
Formulate a thesis.
Decide on the budget.
These key factors will direct your organizational effort and help to build a strong foundation for your firm.
Leyla Karaha: “First, you have to decide on the jurisdiction. After this, you have to decide on your thesis. Why do you want to open this fund? Who do you want to invest in? What problem do you want to solve? What kind of startup do you want to invest in these funds? What’s your why? What drives you to start this fund? Because starting a fund is the same as starting a startup.
You have to pitch to your investors because you need investors to invest in you, so you can invest in startups. The same is true for pitching to limited partners (LPs), to sell your dream, why it is important, and why LPs should put their money in your fund, so you can invest in the startup that you want to invest in. You have to have your why, and you have to be able to tell that story of your why to your investors.”
Jurisdiction
The legal field in which your fund will operate is one of the key VC requirements. Take the time to research all available options and find the best one for your scope.
Leyla Karaha: “ The jurisdiction that will also help you to see what the cost of opening a fund in this jurisdiction is. The other jurisdictions could be less costly, especially for new funds to start. For example, we chose the UK, which is more affordable for us than other jurisdictions. But it also depends on how much you want to spend to put into it to get started.”
Optimal VC fund size
There’s no definitive limit on starting a VC fund. Yet, you should take into account the expenses and income sources management.
Leyla Karaha: “ There’s no limit on starting a VC fund, but it all comes to budget. You have to tell yourself how big the fund is that you want. For Equisscore, we want to first raise 20 million, and then the rest will be 50 million for our first fund. It depends on how big the fund is you want, and also whether you want to put your own money and your LP money, or whether you want to just put your LP money and cover your costs as operational costs. It all depends on how you want to structure it.”
If you’re thinking about starting a micro VC fund, there are no financial limitations for doing that.
Mindset and Vector
Leyla Karaha: “We decided to start a fund instead of a regular company or a start-up due to the lack of access to funding. I’m in the ecosystem, I support female founders for over five years and I see that I help them to get into the scale up stage and I see them struggling to raise their capital to scale to the next level, and I’ve been attending so many women events, founders, and all the things they say is the same: “Access to funding. Access to funds.” I’m that person who doesn’t want to focus on the problem, I want to take my energy on the solution to that problem.
Don’t be Afraid to Challenge Old Beliefs
So, after five years, I’m tired of just saying that: “Oh, women only get 2%.” I’m like: ”Okay, let’s change this.” But the boys are doing it. Some of them know half of what we know, half of the experience that we have. There are five of us with tons of experience. We’re like: “We can do it too. Let’s have that boy’s confidence.”
How to Start a Venture Capital Company: Necessary Background
Leyla Karaha: ”You can have any background. For example, I have an accountancy and finance background, and I’m also an ecosystem builder. My work helps to have that deal flow that we need and our team. We have four other ladies, and some of them have legal and finance backgrounds. Some of them have a venture investment background. Essentially, any background will be beneficial for starting a fund. Once again, the main criterion is to be focused on “why.” Why do you want to raise that fund?
Build a Team
Do not forget also to bring in the team that will cover all the knowledge gaps that you’re missing, and also upskill yourself. For example, the two of us in my team did a VC lab. Actually, I recommend anyone who is interested in venture capital to do a VC lab program. It’s an online program. It’s free to just help you change your mindset to have the investor mindset and help answer the question: “How to start a venture capital business?”
Demistify Venture Captial
It’s a great program because for me, this was a five-year plan; it was a long-term plan, but after participating in that program, it became a short-term plan. It gave me the confidence to demystify what venture capital is, and they showed me that I can do it. Look at what people in my cohort are doing. Look at people who are in the cohort behind me who raised the funds, and look at their background, and they’re the same as mine.
Any one of us can be in venture capital. It’s just to open that gate. It has been a very exclusive space for a while. We need to open the gates of venture capital, so the space will be more diversified. That means more different startups will get funded instead of the same startup getting funded and the same rate of failing happening. Why are we not funding different founders and seeing if they can bring different companies to the ecosystem?”
Final Words
Venture capital funds are available for everyone. Naturally, you will need an initial budget, a financial background, and a plan to build your fund. You will also need a well-defined “why” for your fund and a speech for your LPs. Still, the question of “how to start a venture capital company?” is not beyond reach. With a team, vision, and a plan, you can build a fund of any scope and size and reach the aims you set for yourself.
FAQ: How To Start a Venture Capital Firm
How to raise a venture capital fund?
Raising an initial venture capital fund takes a few steps. First, define your fund’s thesis – geography, stage, niche. Second – build a track record of the deals. Third – assemble a competent team. Fourth – establish legal and operational structures. Finally, pitch your fund’s thesis to LPs (Limited Partners)* and secure initial commitments. __________________ *LPs, or Limited Partners, are the investors who provide capital to your fund. They can include high-net-worth individuals, family offices, pension funds, and institutional investors.
What is a venture capital fund?
A VC fund is a pooled investment entity created from limited partners’ contributions and managed by a venture capital firm. Limited partners earn returns when the fund’s startup investments increase in value and are sold or merged, generating capital gains. The venture capital firm, in turn, earns revenue from management fees and a share of the profits, known as carried interest.
Starting a venture capital fund in the UK requires setting up a management company and ensuring compliance with FCA regulations. You’ll also need to choose a suitable fund structure, such as a Limited Partnership, and prepare the required legal documents. Once the regulatory framework is in place, the rest follows as in other markets: define your thesis, pitch it to LPs, assemble your team, and start building the fund.
How to join a venture capital firm?
A fund of any size requires skilled professionals. A background in accounting, investments, project management, or consulting can help secure a role in a VC firm. Entry-level positions are highly competitive but attainable. Building a network through LinkedIn, internships, and industry events is key, and demonstrating clear value to the fund will increase your chances of joining.
Do venture capitalists make a lot of money?
Yes, venture capitalists can make substantial money, though earnings vary by level. Junior professionals, such as analysts or associates, typically earn competitive salaries that may reach six figures at larger firms. Senior partners, in addition to salary, share in carried interest—around 20% of the fund’s profits—allowing top performers to achieve million-dollar incomes.
How much money do you need to start a venture capital firm?
Starting a venture capital firm doesn’t require millions just for registration. Legal setup, fund structuring, and regulatory compliance usually cost in the low hundreds of thousands of dollars, depending on jurisdiction. The bigger challenge is raising capital: to operate a credible VC fund, most firms aim for $25–50 million or more, though some micro-VCs may begin with $10 million or less.
How to start a venture capital firm with no money?
Starting a venture capital firm with little personal capital is challenging but possible. Legally, setting up the management company and registering the fund typically requires only a few hundred thousand dollars to cover incorporation, legal, and regulatory costs. After that, you need to find partners or limited partners who will provide the investment capital for the fund. With strong professional networks, credibility, and persuasive skills, it is feasible to launch a small VC firm with minimal personal investment.
How to register a venture capital firm?
First, choose the jurisdiction where you want to register your firm, as different regions—Europe, the US, Asia, etc.—have unique compliance requirements. Next, establish a legal entity in that jurisdiction, such as an LLP, LLC, or limited partnership. Prepare the limited partnership agreement and ensure your firm complies with local securities and financial regulations.
How to get into venture capital without experience, or how to become a venture capitalist?
The main criterion of joining a VC firm or starting your own is to provide value. Obtain a background in accounting, financial analysis, consulting, or the investment field. You can join online courses, participate in internships, and build skills via networking. Venture capital is a professional field like any other. Therefore, with clear focus and diligence, you can demonstrate your value to a VC firm early and from there obtain the necessary experience to start your fund.
How do venture capital firms make money by investing in startups, and how to make money in venture capital?
How do venture capital firms make money by investing in startups, and how to make money in venture capital? Carried interest is the major source of profit for VC firms. Venture capital companies create a list of start-ups worthy of investment. Most of the entries will generate zero profits, but the VC firms focus mostly on start-ups with 10x-100x possible returns. The investment-to-exit timeline takes from 5 to 10 years; quick liquidity is a rarity for such firms. When the startup returns the LP’s initial investments from profits plus hurdle rate, the VC firm takes carried interest, which is up to 20%.
How do venture capitalists make decisions, and how do VCs value companies?
Inbound pitches are a key part of VC deal flow, although firms also proactively source opportunities. When evaluating a company, VCs focus on the quality of the team, the product, the business model, and its market potential. The valuation process for a startup can take several weeks and depends on the complexity of the business. VCs typically use methods such as comparable company multiples, the venture capital method, and qualitative assessments of the team, product, and market potential.
How many venture capital companies are there, and what do venture capital firms invest in?
According to Venture Insider, there are approximately 4000 venture capital firms globally, including micro-funds. The main vectors of investment of such firms are SaaS, biotech, fintech, healthcare, and climate tech startups.
Disclaimer
This article is for informational and educational purposes only. It does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation to invest in any fund, security, or financial instrument. The content is not intended as marketing or promotion of any investment vehicle, including venture capital funds, and should not be relied upon as investment advice.
About theAuthor
Kateryna Moskovenko
Financial Consultant with 14 years of experience in accounting, management accounting, and financial modeling; Founder of Fiscra; Author of courses and trainings in financial modeling, business planning, and entrepreneurship; prepared more than 50 financial models for startups. Linkedin
