VC Office Hours: Unlocking LPs in a bear market

Emerging fund managers have had a tough time these past few years, and there is no telling when it will get better.

Still, some were able to brace the market’s winter. One of those was Gale Wilkinson, a managing partner at the early-stage fund Vitalize. Her firm just closed a $23.4 million Fund II after two years of fundraising. She called the experience “enlightening.”

She plans to use that money to invest in at least 30 companies and has already cut checks to 50 from earlier capital pools. Her firm, founded in 2018, focuses on future-of-work technology. It typically writes seed checks between $250,000 and $750,000 and has an angel network that has deployed just over a million dollars in 14 deals.

Wilkinson has no plans to raise a third fund anytime soon but has some advice for those who are, given the looming uncertainty in the venture market. She spoke to TechCrunch+ about why she no longer wants to work with institutional investors, what to do when an LP says no, and why she no longer aims to raise $100 million funds.

Image Credits: Gale Wilkinson

TC: This hasn’t been the easiest year to fundraise for many firms or founders. What were some of the big lessons you learned trying to court limited partners this year? 

GW: I made one key error, which was to listen to everyone else when developing the strategy for Fund 2. They said to raise more, go after institutional capital, deploy faster, write bigger checks, do fewer deals, get more ownership per deal, and build out a bigger team to set the stage for further expansion in the future. Initially, I listened and went out to raise $50 million with the expectation of someday getting to a fund size of $100 million, which I think is about the largest seed-stage fund a VC should raise.

After 300 conversations with institutional LPs, I had an aha moment in which I realized that I did not want to primarily work with institutions in the future. For over a decade, I have worked with individual investors, and it’s part of what I love most about this job. Individual investors are very different from institutional investors in all the right ways, in my opinion. Individuals are willing to make their own decisions versus just following the pack; they are adept at looking into the future, and they move fast.