Begin Capital

Every investment is a new episode. Founders are the actors. We’re the casting directors.

[Begin Capital @BeginVC]

Renewed for Season 2. $100M for deep tech founders.

Now casting: https://t.co/cBDVbEQnkg

[Alex Menn @_AlexMenn]

https://t.co/efjdLHUvD9

[Paul Klay @PaulKlayVC]

raising Fund II has never been harder. only 12% of first-time VC funds from the 2022 vintage have raised a second fund so far. here are 7 reasons i think so many struggle

1. they're better at fundraising than investing

some managers are great at telling LPs what they want to hear. they have a compelling story, a convincing deck, and a thesis that sounds amazing. but can they actually pick companies that will generate returns? that's a very different skill. 50 out of 99 VC funds failed to return invested capital after fees, while 62 out of 100 failed to outperform public markets after fees and carry.

the problem is that you won't know the final results for years. by the time Fund II fundraising comes around, LPs are already judging you on early portfolio performance, the quality of your decisions, and whether your original thesis is playing out. you need to show progress before the exits happen.

2. they have no real edge in deal flow

venture returns are driven by a tiny number of exceptional companies. less than 4% of invested capital in its dataset of venture-backed exits generated returns of 10x or more. everyone wants those winners. but how are you actually going to find them and get onto their cap tables? if your strategy is just going to events, asking for intros, and competing for the same deals as everyone else, you're going to have a hard time.

you need a real reason why the best founders would come to you, ideally before everyone else knows about them. otherwise, you're often left competing for deals that stronger investors have already passed on.

3. they don't have a plan for their winners

finding a great company is only half the job. you also need enough ownership for that company to make a meaningful difference to your fund. i think this is where follow-on strategy becomes really important. as an existing investor, you get to see how founders execute, how the team works, and whether the business is actually delivering on its promises. that information can give you a real advantage when deciding where to put more capital.

of course, doubling down doesn't always make sense. valuation, dilution, and concentration risk still matter. but if you've found an exceptional company, you should have a plan for how to benefit from being right.

4. they can't explain why LPs should choose them

this one is pretty funny. VCs constantly ask founders what makes their startup different, why they'll win, and why anyone should invest. then some of those same investors go out to raise their own funds and struggle to answer exactly those questions.

what's your investor-market fit? what's your edge? why should an LP trust you instead of giving that money to an established manager? especially when you're starting out, you need a convincing answer. and the fundraising environment isn't making things easier. only 81 first-time US VC funds closed through Q3 2026.

5. they're competing in a market where capital keeps concentrating

this is probably the toughest part because even good managers can't control it. through Q3 2026, US funds of $500M+ captured 78.1% of all VC capital raised, despite representing just 6% of funds closed. firms raising their fourth fund or later took 88.2% of the capital, while the median fund size fell to $10M.

think about that. huge amounts of money are flowing into venture, but most of it is going to a relatively small group of established firms. a new manager can have a strong thesis, good founders, and a promising portfolio and still struggle to raise the next fund.

6. they underestimate how much LP relationships matter

i've seen how important this is. some managers only start building LP relationships when they're ready to raise, but by that point, they're already behind. LPs want to know how you think, how you make decisions, how you handle problems, and whether they can trust you over the long term. regular updates, honest reporting, and actually understanding what matters to each LP can make a huge difference.

ideally, by the time you start raising Fund II, your existing LPs already know exactly why they want to invest again. and if they don't, you should understand why long before fundraising starts.

7. they don't think enough about liquidity

this one is becoming increasingly important. a fund can have impressive paper returns, but LPs can't reinvest unrealized gains. TVPI matters, especially early on, but DPI tells a different story. at some point, investors want to see actual distributions. and when exits slow down, even funds with strong portfolios can struggle to return capital.

that doesn't mean every Fund I needs substantial DPI before raising Fund II. but managers should understand their portfolio's path to liquidity and be able to explain it clearly to LPs.

here are a few investors who recently raised their second funds and are worth following: @JedBreed, @jakobdiepen, @brettcalhounn, @yoheinakajima, @jamoses92, @kola_aina

[Paul Klay @PaulKlayVC]

here's what you need to understand if you want to start angel investing or launch your own fund:

1. be memorable. think carefully about your brand, what you stand for, and how you position yourself. especially when you're just starting out, quality and originality can make a huge difference in how people remember you and whether they want to work with you.

2. find your investor-market fit. why should LPs trust you with their money? what's your track record, and what unique knowledge or expertise gives you an edge? you need a clear answer to these questions if you want to raise a fund and succeed as an investor.

3. build your network. strong positioning and a good track record will help, but relationships are what bring you the best opportunities over time. a lot of your best deal flow will eventually come from people who know and trust you. just remember that knowing everyone means very little if you can't actually deliver results.

4. give useful feedback, even when you pass. i think this is underrated. if you're rejecting a deal, take the time to explain why and share something genuinely valuable. founders remember investors who understand their market and give thoughtful feedback. sometimes they'll come back in a later round, and sometimes they'll recommend you to other founders.

5. know exactly why you're investing. you need a clear thesis and a good understanding of what makes a particular opportunity worth backing. write an investment memo, structure your thinking, and make sure your reasoning actually holds up.

6. understand what you're investing in. don't just repeat what the founder told you in your investment memo. fact-check the claims, challenge the assumptions, and figure out whether the business makes sense. talk to people who've actually built successful companies in that industry. their feedback can save you from some very expensive mistakes.

7. do your founder references. talk to employees, partners, and previous investors. you can learn a lot about a founder from people who've actually worked with them, especially things you won't pick up during a pitch.

8. stay flexible. the market changes fast, and your thinking should too. keep watching what's happening, stay curious, and don't get too attached to your original assumptions. some of the biggest opportunities come from recognizing something that most investors haven't noticed yet.

there's obviously a lot more to becoming a good investor, but i'd start with these.

[Begin Capital @BeginVC]

@PaulKlayVC @paradigm @slow @blueyard @airstreet https://t.co/cBDVbEQnkg

[Begin Capital @BeginVC]

@fuckgrowth Let’s make this season count 🚀

[Begin Capital @BeginVC]

Renewed for Season 2. $100M for deep tech founders.

Now casting: https://t.co/cBDVbEQnkg

[Alex Menn @_AlexMenn]

https://t.co/efjdLHUvD9

[Anatoli Kopadze @AnatoliKopadze]

I'm begging you, read this if you think you need money and connections to win in VC...

This is one of the most inspiring stories I've seen in a long time.

[Begin Capital @BeginVC]

@thecoachchris_ The real work is backing the founders who’ll build what comes next 🔥

[Begin Capital @BeginVC]

@gpt_alex Fund I was just the beginning. Excited for what comes next 🚀

[Begin Capital @BeginVC]

@0ogeth The future belongs to those who build it, not those who wait for permission !

[Begin Capital @BeginVC]

@netrovertHQ The best stories come from the founders themselves. We just make sure they’re told right 😎

[Begin Capital @BeginVC]

@soonmource The next chapter is going to be a good one !

[Begin Capital @BeginVC]

@MaginAbheet @_AlexMenn @PaulKlayVC The next generation of category-defining companies is being built right now 🔥

[Begin Capital @BeginVC]

@MaginAbheet And we’re only getting started 👀

[Begin Capital @BeginVC]

@ArjunKalsy Fund I set the foundation. Now it’s time to build on it 🚀

[Begin Capital @BeginVC]

@dizhel Big things ahead. Let’s make them happen 🚀

[Begin Capital @BeginVC]

@Laurentxdev Still one of our most unconventional fundraising tools 😉

[Begin Capital @BeginVC]

@ilavanyajain The kind of big that starts with the right founders 👀🚀

[Begin Capital @BeginVC]

@RAnSacks Let’s build something massive 🚀

[Begin Capital @BeginVC]

@SR_Researcher_ @runware @CodesphereCloud @dwelly_group Three founders we backed in Fund I are now helping shape Fund II from the other side of the table. Full circle 🤝

[Begin Capital @BeginVC]

@TheOneAndArjun Thanks for the shoutout! Really appreciate it 🤝