Lessons from ‘The Hard Raise’: Inside USV’s Debut Fund Prospectus
How Union Square Ventures went from 100+ rejections to a 13.8x Fund
The Hard Raise
Reading USV’s debut fund prospectus,1 it’s hard to believe that the now-storied venture firm struggled to get off the ground. Dubbed “the hard raise,” founding partner Fred Wilson recounts on his blog how he and his co-founder, Brad Burnham, spent 18 months fundraising—enduring over 100 rejections and relentless travel across the US and the world—just to reach a first close.
The fundraising struggle is even more striking, given Fred and Brad’s track records at the time. They had already invested $299m and returned a staggering $1.3bn at their prior firms. Yet in 2004, they faced deep skepticism. Limited partners were hesitant and reeling from the dot-com crash in 2000, unaware that in a few years they would be kicking themselves for passing up an opportunity most would eagerly seize today.
Things took a turn for the better when “someone got it,” as Fred writes. That person turned out to be Lindel Eakman, an investment manager at the University of Texas endowment fund, better known as UTIMCO. In an interview on the 10X Capital Podcast, Lindel shares the story of how he “literally picked Union Square Ventures out of a pile of PPMs,” and in Brad and Fred, he saw two young partners in their early 40s who had “enough experience”, “a chip on their shoulder”, and most importantly, a clear “point of view” about where the technology market was going.
After due diligence, Lindel made a call to Brad that would change everything: “We’d like to invest, and we'd like to be $25 million of your $125 million fund.” This was the first “yes”, but with UTIMCO’s commitment, everything started to fall into place. Within a few months, USV got to a first close with a sizable group of investors and eventually closed the fund.
As of February 2023, UTIMCO has received 13.8x times its money on USV’s first fund and a blended 9.1x return across the seven USV funds it invested in from 2004 to 2014, according to publicly available filings (see below).
While not all hard raises lead to exceptional outcomes, the USV debut fund story brings to life fundamental truths about success: Perseverance, a willingness to learn from rejection, and having the conviction to back yourself, even when others won’t. These aren’t groundbreaking ideas, but they’re worth revisiting when the going gets tough.
Drive, Hunger, and Ambition
Beyond the fundraising story, what’s evident from USV’s prospectus is the sheer intensity and drive that Fred and Brad had despite their prior successes. They saw themselves not just as investors but as entrepreneurs and relentless competitors. “We want to run,” they wrote. And emphasizing the urgency behind their investment thesis, they added, “...we see a great opportunity and want to go after it.”
Fred and Brad weren’t just out to manage a one-time fund either. They were building something that would endure, and they knew how to do it. “We aren’t rookies,” they wrote. “We’re veterans of the venture business who’ve made significant returns for our partners.”
The prospectus is worth reading in full because it really is a skilful work of persuasive prose. It's driven by an engaging narrative that blends founder testimonials about Fred and Brad with details of their investment thesis and prior successes—all without losing sight of their primary drive: “We are in business to make money,” they conclude. “That is, and must be, the single most important focus of our work.”
Wisdom from the Trenches
At the time of the raise, Fred had 17 years of investing experience and Brad had spent over two decades as a founder and investor. Their wins, losses, and a deep study of venture investing shaped a no-nonsense approach to the business. This philosophy shines through in a curation of aphorisms strategically placed throughout the prospectus.
Each aphorism appears deliberately incomplete at the bottom of a page, compelling you to turn to the next to see how it ends. This stylistic choice is a small touch with significant impact: It mirrors USV’s approach of being intentional. The document doesn’t just sit back and hope you notice. It captures your attention and keeps you reading till the end.
Here are all the maxims from the prospectus. If you’ve been investing long enough, you’ll undoubtedly have stories of your own that bring them to life. If you’re still early in your career, park them as mental signposts. They were earned the hard way, and there’s a reason why they still ring true today.
“If an entrepreneur isn’t listening, yelling isn’t going to help.”
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“Passion to make a buck is not the same as passion to build something.”
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“When management wants to sell, they know something you don’t.”
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“CEOs hate it when you sell their stock. Do it anyway. They’ll get over it.”
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“Knowing something is big is different than making money from it.”
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“If you don’t understand it, don’t do it.”
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“A world-class CEO won’t fix a bad investment.”
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“Junior VCs manage downside. Experienced VCs manage upside.”
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“Diligence is an attitude, not a process.”
You can read the full prospectus below. Kudos to Trevor McKendrick for the share.
