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After running three funds, helping hundreds of others launch their funds, and investing in 10 funds in the last 18 months, this is the new and improved fund launch formula.
Learn the proven fund launch formula to start your own investment fund in 2026, covering strategy, investor relations, and legal steps.
Key Takeaways
- Start with a strong deal and strategy focusing on asymmetrical risk before legal work.
- Seek investor and mentor advice early to refine the fund and gain verbal commitments.
- Avoid costly legal fees by delaying lawyer involvement until investor interest is confirmed.
- Successful fund launches require iterative feedback and clear communication with investors.
- The fund launch formula is a tested method used by hundreds of fund managers to create investor-desired funds.
Summary
- Bridger Pennington shares a refined formula for launching various types of investment funds including venture capital, real estate, private credit, hedge funds, and private equity.
- The video emphasizes building a fund strategy and deal with asymmetrical risk before engaging lawyers to avoid costly legal fees.
- Entrepreneurs should seek advice and verbal commitments from mentors and investors before formal legal formation to iterate and improve their fund structure.
- Lawyers typically charge $30,000 to $100,000 to set up private investment funds, and frequent changes during legal setup can increase costs significantly.
- The fund launch formula prioritizes investor feedback and iterative improvements to create a fund that investors are eager to join and oversubscribe.
- The process includes identifying a clear deal and strategy, securing investor interest, legal formation, first close, asset management, and ongoing fund growth.
- Many funds fail to launch due to premature legal expenses and lack of investor validation, which this formula aims to prevent.
- Raising capital is framed as building relationships and asking for advice rather than directly asking for money initially.
- The formula is proven through hundreds of successful fund launches and is applicable to both small and large fund managers.
- The fund launch process is cyclical and ongoing, focusing on continuous improvement and investor engagement.
Full Transcript — Download SRT & Markdown
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venture capital funds, real estate funds, private credit funds, and even other wonky weird funds. This is the way that entrepreneurs are launching investment funds right now. Now, this video today is specifically to people that are building and launching their
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Now, this formula covers whether you're doing hedge funds, private equity funds, venture capital funds, real estate funds, private credit funds, and even other wonky, weird funds.
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you this. They're going to say, "Go hire a lawyer." And a lawyer can start helping you with a fund. Well, if you actually go look this up, most lawyers charge anywhere from between $30,000 to $100,000 to set up a private investment fund.
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This is the way that entrepreneurs are launching investment funds right now.
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teach you about these funds. Secondly, many fund managers as they're building their fund with a legal team, go and change their fund. As they talk and work with investors, they want to update and iterate on their fund. And every time
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Now, this video today is specifically for people that are building and launching their own investment funds.
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and then they figure out the fund idea they had wasn't all that great, and they actually don't want to launch the fund or investors didn't like it. But they're stuck with a massive legal bill. Hence why the fund launch formula was
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Now, if you went online and you look up some blog or ask chat, most groups are going to tell you to jump to the middle of the fund launch formula, which I would say, don't do it.
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launch formula. What I'm about to describe to you right now, this is how entrepreneurs go and build funds that investors want. When you launch your fund, you want investors begging to get into your fund. Your first close is
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But they're going to tell you this. They're going to say, "Go hire a lawyer." And a lawyer can start helping you with a fund.
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going to focus on your deal and strategy, which seems pretty obvious. Let's work on finding an actual deal, the actual underlying asymmetrical risk that you're going to have in your fund.
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Well, if you actually go look this up, most lawyers charge anywhere from between $30,000 to $100,000 to set up a private investment fund.
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lawyers. You're not going to lawyers yet. We are working through what's your waterfall structure, how are you going to pay back investors, how much leverage are you going to have on your fund, what partners are involved, etc. This is all
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This is primarily due to lawyers, first off, having to teach you about funds. I always say you don't want your lawyer to also be your teacher because it's a very expensive teacher.
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going, hold on. Don't do it quite yet. What you want to do third is come down here and actually start getting verbal commitments from investors. What you're going to do is take that deal and strategy. Take the frame and structure.
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They're oftentimes billing you $800 to $1,200 an hour to teach you about these funds.
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to a mentor and say, "Hey, I'm looking to put a fund together. Can I pitch you on this fund for 12 or 15 minutes, and can you poke all the holes you can in this thing?" And what you do is you go
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Secondly, many fund managers, as they're building their fund with a legal team, go and change their fund.
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What happens is they will actually give you advice and you go, "Wow, that's actually a pretty good point. You know what? I'm going to go tweak my deal or I'm going to find new team members to be on my team with me or I'm going to go
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As they talk and work with investors, they want to update and iterate on their fund.
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mentors, coaches, whatever to gain advice on your fund. Now, there's an old saying that I absolutely love in capital raising. When you ask for advice, you generally get money. When you ask for advice from these people, eventually they will say, "Hey, are you actually
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And every time you make a change order, lawyers happily will bill you an extra 5 or 10 grand to make that change.
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relationships with people that you know. The hard thing about raising money is like, I don't want to go pitch all these people I know and be trying to get money out of them. Don't go ask them for money. go ask them for advice and they
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And finally, the last reason is most funds actually never launch, meaning they go talk to a lawyer, they start paying legal fees,
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advice people on your first fund people like hey I'm not giving you money but here's a bunch of advice of how you should change things and it's often times ruins the relationship that you're at. So go ask for advice not money. Once
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and then they figure out the fund idea they had wasn't all that great, and they actually don't want to launch the fund or investors didn't like it.
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individuals that are saying, "Yes, with that deal and structure and that frame, I would love to invest. Then and only then we cross over into the legal formation stage. To me, this is the easiest part of actually putting
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But they're stuck with a massive legal bill. Hence why the fund launch formula was developed and is so necessary for people to launch funds.
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with a number of realworld people, investors, mentors that love this fund idea. They want me to build this. So, I work with my lawyers for a little bit.
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This comes from helping not dozens, but hundreds of fund managers launch their funds.
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Woohoo. We are in. And now we hit this new side of the fund launch formula.
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What we found was this model did not work very well. What worked well was the fund launch formula.
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We're going to go and try to hold a first close. So, I'm going to go back to all of those mentors I talked to earlier and say, "Hey, fund is now live. We're closing at the end of the month. We're
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What I'm about to describe to you right now, this is how entrepreneurs go and build funds that investors want.
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We're actually going to go and buy these assets. So asset management, we're buying the crypto or the real estate or we're investing into the apartment building. That's the asset management side. And we're starting to grow these assets. And then finally, at the bottom,
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When you launch your fund, you want investors begging to get into your fund. Your first close is raised and oversubscribed.
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build the firm. As you can see, it's a circle here cuz you're doing this forever. This is what small fund managers are doing. This is what large fund managers are doing for the rest of eternity. You are doing these three
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And you can do that through the fund launch formula.
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to launch my hedge fund. This is what we used to launch my GP stakes private equity fund. This is what our students and people in our program have used to launch hundreds of funds at this point.
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Let's go down to the first side over here of the fund launch side. There's three distinct keys of this side.
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asymmetrical risk? What is your edge? How do you go and actually raise capital? Who you're raising from? What are the legal structures and formations?
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Number one, with the fund launch formula, we're going to focus on your deal and strategy, which seems pretty obvious.
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That's all contained here. And on the rest of this channel, we have other videos on that. But in a nutshell, this whole formula is how entrepreneurs build funds that investors want that last that people are actually begging to have.
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Let's work on finding an actual deal, the actual underlying asymmetrical risk that you're going to have in your fund.
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work on Wall Street for 20 plus years to do this or play in this game. I didn't have all those things when I launched my fund. My other mentors that you've seen on this channel didn't use those things
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After we have a deal identified, we feel like we've gone through the hard work of putting this deal together.
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clear structure, investor conversations to iterate and work with, and the willingness to follow the process to see it through. Funds are about building a product that investors are excited and begging to join and get into. If you can
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We're then going to go and start building out the frame and structure of your fund.
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verbal commitments. Then cross validation to your legal formation. Launch your fund. And then move into the fund management side where you're raising more capital, you're buying deals, doing asset management, and building out your team forever. [music] When you follow this order, you build a
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Again, this is happening all before you go to lawyers. You're not going to lawyers yet.
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you're notified every time we drop a new video. Thank you so much for watching.
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We are working through what's your waterfall structure, how are you going to pay back investors, how much leverage are you going to have on your fund, what partners are involved, etc.
Topics:fund launch formulainvestment fundventure capitalprivate equityreal estate fundsprivate credit fundsfundraising strategyinvestor relationslegal fund formationcapital raising
