EMERGING MANAGERS Cash Flow Management

Cash Flow Management for Emerging Managers

Natalie Headshot small 80 x 80. png

written by:
Natalie Fratto
Managing Director, SVB’s Emerging Manager Practice

Best practices for emerging managers as they approach capital calls and distributions.

You may have heard the lifecycle of a venture fund compared to a farmer tending a crop cycle — a period of seeding, a period of watering and a period of harvesting the fruits of their labor. In this analogy, strong cash management lays a foundation for a fund manager to plan and predict from seed to harvest.

The questions a fund manager asks are similar:
  • How much should I invest per crop (startup)?
  • How can I prepare to weather future storms (market cycles)?
  • How and when can I yield a large enough harvest (return) for the entire partnership to share?
Strong cash flow management is integral to an emerging manager’s success because it tells a compelling story to limited partners (LPs). Cash flow directly affects a fund’s performance, so LPs are naturally likely to focus on backing general partners (GPs) who have proven cash management skills. From an LP’s perspective, cash flow metrics shed light on whether they can minimize the amount of uninvested capital held in reserve while maximizing returns.

But LPs aren’t only focused on when funds deploy the uncalled capital on their balance sheets. They also typically want to know how best to manage capital that they’ve committed but has yet to be called. Because they typically want that capital to continue to appreciate while staying liquid, GPs tend to prefer a holistic cash flow strategy that encompasses both capital call strategies and distribution strategies designed to show LPs exactly how they intend to deliver the best possible results.

quote marks

From an LP’s perspective, cash flow metrics shed light on whether they can minimize the amount of uninvested capital held in reserve while maximizing returns.

Natalie Fratto
Managing Director, SVB Emerging Manager Practice


Review these Capital Call and Distribution templates

Click on each topic below for a deeper dive into how fund managers should think of cash flow management, as well as strategies for balancing the needs of GPs and LPs alike when mapping out plans for capital calls and distributions.


Cash Flow Management Considerations

Component 1 of 4
Considerations for managing cash flow throughout the fund cycle.


Capital Calls

Component 2 of 4
Things to consider when generating a fund’s capital call strategy.

Capital Call Lines of Credit

Component 3 of 4
The pros and cons of capital call lines of credit.

Fund Distributions

Component 4 of 4
Considerations for managing a fund’s distribution strategy.

Read the other articles in this Emerging Manager article series

Building a Comprehensive Data Room

When the time comes for emerging managers to raise funds, a comprehensive data room can be essential. Your data room can provide limited partners (LPs) with a one-stop shop to understand your team, your strategy, and your track record. The stronger your data room, the more likely prospective LPs may be able to entrust you with their capital. Learn about the 9 key data room components that LPs need from emerging managers.

Establishing, Navigating and Maintaining LP Relationships

Learn about the different types of LPs and determine the right mix of LPs for your firm. You’ll get tips for how to interact with prospective LPs throughout an active first fund fundraise and understand the LP’s expectations once you’ve secured funding to be ready to deploy capital.
00 Nat Fratto Home LP Engagement 500 x 500

Pitch Your Fund by Highlighting What Makes You Noteworthy

Because the venture capital space continues to be very competitive, it’s important that first time fund managers communicate how they stand out from the rest of the crowd. Learn some best practices for making a first-time fund stand out helping to reduce the risk LPs take when investing in these new funds.
Natalie Article 3 promo 500 x 500

Subscribe to SVB’s Emerging Manager Insights