The (Not So) Hidden Work of Building a Venture Capital Fund
- Mark Kleyner
- Dec 17, 2025
- 13 min read
For years, people have assumed that launching a venture capital or corporate venture capital fund is mostly a legal or capital allocation exercise.
After spending the past several years working with investment teams, training new venture professionals and fund managers through Dream VC and helping corporates design CVC units through EDGE, I have learned something very different.
▌ “Venture capital is not gambling with a cheque book. It is a multi-person operating system for optimising early stage investments.” - Mark Kleyner
It is worth my saying upfront that most corporations do not begin with a fully formed venture fund. Many start with internal investment papers, pilot budgets, business unit scouting, or venture enablement goals. That is a normal and often wise pathway. Through EDGE’s work, we run dedicated CIBDI (Corporate Innovation, Business Development and Investment) programs and strategic advisory engagements where corporations expand into new markets through venture investment or venture building rather than immediately forming a fund. Across dozens of corporate and emerging market VC builds, the same lessons surfaced - and this article distils what consistently matters. So without further delay, what follows are my reflections from working across those journeys, whether those that recently began with an internal white paper or those that have already evolved into a full investment vehicle or fund of funds¹ program.
Once you have seen dozens of organisations try to build that system, the common failure points become painfully predictable.
This article explores what sits beneath the surface, drawing on the work we have done with fund managers, sovereign investors, insurers, telcos, banks and family groups across emerging markets.
Let me walk you through what most people get wrong, and why the work is heavier than it looks from the outside.
The Hardest Thing About Venture Capital Is That Most of the Work Happens Before the First Deal
Corporations routinely underestimate the labour behind building a venture capability. Long before capital flows, a venture unit must define how it makes decisions, who holds power, how value is created and what good looks like.
At its core, building a VC fund is a multi-year exercise in engineering how an organisation experiments under uncertainty.
The steps below reveal the unseen architecture behind any functioning investment engine.
1. Strategy Is Not a Slide, It Is a Boundary for Action
Before incorporation or capital calls, a fund must articulate its purpose. Is it pursuing financial return, market learning, access to innovation, or capability lift for executives?
We see this constantly. A company thinks it is launching a “fintech fund” but later learns it is really pursuing “enterprise transformation” or a complete “digitisation” of existing revenue lines. One realisation changes everything: who they invest in, how they evaluate deals and how internal champions engage.
One of our alumni launched a generalist² seed fund, believing a broad thesis would give them flexibility. A year later, dealflow³ was wide, but conviction was thin, and they were losing the most competitive deals. They paused deployment, rebuilt their thesis and narrowed the mandate. Only then did they realise a few early investments were not strategic fits at all, but artefacts of learning on the fly. Focus and discipline became their inflexion point.
2. Structure and Regulation Are Far More Complex Than Picking a Jurisdiction
Designing the fund means selecting GP/LP structures, ring-fenced pools, co-investment pathways and parallel vehicles. Jurisdiction is not cosmetic - it informs tax treatment, investor comfort, regulatory submission and audit scrutiny.
In practice, this means a fund can lose half its investor base simply because it chose the wrong domicile. I have seen organisations redo their entire structure eighteen months into fundraising because they learned this lesson too late.
Regulators in Singapore, Dubai, Mauritius, Luxembourg, the UK and the US (just to name a few) all expect specific filings, exemptions, disclosures or licenses. Tax architecture must cater to corporate structures, family offices, foundations, DFIs (Development Finance Institutions) and pension funds.
Interestingly, for one corporate VC we worked to set up and operate, integration success did not come from governance memoranda but from structure. Instead of funding the CVC entirely from a central asset management budget, the vehicle was capitalised through contributions from different business units. That decision quietly transformed engagement. Heads of business units felt ownership, strategic priorities surfaced early, and pilots found champions faster. Structure became a tool for alignment rather than just compliance.
3. Fund Economics and Governance Decide Power Long Before Money Moves
The unseen politics of venture creation lies in economics.
Who gets carry⁴? What is the hurdle⁵ rate? How much must the GP commit? When does recycling⁶ apply?
Governance goes deeper: who votes, who vetoes, what happens if a key person leaves and how decisions remain intact through leadership shifts.
These questions quietly determine behaviour long before the first investment memo appears.
At EDGE by Dream VC’s Virtual CVC Summit in 2025, where more than 60 corporations and numerous CVC leaders were present, several participants openly acknowledged that a weak understanding of venture incentive mechanics and rigid committee design had led to compensation structures that did not reward long term performance.
On the one hand, this resulted in disengaged managers. These were people who did not need to hunt for the strongest deals because their earnings were disconnected from the value created inside the core business or the eventual performance of the fund.
On the other hand, it generated the classic “death by committee” problem. Investment committees with 11 or more voting members became arenas for extended debate and delayed approvals. As a result, windows closed, and such funds were routinely excluded from the most competitive deals. Several GPs privately noted this as a key reason they were exiting the corporate venture space altogether.
In contrast, industry data, including Dream VC’s and A&A Collective’s Africa Investment Salaries Report, shows that well-designed long-term incentives and lean, mobile investment committees allow VC managers to operate through periods of low or even zero salary. These structures increase execution speed, and when paired with delayed but meaningful upside, align belief with performance.
The lesson is simple: power dynamics, both inside a VC and in its external interactions, are set long before the first cheque is written. The right incentive and governance architecture either accelerates conviction and access or suffocates opportunity before capital flows.
4. Before Deals Come the People, Incentives and Roles
Venture investing is a talent craft. You need analysts, associates, platform builders, venture partners and often a CFO or COO.
Decisions around sourcing authority, due diligence ownership, portfolio support, internal influence, and carry distribution shape culture before deals exist.
Through Dream VC’s global venture capital training programs and EDGE’s advisory work, we see one pattern repeat: the highest performing funds invest early in people capability, not just deal capability.
We have seen every version of this through our alumni community and corporate work. Teams scale from five people to more than forty and then back to five within eighteen months. Monthly churn in leadership roles. Partnerships collapsing under misaligned carry. Even market-leading CVC units have lost top talent because incentive models rewarded risk aversion and ‘acceptable work’ rather than rewarding value creation. None of these outcomes were inevitable. They were the result of building teams before building the architecture that sustains them.
5. Fundraising Is Not Just a Roadshow, It Is a Relationship System
Raising capital demands clarity of story, credible conviction and institutional documentation.
Decks, IMs, DDQs, FAQs, case studies and a disciplined data room become tools of trust.
Then come negotiations: LPAs⁷, side letters⁸, representation clauses and investor-level conditions.
In reality, fundraising begins long before the first pitch - it is a system of mapping stakeholders, qualifying relationships and communicating consistently.
▌ “Once strategy, structure and team dynamics are in place, the focus turns outward: convincing others to believe in the fund.” - Cindy Ai
The highest-performing funds we encounter treat fundraising as relational, not transactional. They identify a specific type of LP, cultivate that ecosystem over years, build trust through in-kind support, make their internal thinking visible, and demonstrate through behaviour that they listen, learn, adapt and go the extra mile. It is this pattern of earned credibility, not capital theatrics, that separates enduring funds from crowds of hopeful managers.
This is also one of the biggest downfalls of many fund launch and fund accelerator programs. The scale and standardisation come at the expense of customised long-term relationship building - a key step we’ve observed in the maturity of fund managers among colleagues and alumni across the VC ecosystem.
6. Investment Capability Is Designed, Not Improvised
This is where outsiders think a fund “starts”, yet most of the heavy lifting happens long before.
Funds must decide how they use instruments like equity, SAFEs, convertibles, venture debt or revenue share. They must codify sourcing, screening, deep-dive evaluation, IC presentation, approval pathways and portfolio monitoring.
Good funds build decision factories, not opportunistic deal hunters.
Across our structuring work with Africa’s most active early-stage and growth funds, our support to leading actors in the Middle East and our venture education spanning 20+ markets from Latin America through Africa and Asia, we have seen this pattern repeatedly: while every fund’s investment SOPs must reflect its context, there are proven frameworks, best practices and mindsets that dramatically lift capability. Proven technologies that can work to streamline deal management, proven structures for building out your deal analysis, proven techniques that can mitigate common biases in investment voting decisions and more.
European, American and African teams that have gone through Dream VC’s programs consistently report 90-100%+ improvements in confidence, vocabulary, and process efficiency across VC topics, and our corporate partners frequently emphasise that the applied nature of Dream VC’s end-to-end implementation support, has become the catalytic differentiator that helps internal leaders, business units and boards buy into the discipline of “doing CVC well”.
7. Behind Every Investment Deal Is a Service Provider Stack
Fund administrators run capital calls, investor registers, accounting and compliance. Lawyers negotiate structures and terms. Auditors, tax advisers, custodians and insurers supply the backbone trust.
Funds implement CRMs, portfolio monitoring stacks, valuation dashboards and reporting systems. They must budget for operations, visibility and execution before carry ever exists.
A few anecdotes of evidence where this can go wrong or how it can go right come to mind.
For instance, in the last few years, I've seen several funds make over 100 investments, and do so without a dedicated portfolio operating system. Quick deployments and an optimised allocation process meant the funds were able to quickly put their entire investment balance into the market. On the other hand, those same funds then came back to Dream VC, asking for training and support with portfolio rationalisation - showing us broken portfolio management processes, disconnected founders - who weren't reporting on updates, and difficulty in securing allocations in follow-on rounds. This clearly makes a case for using technology, in a way to make your fund management more efficient.
In another case, a first-time fund manager, who had hired several alumni of Dream VC’s institute, closed capital, but couldn't draw it down for over 6 months. Their conventional fund administrator had refused to run capital calls until the reporting, AML and custodial flows were finalised - and these could all have been prepped in advance. This led to some HNWI LPs pulling out - causing undue duress and a delay to the final close.
Awareness of these procedural risks and advance preparation could have meant a smoother onboarding for limited partners and expedited approval of fund administration work.
8. Investing Is Only Half the Work in Venture. Value Creation, and Exits Are the Other Half
Once capital is deployed, the real work begins.
Funds must define expectations for governance, board roles, oversight rights and reporting cadence.
The platform function becomes essential: hiring pathways, customer introductions, commercial pilots, advisory communities and knowledge transfer become engines of uplift.
Exit playbooks matter too: secondaries⁹, M&A pathways, buybacks and eventually public listings require preparedness.
Globally, platform capability has become the fastest-growing area of venture practice – and Africa is no exception. In the past five years, the number of African funds with dedicated platform roles has more than quintupled. LPs now benchmark funds not only on sourcing and capital deployment but on their ability to accelerate sales pipelines, secure regulatory clearances, source talent and actively unlock exit pathways. Whether in VC or CVC, the edge increasingly lies “below the hood” - in whether a fund can materially change the trajectory of a portfolio company beyond wiring cash.
9. Compliance and Continuity Are Invisible Until They Fail
Regulators expect filings. LPs expect transparency. Auditors expect valuation discipline. Cyber risk, succession plans and operational continuity determine whether a fund survives stress.
The best investors assume disruption and build resilience early. No one thinks about continuity until the first audit challenge or key person departure forces the issue. By then, it is usually too late.
Flexibility and strong structural design are not luxuries. They are survival conditions.
Consider the funds that relied on USAID guarantees or continue to operate by covering critical expenses such as salaries or rent through technical assistance grants from DFIs. Once those cushions disappear, many struggle to maintain investment discipline or restart fundraising momentum.
Governance complexity grows further when capital comes from state-owned entities across borders. In today’s multipolar political climate, money is anything but neutral. At GITEX Global, in leading a roundtable discussion with Central Asian, West African and South Asian managers, conversations repeatedly surfaced around restrictions on accepting capital from politically exposed institutions. These rules do not necessarily block fund formation, but they create asymmetry. A ten-thousand-dollar cheque from one party can make a fund ineligible for a potential one hundred million dollars from another. In this respect, CVCs and family offices often appear more resilient because their balance sheets and reserves insulate them from some of these external chokepoints.
Yet even the most sophisticated players are not immune to governance risk. In 2023, Sequoia initiated a three-way split into Sequoia United States, HongShan in China and Peak XV in India and Southeast Asia. The transition made visible how key person change, geopolitical risk and continuity design become existential considerations for LPs regardless of performance history.
The lesson is straightforward. Continuity is not tested in business as usual. It is tested at the exact moment when money, power and people change. Funds that anticipate this reality through governance and structural resilience are rewarded. Those who do not are punished long before their portfolio results have time to speak for them.
Why This Matters for Corporations Entering Venture Capital
Most organisations realise too late that they have built the structure, but never built the capability to make it work.
They underestimate the design challenge behind becoming an investor. They overestimate how easy it is to convert capital into capability.
At Dream VC, we train emerging market investors and both current and aspiring fund managers who learn how deep this operating system truly goes. Through EDGE, we work with corporations to build it deliberately instead of painfully.
Why Are Corporations Going Through The Hassle?
Through our EDGE division, we have tracked more than twenty-seven distinct motivations behind why CEOs, CSOs, CIOs, Board Members and transformation leaders authorise (and have authorised!) corporate venturing initiatives, just looking at the last few years alone. Many ‘CVCs’ begin as narrow pilots responding to a specific challenge – entering a new market, diversifying revenue streams, testing vertical integration, digitising some function or even improving employee retention – but later evolve into accelerators, venture studios, or fully operational CVC funds with dedicated investment and procurement functions optimised to drive the business forward.
It’s therefore unsurprising to hear statistics like how globally corporations participate in almost ~30% of venture deals (according to SVB’s State of CVC in 2025), or that industry analyses estimate more than 3,000 corporate venture units globally, with over 6,000 corporations worldwide (according to GCV’s tracking) participating in startup investing in the past decade.
Unlike most corporate strategy instruments, CVC offers an unusual blend of flexibility, optionality, strategic intelligence and financial upside. It enables companies to:
Future-proof against disruption
Learn new business models
Build digital capabilities
Expand revenue lines
Test transformation agendas with limited risk
Attract and retain top talent and partners
Shape industry direction rather than react to it
And 20+ more outcomes. From our recent surveys and engagements across the last few years, I’ve noticed some common ‘reasons’ companies later used to justify corporate venturing. These largely mirror the desired outcomes above:
Put simply, corporate venture capital is one of the few strategic mechanisms that simultaneously delivers insight, influence, capability uplift and, when executed well, outlier financial returns. Organisations persist through the complexity because the upside – strategically and financially – proves difficult to replicate through traditional planning cycles or internal R&D.
We have seen executives reach this realisation repeatedly through our structuring and educational engagements. Once leaders experience the learning loops, market vantage points and ecosystem access CVC unlocks, the question shifts from “Why do this?” to “How do we scale this intentionally and avoid painful mistakes?” That is where design discipline matters. Thesis clarity, governance design, operating models, incentive alignment and capability development all play roles – and this is where our methodology performs best, applying lessons hard-won across dozens of builds in emerging markets.
Why CVC Is Even Harder Than VC
Traditional VC optimises for financial returns. CVC must optimise for returns and organisational impact, which multiplies complexity.
Internal alignment matters. Themes must reflect business priorities. Planning cycles clash. Decision bottlenecks appear. Politics grows louder.
CVCs must also build pathways for pilots, bypass procurement friction, integrate innovation and measure strategic value beyond IRR¹⁰. They navigate budget cycles, leadership turnover and culture.
Ultimate success relies on capability building, translation between startup speed and corporate process, and internal evangelism so the organisation sees CVC as strategic, not symbolic.
Closing Reflection
Each of these layers compounds. Funds fail not because they misunderstand markets, but because they underestimate the operating system required to engage with them. Whether it is a corporation overcomplicating a pilot or an independent fund manager ‘winging it’, the failure mode is the same. The difference between enduring vehicles and abandoned pilots lies not in branding, but in design discipline and capability maturity.
Ultimately, launching a VC fund is not forming an entity. It is designing how an organisation learns, experiments and bets. Corporate venture capital raises the bar further. It demands fund design, governance infrastructure and organisation-wide change management.
Through Dream VC’s investor education work and EDGE’s on-ground structuring and implementation work, we see these lessons unfold repeatedly across industries.
If your firm is exploring how to build a venture capability or strengthen the edge your organisation already has, we would welcome the opportunity to share perspectives on what works, what fails and what accelerates the journey, and to help you take the next leap with confidence.
Footnotes:
¹ Fund of Funds = A fund that invests in other investment funds, like PE or VC funds, instead of startups directly.
² Generalist Fund = A fund that invests across different sectors or industries (i.e. Education, Real Estate, Marketplaces), rather than focusing on one industry (i.e. Digital Healthcare).
³ Dealflow = The volume and quality of startup opportunities, looking for capital, reviewed by a fund.
⁴ Carry (Carried Interest) = The performance-based share of profits paid to fund managers once investors receive agreed returns.
⁵ Hurdle Rate = The minimum return limited partners must receive before carry is paid to the fund manager and their team.
⁶ Recycling = Deciding if proceeds from early exits can be reinvested back into the fund or distributed back to the investors in the fund (LPs).
⁷ LPAs (Limited Partnership Agreements) = The legal contracts governing rights, obligations, economics and governance between investors and fund managers.
⁸ Side Letters = Custom agreements granting specific investors additional rights or terms outside the main fund agreement.
⁹ Secondaries = Transactions where existing shareholders sell their equity stakes rather than issuing new shares (as opposed to direct investments, or ‘primaries’).
¹⁰ IRR (Internal Rate Of Return) = An annualised performance measure used to evaluate investment returns over time.
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