What is the most effective way to get funding to start a hedge fund?

My first tip is to put as much of your own money into it as you can. Yes, it could take a while, but one of the benefits of doing this is found in showing others that you believe in the hedge fund. If someone came to you and wanted you to invest in something that they don’t invest in, would you want to do it? Probably not.

Next, begin to talk to your friends and family about investing. Keep investing your money and the money of your friends and family so that you can begin to establish your hedge fund. During this time (and, yes, it takes time), make sure that you keep your performance documented. Have records of your returns to show to your family, friends, and potential investors.

Eventually, you’ll want to approach third-parties to invest. Here are some tips that you can use for that (or even with your family and friends):

  • Be able to explain what you’re doing in simple terms. Don’t use industry jargon. Can you explain what you’re offering and the potential benefits in a way that a six-year-old could understand? Keep in mind that this doesn’t mean patronizing someone. It just means simplifying.
  • Perfect your message. Take the time to know what you want to say and the best way to say it to help you get the results that you want. You may have more than one presentation depending on whether you’re approaching family, friends, or third-parties.
  • Know your ultimate goals and find the right audience. You cannot be everything to everyone. Know what you want to do and who would be interested in what you offer. A qualified prospect means it is more likely that you’ll get the funds just based on the fact that they are interested in what you offer.
  • Know what you’ve done in the past, but don’t live there. Past returns are important. You definitely need to show how your hedge fund performed in the past, but people want to know how they will benefit in the future.
  • Be trustworthy, reliable, and consistent. People do business with people they can trust.
  • Spend time every single day marketing. Online, offline, or both. Build your network.

If you’d like to get some legal advice related to fundraising for your hedge fund, consider LawTrades. We’ve collected some of the brightest freelance fund formation attorneys across the country who have the expertise to guide you through starting a hedge fund. Visit us for an initial complimentary consult!