Through the Miami Venture Capital Association, I worked with dozens of professional, institutional funds while also meeting with many bright, new emerging fund managers looking to make their mark. I also helped LPs (Limited Partners) with hundreds of millions in capital to identify good managers.  As a result, I received a lot of new vintage fund presentations from all over the world from groups looking for LP capital.

Most are indistinguishable from each other. Many convey questionable or even misleading information. A few merely adhere to the market standard. None are perfect.

Part of the Venture Capital business is fundraising from LPs, and managing that relationship for a decade or more. Through the MVCA, we help facilitate these relationships and help emerging managers get off the ground. Here are some opinions on best practices for emerging fund decks:

1. Be clear about how much capital is committed

More and more funds are announcing themselves with a large fund size as a beacon to attract press, entrepreneurs, and LPs. Although there is nothing wrong with having a fund thesis that requires a certain size to execute; you should not publicly disclose you have raised money if the funds are not in your bank account or escrow.

At the end of the day, you’re only as big as how much you have available to actually invest. Misleading entrepreneurs, LPs, and the public is not a good look.

2. You are not an institutional fund if you rely on capital calls with LP approval 

Another negative practice I’ve seen is the rise of the pseudo fund. By all appearances, a pseudo fund looks like any normal venture fund with a certain amount of committed capital, investing using a specific thesis. The difference is, in a pseudo fund the GP does not actually have committed capital. Instead, they have to get LP approval and make a capital call for every deal they do, slowing down the deal process dramatically and misleading the entrepreneur.

Psuedo funds are not venture funds. This entity is a dealmaker, broker, or syndicate network where the GP is nothing more than a source of deal flow for their LPs.

3. Be agnostic or specific, not everything

“We invest in IoT, Biotech… and Saas sectors… with a focus in FinTech, Blockchain, AR/ VR… and we’ll also invest in deals we like.“

The majority of agnostic funds’ presentations I see describe their strategy like the above. Your fund either has a specialist vertical focus or is an agnostic fund, not both.

Picking a bunch of random verticals that are not correlated to each other or where you don’t have operating experience reflects negatively. LPs will ask emerging fund managers what special advantage they have for each stage and sector. This will often cause most LP’s to reject your fund for lack of specific funding criteria and presents a lack of focus on behalf of the fund’s management team.

You are either focusing on a specific vertical because of a unique competitive advantage you have; or you’re an agnostic fund using a specific thesis, DD criteria, or methodology that gives your fund an authentic differentiation from others. Regardless of which, it should be explicitly clear to an LP what you are.

The same goes for location. I’m seeing more and more funds be misleading with regards to their geographic focus. For example, a national fund with several hundred million dollars will open a satellite office in a third tier market and announce that a fund of the aforementioned amount is now open in said market. The reality is they have a national fund, not a local one and in most cases will only invest a de minimis amount of capital in the new geography.

4. Don’t mark up your old investments with your new fund

Do I seriously even need to explain this one? I’ve actually seen new managers invest in ten companies in their first vintage fund. They then have the general partner of fund two sign LOI’s to invest at a higher valuation in all of the companies in the first fund. They then use the markup from the LOI’s, which are not closed financings, nor open market deals, to claim a track record on the first fund. In effect, they are marking up their own books to create a fake track record. This is a strong deviation from best practices and in quite possibly illegal. Even if it isn’t, it is a huge conflict of interest between the entrepreneurs, the LPs of both funds, and the GP teams.

5. Don’t list advisors, contacts, or team members that aren’t contractually signed

Many funds like to differentiate themselves in their decks by including countless bios of advisors, mentors, or contacts that can create value for their portfolio companies. There is nothing inherently wrong with this, so long as these people have a contractual relationship with the GP and have committed in writing to an allocation of time and efforts to the fund’s portfolio. Often uncommitted advisors, mentors, and the likes are nowhere to be found after the fundraising efforts end.

Furthermore, nearly every fund has a mentor network that they leverage to add value. Networks are a weak differentiator at best, and on their own, a fund will find it nearly impossible to raise capital if an advisor network is the best differentiator in their deck.

6. Don’t expect market terms if you’re a first time VC

The Venture Capital landscape is currently saturated with new money flowing in and new GP’s trying to raise first or second funds. Why should LPs take a risk on you when they can either wait to see how you do with someone else’s money or simply only invest in proven track records?

To get your first fund closed, be prepared to abandon your management fee, split your carry, or offer friendlier than market terms to get your first LPs. Furthermore, if you don’t have an audited track record by a third-party, you need to speak to a fund administrator in the space who can help you with this. Often times this means pulling together various SPVs and other investments in order to piece together a holistic record of your growth and IRR on your investments.

Just like entrepreneurs spend time practicing and perfecting their pitch, venture capitalists need to as well. Take the time to make sure you aren’t doing any of the above with your fund. Pitch your fund and track record, honestly, transparently, and with complete candor, and you will find LP’s will give you good feedback, and maybe even write a check.

Herwig Konings is the Founding Partner at Security Token Partners and also the Founder of InvestReady. Previously, Herwig served as the Managing Director for the Miami Venture Capital Association and currently serves on the Board.