First time funds are difficult to raise. The primary requirement is a team with proven track record of delivering returns in the sector you wish to target. Your team of Partners need to be able demonstrate that they were responsible for finding and executing business, successfully monitoring and then exiting investments with decent returns on capital. This track record must be relevant to the sector / geographic area your fund intends to target. Investors must be able to verify the returns your team have achieved previously and verify that your team were responsible for those returns and were not just bystanders to the deals.
Once you have your team and have collated a decent track record, you need to raise funds and establish the vehicles.
This almost definately be a pure vanilla offshore Limited Partnership (Cayman is common) and with a standard 2% management fee and 20% carry on returns over an hurdle. Many law firms can help you here, but I would recommend SJ Berwin.
Ideally, your team will have access to investors who have previously done well on the investments in their track record and this is a good starting point to fundraising. For a first time fund, you should definately use a placement agent. There are a number of very good firms around, and they will themselves undertake extensive due diligence before agreeing to take on your fundraising. In no particular order, I would recomend Helix Associates, Atlantic Pacific Capital, Berchwood Partners, Almeida Capital, CP Eaton, Acanthus, Campbell Lutyens, Delloitte, although there are many players in the market. Choose one with a really good reputation and a network of offices internationally.
This process is going to be extremely challenging and with current market conditions, more so. Institutions are not receiving monies back from exited investments in current funds as fast as previously anticipated and hence this money is not making it way back into the pot for new investments. 2009 will see tightening in LP funding availability and hence a flight to quality.
If I can help any further, just ask.

posted September 15, 2008

Dear Edward.
This may be useful to you:

Private Equity Fund Start-up Checklist
General Procedures:
Develop a business plan clearly outlining the goals, investment strategies and operating procedures including a basic term sheet discussing the fund's fee structure, liquidity, and valuation issues.
Select external consultants - attorney, independent accountant, custodian and technology support
Determine if reporting and accounting functions should be performed internally or externally (will have an impact on personnel requirements and fund performance)
Consider members of management team (Chief Financial Officer, fundraiser, analysts) and employment contracts Accounting Services
Find a location for business (consider tax effects) and determine equipment and technology needs
Select a name for the operating entities (general partner/managing member/investment manager) and the fund.

Are you planning on branding your products?
If so, consider trademarking the names.
Obtain adequate business, life and health insurance
Set up business bank account
Create business materials - logo, business card, stationery and marketing materials.
Keep in mind that the SEC has rules and interpretations discussing what can be used in marketing materials and the presentation of the same (discuss all marketing materials with an attorney)
Structure compensation / profit sharing for owners and others (401K); consider fee deferral issues with respect to offshore funds
Consider disaster recovery needs

Legal Procedures (Consult with Attorney)
Decide upon the following (considering tax impact of choices):
Legal entity (LP, LLC)
Structure (onshore, offshore, parallel vehicles) Note that the fund's strategy may dictate structure.
Year-end date (generally 12/31)
Related entities (advisor, general partner, managing member) of fund
Prepare legal documents
Private Placement Memorandum ("PPM" should be prepared before solicitation to outsiders)
Limited Partnership Agreement / Articles of Association / Operating Agreement
Subscription Agreement / Partnership Questionnaire
Be aware of "blue sky" laws which require certain filings when sales of the fund's interests are sold
Determine provisions to be included in partnership documents (prepared by attorneys):
Capital commitments (and stringent consequences for defaulting on a commitment), contributions, distributions, withdrawals (including any lock-ups), and transfers
Allocation of profits and losses - economic allocations, tax allocations, incentive allocation or fee, loss carry-forwards, hurdles / preferred returns and claw-back clauses (escrow or guaranty provisions)
Valuation of investments
Management fees
File organization papers and register to do business with appropriate jurisdiction
Be aware of the different regulatory authorities (SEC, IRS, ERISA) and their pronouncements and establish procedures to ensure compliance with filings and registration requirements
Create general partner / managing member and management company entities and documents
Assure compliance with solicitation rules: Accounting, Auditing, and Tax Procedures
File for Federal Tax Identification Number (SS-4)
Identify daily, monthly, quarterly and annual bookkeeping, financial and investor reporting needs
Determine annual audit and year-end tax reporting requirements (consider any registration capacities which may impose timing deadlines on audit filings)

Last but not least..let me know If you need any further assistance.

Regards

posted September 16, 2008