The mood on the ground is that fundraising will continue to be difficult for most GPs in the near-term. But despite the pessimism more than 1,800 GPs are currently on the search for some $744 billion in capital from LPs, according to Bain & Company’s 2012 global private equity report.
GPs hoping to meet their targets amid these challenging times may therefore want to consider the following bits of advice extracted from conversations with delegates who gathered in San Francisco earlier this month for our PE/VC Finance & Compliance Forum.
All hands on deck: Get everyone involved in the drafting of marketing materials early in the process, says Jason Ment, general counsel of the StepStone Group. Investor relations staff may want to highlight the firm’s best deals, but general counsel will red line qualitative language like being a “top firm” or any images that showcase cherry picked deals. Finding the right balance between these kinds of competing interests works better if everyone is communicating (and explaining marketing rules) from day one, and undoubtedly a more efficient process than sending along completed documents for lawyers to review after the fact.
Go online: One mid-market GP who spoke to us on the sidelines of the conference recommended saving time by uploading documents into a password-protected web portal that LPs can access. Through software, GPs can have ready some of LPs' most-requested documents, including a comprehensive FAQ section that outlines the firm’s history, investment areas of expertise and track record.
Showcase junior talent: It’s already standard market practice to include biographies and snapshots of a fund’s senior dealmakers in marketing materials, but in demonstrating team stability to prospective investors, it would be wise to also make use of your younger (or newer) talent, recommends one mid-market CFO based in the US.
Keep LPs engaged: Any PowerPoint presentation that begins to run past 25 slides risks boring an investor, whose time may be divided among hundreds of fund opportunities. At the same time, avoid dumping too much data in any one slide. Not only can it be an overload for the LP, but if your audience is reading or otherwise tuned into what’s on a screen, they are not paying attention to you. Industry sources say a good rule of thumb is “6×6”, which is no more than six bullets of no more than six words each.
Rehearse the pitch: Practice your presentation before the big show with LPs. Designate in advance who’s responsible for speaking during specific portions of the presentation, or best suited to answer certain fields of questions. Doing so avoids awkward transitions or nervous glances that can shake your confidence during the pitch.
GPs in today's challenging fundraising environment need all the help they can get; even those with strong past performance may have a hard time differentiating themselves to LPs who have likely seen numerous managers with similar returns. Keeping in mind those factors that make you stand out from the crowd could mean the difference between getting to that final close and spending more nights in hotels on the road.