NewSpring’s CFO on the evolution of fundraising

As COO and president of NewSpring Capital, Jon Schwartz takes an active role in fundraising from the initial planning to negotiating the last commitment. We spoke with him to talk about what he does when NewSpring Capital raises money.

How do you view your role during fundraising?

JS: For me, it starts with the inception of the fund, in terms of the planning what the next fund will look like, collaborating with the general partners and the IR staff to develop a vision for the next vehicle. I’ll take the lead with fund formation issues, and I’ll discuss the latest developments in structures with legal and discern if we need to do anything differently to better suit our LPs and our priorities.

We also get out in front of the data demands. We pre-populate our data room with as much info as possible to anticipate LP needs. But the reality is we can’t predict them all, so when they throw out a new request that we didn’t think of, often we’ll include that data point from that point forward. And personally, I like to handle the actual negotiations with LPs and their legal counsel. I understand what the market is at that moment, what terms and conditions we had in the past, and how best to amend our agreements for the current fund.

Is there a break between efforts or is it one perpetual fundraise?

JS: When you take a look at our business, the industry has shifted. Even at the lower end of the market, say under $2 billion under management, investors expect to back a firm, not just a fund. We have to act like an institution, which means we plan for a three, seven, even a 10-year time horizon. That’s not only in terms of the size or kind of funds that we expect to raise, but how we staff the firm. Who can we bring aboard today at a junior level that will grow into a senior role for a future fund? It’s why we’ve built our analytics team because we’re only going to be managing more data, not less. And we’re investing in technology for the same reason, to make data collection and analysis more accurate and efficient. And we’ve hired staff dedicated to fundraising, in IR and outside sales and marketing, to get a better idea of investors moving into our space.

How has fundraising evolved since you joined the firm in 2004?

JS: Investors expect us to have the infrastructure and technology of a much larger firm, and that was not always the case. And LPs are driving for that because their committing with an eye towards a much longer relationship. They’re focused on longevity.

Investors are also much more curious about my side of the business. They don’t all have their own operational due diligence teams, but even if they don’t, they’ll frequently ask to meet me and discuss how operations are structured and discuss our approach to things like cash management. And I assure them we’ve got that handled so when they ask where our investing professionals spend their time, I can say it’s doing what they do best: sourcing deals, adding value to our companies and hopefully, exiting at a profit.