Any good hiker knows that preparing for a difficult trail requires three essentials: plenty of training, a selective (but smart) arsenal of supplies, and, perhaps most importantly, the right attitude. For a GP heading out on the fundraising trail, the necessities are surprisingly similar.
When it comes to the LP roadshow, placement agents are helpful trail guides, especially for those who don’t yet know the terrain. Seasoned agents have seen it all – the successful presentations and the unfortunate mishaps. Below, we’ve gathered their best anecdotes and insights, broken down by five phases in the marketing process:
Leg one: prep the team
Select the right team: Picking the partners that will meet with LPs might seem obvious based on their status in the firm and/or participation in deals, but public speaking skills and personality fit with potential investors are also key, notes Steve Standbridge, managing partner at Capstone Partners. Some GPs are great investors, but have difficulty articulating their strategies. Others are so smooth that they may not come across as sincere. “You have to have the right mix with the most important factor being passion for the story,” says Standbridge, who has worked with such clients as Tailwater Capital and Centre Lane Partners.
Practice thinking on your feet: At Monument Group, partner Bart Molloy attempts to iron out distracting habits like fidgeting by videotaping prep sessions with GPs – who in the past have included Crescent Capital Partners and Dune Real Estate Partners – and encouraging them to practice pitches in front of the mirror. They also do dry runs where the Monument team will pretend to be specific LPs, asking different questions to get GPs to learn how to react quickly.
Leg two: quality content
Keep it concise: The main goal of the presentation is to keep the message consistent with the private placement memorandum (PPM) and the information in the data room. With those elements in sync, GPs should keep the presentation deck concise – about a dozen or so pages with an appendix – and be wary not to include excessive industry data, notes Molloy.
Standbridge agrees, noting that a common mistake GPs make is including too much granular information about market opportunity. “While they think its original, it’s what 200 other GPs are saying in their pitch books,” he says. “If you’re small cap middle market buyout, you don’t need to discuss market opportunity. If you’re a sector specific manager, you might need some information about the sector, but be brief and focus on what makes you different from a strategy standpoint.”
Avoid clichés: As managing director at Probitas Partners, Kelly DePonte has worked with such GPs as The Riverside Company and CarVal Investors. But prior to his current position, he was a consultant with Pacific Corporate Group, reviewing 500 to 600 PPMs per year. He would often hear GPs cite “proprietary deal flow” and an “operational focus,” only because they thought those were the phrases LPs wanted to hear. GPs will need more details to stand out, he says. “If you do have truly proprietary deal flow, what’s your competitive advantage in developing that? And if you do have an operational focus how does it impact your investing?”
Stick to hard copy: While some LPs might be taking notes on iPads or laptops during the meeting, investors prefer that GPs stick to the “good old fashioned flip book” as the primary means of telling the story, Standbridge notes.
One exception might be displaying pictures of potential investments in a property fund, notes Molloy, otherwise he warns that going digital may do more harm than good. “You have to make sure the technology is going to work, not be disruptive and take focus away from the person-to-person interaction,” he says.
Leg three: smart arrival
Ditch the grand entrance: Especially when meeting with public pension plans, don’t show up at the front door in a limo or mention the private jet that you flew in on. It may seem obvious given the current scrutiny over expenses, but flaunting wealth is not the right path to a good first impression, DePonte notes.
Use your time wisely: The few minutes of introductions before the presentation can give you a real advantage in developing a rapport with the LP if you know how to use them. For the savvy GP, modifying each meeting for each particular LP means studying up on details that extend beyond investment appetite.
“For the exact person that you’re meeting, find out their interests and see if they overlap with your own,” advises DePonte. “A placement agent who has been around for a while will know if someone’s a Notre Dame grad, and if it’s a Monday morning meeting and Notre Dame had a big victory on Saturday, it’s nice to know that and talk about that.”
Leg four: In the meeting
Hit the right notes: Once you’re in the room, all the preparation in the world cannot save an inattentive GP. DePonte recommends keeping in mind an old Chinese proverb: “two ears, one mouth.” If your agent has warned you beforehand that the LP wants to discuss pages three, five and nine, don’t barrel on through your presentation in chronological order. Stop and discuss in-depth with an eye for that LP’s individual concerns.
Be accountable: When an LP asks about track record, be honest, Molloy stresses. If one deal in 16 went badly, represent that accurately and explain why. If the LP asks about a deal led by another partner who isn’t in attendance, don’t shirk responsibility.
“You need to speak at a reasonably good level about anything in the track record to show that, as a partnership, you discuss everything together,” he says. “But if someone wants to go deep into the details about a certain deal and you don’t have the answers, it’s fine to say ‘I’ll get back to you’ and double check the facts.”
Put down the phone: When DePonte was a consultant, he once sat across from a managing partner who presented three pages, handed the presentation over to a junior partner, then picked up his Blackberry and checked emails for the rest of the meeting. “Not only was he dissing the LP, he was dissing his team – he wasn’t going to listen to them,” DePonte says. “One thing you have to do is practice listening to a presentation you’re going to hear 50, 60, 100 times. If you don’t look like you’re attentive to your teammates, it communicates the wrong message.”
Respect the competition: If an LP brings up a rival firm, take the high road. “When people ask who your competitors are, to do cross checking, be respectful and focus on what you do as a firm versus what others don’t do,” says Molloy. Remember that the LP might be in that competitor’s fund, Molloy adds, and might know much more than you do about it.
Leg five: wrapping it up
Know your timing: Find out in advance is exactly how much time an LP has for the meeting. Most allot about an hour, and running long could hurt you, notes Molloy. “You can lose someone at the end of the meeting when you ask them to stay,” he says.
Get ready to start again: When you’ve secured commitments and closed the fund, that doesn’t mean the work is done. “The process of raising a fund ends but the process of developing and maintaining the relationship doesn’t end,” notes DePonte. “Especially for larger, important LPs, GPs need to be aware of maintaining that relationship way in advance of the next fundraising.