On the hoof

When not fundraising, most GPs rely on an annual meeting or a quarterly conference call to stay connected with LPs. On occasion, a deal partner may visit a key investor at their office if they happen to be in the same city on other business. It’s rarely a priority.

But those impromptu meetings might prove worth the trouble. They offer the chance to gauge an LP’s priorities and concerns. They can build closer ties with an investor so when a portfolio company underperforms, the LP is inclined to listen to the whole story.
“Some GPs think they can ride in every three or four years during a fundraise and be the most important person to that LP,” says Michael Elio of StepStone Partners. “But the reality is that investors probably had 20 white horses ride into their office in the last few months.”

A visit or phone call can change the tenor of that interaction. “LPs want to feel they can trust you,” says Aaron Rudberg of Baird Capital. “They want a true partner that’s transparent with them, and that kind of relationship is hard to forge when you’re asking for a commitment.” The off-cycle meeting offers room to get to know the LP personally without the pressures of raising a fund.

“It builds goodwill,” says Elio. “So when a portfolio company gets marked down, you’ve got a relationship where you can level with the LP.” And with the turnover at many of the large institutions, investors can move to a new group where they would be able to make a new commitment.

“[With off-cycle meetings] you’re making a connection with a person, rather than just the institution,” says Michael Romano of Lightspeed Ventures.

But what should GPs talk about at these meetings? The consensus is to let LPs lead the conversation. “LPs don’t have the secrets,” says Elio. “Most of them are subject to Freedom of Information Act requests, so they’re happy to talk about process and preferences.” Provided they get a chance to speak.

“The best GP I’ve ever seen in these meetings opens with a simple question: ‘What do you think about the world? About the market?’” says Alan Pardee, a placement agent at Mercury Capital Advisors. “It sets the tone where the LP feels listened to, and gives them the chance to share their concerns and priorities.” And the GP can apply what they learned to their pitch for the next fund.

However, LPs just might not have the time to meet. Most are stretched thin by monitoring current investments and screening new ones. “The meeting might not happen, but they will still give you credit for trying to catch up,” says Elio.

“I tell GPs they’re in two businesses: the investing business and the fundraising business,” says Pardee. “No GP should ever forget they are in a client service business with respect to their existing and future LPs.”

That makes the point that these impromptu visits might not be so ‘off cycle’ after all.