“A La Carte” Fundraising: How to Economize and Maximize your LP Outreach
As a private equity manager, there are a number of strategic issues that are top of mind beyond, of course, finding and executing deals. You may have dreams of expanding your platform and raising alternative strategies but are unsure about whether LPs will be supportive. You may worry that your LP base is too concentrated around one particular LP, or that you don’t have enough LPs focused on partnering with you for multiple funds. You may have even noticed that one of your largest LPs has recently been cold and you are worried about what that means for your next fundraise. The reality is that over the lifecycle of your firm, you will likely find yourself faced with multiple scenarios like the ones outlined above. As you think about your business strategically, it is critical to have an experienced agent/advisor by your side that can help you proactively determine a game plan to address each potential issue.
We hear from GPs that the LP community can sometimes feel opaque and it can be difficult to get honest, direct feedback on the future. This is partially by design. LPs may feel the need to hold back on difficult feedback to GPs in the interest of maintaining positive relationships. Even when LPs are generally unsupportive of a certain idea, they don’t feel the need to shoot it down unless there is a specific ask on the table. Having an advisor with quality relationships is invaluable in situations like this, as it is much easier for an LP to have a direct dialogue with your placement agent than with a GP. In this way, advisors who have cultivated long-term, multi-fund relationships with LPs can add value as your “ear to the market” in addition to their role as a fundraising partner. This way, when you do eventually go out to the market to raise that side strategy you’ve been thinking about for years, you can do so with confidence in the fact that you have done your homework and have good information on how the market will view this move.
Hand in hand with soliciting feedback from the market, a quality advisor can serve as your sounding board for long-term strategic initiatives. Placement agents interact with LPs on a daily basis across a number of different asset classes, industries and specific managers. With this much constant connectivity to the market, a quality agent can be your best resource to glean the shifting moods and preferences of various kinds of LPs. If you are considering adding a credit strategy alongside your current buyout funds, your advisor can point you to specific LPs that would be open to the idea and potentially take the dialogue further. In the same token, and arguably more importantly, your advisor can tell you which LPs NOT to waste your time with until you have more support around the idea. Discretion is often critical in situations where you are on the fence about an idea, and a quality advisor that sees themselves as a long-term partner in the strategic planning of your firm will provide you with outsized value beyond just fundraising.
Finally, the right advisor can be surgically deployed to resolve issues that your firm may be facing. If your relationship with an LP has taken a turn for the worse, speak to your agent about what you can do to improve it. An advisor will likely have a deep understanding of the LP’s broader program, including the different incentives and catalysts that they look for. They can connect you with key influencers within the institution that can be valuable assets for your continued relationship.
At the end of the day, countless GPs miss out on the fact that there is a world of value to be uncovered from the right advisor beyond simply fundraising. Regardless of whether you are currently faced with all the above situations or none, it would be wise to keep your advisor appraised of your immediate AND long-term vision so they can advise you on how best to approach it in the context of one of your most important constituents – the big, scary “market”.
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Sixpoint Partners, LLC, is a registered broker/dealer, member FINRA (http://www.finra.org) and SIPC (http://www.sipc.org). Sixpoint Partners Asia Limited is licensed by the Securities and Futures Commission (http://www.sfc.hk).