Why Are LPs Holding “Mini-Onsites” At Your Office Without Your Knowledge?
In the last issue of 60 Seconds, I wrote about how Limited Partners in 2020 have more options to invest in than they have dollars and time. As a result of this new constraint, LPs are rethinking how best to navigate the political and operating challenges of the onsite process. As the fundraising process elongates, LPs are increasingly getting to the onsite stage with more than one GP in mind for an open investment slot. In a crunched timeline with multiple drags on their resources, LPs aren’t always available to come in the night before, spend time for dinner and allocate over half a day with a manager they aren’t sufficiently committed to yet. To that end, the industry has responded by creating a new twist on the traditional onsite meeting.
Enter the “mini-onsite”. This new class of meeting is typically held between the initial interaction and full onsite to advance the diligence process. As its name implies, a mini-onsite is something less than a full-blown, due-diligence intensive onsite while being more than an informal “meet and greet” or hastily arranged lunch meeting.
Mini-onsites are real, productive meetings in the sense that they are arranged in the same manner as traditional ones. However, given that they are also less formal than their original counterpart, mini-onsites are in nature less agenda-driven, less scripted, and less time-consuming. A mini-onsite only runs about two hours, and they typically begin with a brief overview of a fund’s strategy with a heavy focus on meeting new team members and highlighting portfolio catalysts, as opposed to a full track record review and any near-term actionable deals in the pipeline.
The conscious lack of a detailed agenda is the defining feature of the mini-onsite. This structure encourages an unfiltered and free-flowing exchange of ideas, allowing participants to bring up topics and concerns they actually want to address. LPs ask questions they might not otherwise raise because they aren’t normally included in a scripted and polished GP presentation. At the same time, the short duration of a mini-onsite forces GPs & LPs to be concise and focus on issues they feel are most important. In other words, parties can get straight to the point.
Like the agenda, the guest list of a mini-onsite is wide open. An LP can bring along junior personnel who might otherwise not have joined, or senior executives who might not have the time to attend a longer meeting. A GP can choose to highlight their operations people, risk management team, or key decision-makers who sit on the investment committee. These new introductions can be used to address some of the shortcomings or concerns a potential investor has expressed in prior meetings. I often hear LPs mention that it can be illuminating and game-changing to hear other team members explain the fund’s story. A mini-onsite is an excellent opportunity to sway an undecided investor.
A key benefit of the mini-onsite from the LP side is that they have the potential to manage GP expectations effectively. An LP may shy away from booking a traditional onsite because they don’t want to get a GP’s hopes up of commitment. In years past, an onsite was essentially a box to tick. In the current PE climate, potential investors don’t want to make GPs think that there is an 80 to 90% likelihood of commitment post-onsite. A relatively quick visit with a GP might give an LP who’s on the fence that extra little bit of information they need to decide whether or not move forward with next steps. It also has the benefit of forcing the GPs guard down, since the lack of agenda and short visit feels more like a part of the courting process, rather than the penultimate step towards a decision.
All in all, the mini-onsite can act as a bridge between a traditional onsite, and the decision to commit to a close. The driving force behind the rise of the mini-onsite meeting is the idea of optimizing the diligence process by holding a shorter, less structured, and more open meeting where people can discuss what is really on their minds.
The concept of the mini-onsite is taking hold and will eventually be fully adopted by both sides of the industry. As a manager, it’s essential to understand that these meetings will be focused on issues you may not want to put down on paper. As a GP in fundraising mode, you should be prepared to answer touchy questions such as a jump in fund size, succession planning or other topics you may have gotten push back on. Above all, always be focused on closing and remember that you are being judged in every interaction which may be your last: for better or for worse.