I am currently in the process of opening an investment firm for seperatly managed accounts (fund sometime in future if AUM supports it), however, one part of the business I could use some advice on is sales. I think my investment strategy and cost strcture is solid (2% management, no performance fee) but i'm not sure what would be the best way to present the strategy to potential investors. I have a list of people I think could be interested such as former finance professors and fund managers, as well as some friends and family who might be willing to throw some money in. Does anyone have a story about how you got started and what you did to earn the confidence of your intial investors?
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To attract initial investors for your investment firm, focus on building trust, showcasing your strategy, and demonstrating professionalism. Based on the most helpful WSO content, here are some actionable steps:
Highlight Your Edge: Clearly articulate your unique investment strategy and why it stands out. Investors want to see a consistent, well-thought-out approach. If you have a track record, even if it's personal or small-scale, showcase it to build credibility.
Leverage Relationships: Start with your warm network—former finance professors, fund managers, friends, and family. These individuals are more likely to trust you and give you a chance. Be transparent about your goals and how their investment will be managed.
Professional Presentation: Create a polished pitch deck that includes:
Demonstrate Institutional Quality: Even if you're starting small, show that you're running a professional operation. This includes having a strong back-office setup, clear reporting, and a focus on transparency. As noted in WSO threads, institutional-quality operations can instill confidence in investors.
Consistency and Trust: Investors value consistency in strategy and team. Avoid strategy drift and ensure you can articulate how your approach aligns with their goals. Transparency is key—share pipeline information and lessons learned to build trust.
Soft Market Your Strategy: Before formally asking for investments, engage in conversations about your strategy. Gauge interest and refine your pitch based on feedback. This "soft marketing" approach can help you build momentum.
Focus on Emerging Manager Mandates: If you plan to scale, consider targeting institutions or individuals with mandates for emerging managers. Show at least 10 quarters of performance to build credibility, as suggested in WSO discussions.
Keep It Personal: For friends and family, emphasize the personal connection and your commitment to safeguarding their investments. For professionals, focus on your expertise and the potential for consistent returns.
Remember, the key is to inspire confidence through professionalism, transparency, and a clear value proposition. Good luck with your firm!
Sources: AM vs HF: The Business of Our Business, How to build HF track record that is worth anything?, How to Be King of Your Own Private Equity Firm, AM vs HF: The Business of Our Business, I've raised money for PE and HFs. Q&A
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