Hey all,
I enjoyed the Q&A on furndraising before, so I thought I'd share what I've learned again, but also to ask for help because in fact there's a LOT I don't know about fundraising and can learn from you monkeys.
What I've Learned
-
fundraising is 65% product, 25% market, 10% process. A great track record can overcome a bad market. A bad market will make things much harder, but it can be overcome with a great track record. A good fundraising and IR process is essential, but even a great process will not overcome a poor track record.
-
LPs want to see strong track-record, consistent strategy, consistent team. They would prefer to reliably make 18% per annum, than be up 50%, then flat/down. Consistency. Team should hold together for a long time, strategy should be consistent and not drift.
-
have an edge / secret sauce - it's a competitive market. You have too many funds chasing after too little LP money. You need an edge you can clearly articulate.
-
Learn to think about things from an LP perspective. They have cash-cycle management issues, and portfolio composition issues. They want the best of breed in every category they occupy. So they pick a good pharma fund, a good Skandi fund, a good TMT fund, etc. You have to understand how each one uniquely thinks, and then fit in and try to solve their problem.
What I don't know / Where I struggle and fall short
-
It's difficult to figure out which LP is a viable target for products I'm raising for. Blast emails don't work. How does one target?
-
Closing is difficult. LPs often know there's no urgency. It's difficult to figure out how to create a sense of urgency and it's not so simple to close as the ABCs - always be closing. Tips on this?
-
Managing the crazy process of dealing with so much outreach, so many contacts, and then doing follow-ups is really difficult. I try to use CRMs but ultmately they fail. Keen to hear advice on the process mgmt. tools.
Why do CRMs fail for you? I believe you that they do, but they work for so many people across functions, I'm wondering what makes them fall short here.
Good question. Generally your rolodex and relationships are your key fundraising value. But how can one actually track - and push forward and close - those contacts? That's where I've struggled.
CRM
Basically I've been using Google Sheets with a mail-merge function, with different cities each having their own sheet.
This is the easiest to manage that I've found. Others -and I've tried SalesForce, HubSpot, etc., all are such a pain in the ass to update and then manage, and I've spent a fortune on consultants to do this management.
The CRM systems make it such a pain to create subgroups, then you have to remove names that do reply to you, if then you are chasing up on people.
I just wish there was a more efficient and pleasant way to chase up on people and set up roadshows, etc.
while I'm not chasing the big tickets you likely are, I pitch these deals to clients and prospects often.
It's difficult to figure out which LP is a viable target for products I'm raising for. Blast emails don't work. How does one target?
keep your list smaller rather than larger, pitch to a wide audience first, and after you go through a couple of deals, you'll get a sense of what someone's appetite is for. if it's an endowment, you can look at their holdings and see where there are gaps (as the holdings are likely public). I know who has no interest in certain strategies just like I know who's overexposed. for example, none of my tech executive clients ever get pitched a tech VC/PE fund, because they're already overexposed, but they're likely underexposed to energy, healthcare, and non-US stuff
Closing is difficult. LPs often know there's no urgency. It's difficult to figure out how to create a sense of urgency and it's not so simple to close as the ABCs - always be closing. Tips on this?
my experience with PE is that there is always a sense of urgency so it makes the close easier (this funding round closes in 6 weeks, so I'll follow up with you in 2 weeks after you've had a chance to review and then we'll talk more). please elaborate, if anything, the timeline's the easiest obstacle to overcome.
Managing the crazy process of dealing with so much outreach, so many contacts, and then doing follow-ups is really difficult. I try to use CRMs but ultmately they fail. Keen to hear advice on the process mgmt. tools.
you've not found a system that works for you, and that's ok. we have CRM tools, but I often find old school is best. I've got all of my CRM tasks which may be a combination of 4-5 dozen things on my to do list a given day, obviously not all of those need to get done today, nor are all of them urgent. on a weekly (sometimes daily) basis, I make a list of the 4-5 things I need to do. so it is with fundraising, if I know a round is opening and theres 30 people I need to call, I make a list, maybe I call the lower end prospects days 1-3 to get used to common questions/objections, and then have the whales at the end. break up your contact into bite sized pieces, and it'll be more manageable. how many potential clients are you trying to reach out to?
LP chiming in here...
Could you provide more detail on your background? Were you with a quality firm before? Do you have deal lead/PM experience? A referenceable track record? A built out team and back office? Have you warehoused/closed deals?
All of these details can help you to better target LPs that might be a fit for your fund. Different LPs have vastly different risk tolerances/expectations and your specific profile may make you a non-starter for one LP but a perfect fit for another. Some LPs won't commit to first time funds/emerging managers while other might consider the emerging manager pool a valuable part of their program.
Securing meetings with LPs should not be difficult. Getting them to commit is an entirely different animal. Many LPs take tens/hundreds of meeting a year and may not commit to any first time managers. Frequently, they'll take these meetings to learn about a new market, diligence the GPs prior firm/reason for spinning out, or as a favor to another LP/investment committee member, etc.
So, your starting point before taking an in-person meeting should be to learn as much as you can about the LP. Ask them (or your placement agent or other GPs) about their portfolio construction. Will they take new/emerging manager risk? Who else have they backed? Are they looking to add a manager with your strategy? If there is an open slot, what does their process look like? Will 1 intro meeting an on-site suffice or do they require more? Do I have to be approved by their gatekeeper/how much discretion does the investment team have (versus the investment committee/decision maker)?
If the answers are promising, then take the meeting. In terms of outreach and following up, I'd primarily leave it to the LPs to get back to you. Chasing doesn't work. Don't BS the amount of soft circled commitments you have. I would advocate against creating a sense of urgency. Bear in mind that when an LP makes a commitment, it will be years before they know if they've made the right call and years before they see a distribution in the event that you're raising a drawdown fund. Respect this fact and acknowledge that they'll likely want to get to know you over 3-12 month period (or longer) to test your integrity and see how well you can execute against your plan. The best course of action is to add them to your distribution list so that they can see your fundraising progress, portfolio progress, and dataroom.
These are just some preliminary thoughts... happy to answer any questions.
Magni accusamus velit perspiciatis blanditiis nesciunt qui. Officiis consequatur qui ducimus qui dolores cum explicabo.
Pariatur ullam aliquam cumque non. Non molestias et omnis dolores voluptate quas quis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...