Why is rainmaking difficult?

there are two ways to make more money fishing.  Catch a bigger fish or catch more fish.  Both take different skills. 

You can't cast too wide of a net. No one wants to do a deal with the guy covering 100 companies across all sectors and meeting with you once a year when you have someone proactively meeting with you, expert on the space, and covers 30 clients but is a full-service broker and holds your debt, handles business management trades, and is also on the M&A side.

Sales ability and grit more so than creativity bring success in IB and PE. No one is re inventing the wheel with M&A, but convincing CEOs that now is the right time and you are the right team to handle is is the art. Additionally, you lose most things in banking so you have to be able to meet with clients just to close a few deals a year.

this is exactly why capitalism works, everyone is catching fees and playing a part - a part of what? well that's up to the investors to narrate.

mm66

This is great shit, and exactly what I was looking for.

Cheers. My original post was my subjective $0.01 and so is this response - take it all with a grain of salt. Your mileage may vary.

My $0.01 below, apologies for the ramble 

All good. I like to write long essay emails; unfortunately, I've known only a handful with the mental stamina to keep-up. 

It's not always great practice if you can avoid it - It was drilled into me early on in my PE life that you gotta distill the essay into 2 bullet points for the Senior Partners, cause sometimes they only read the first line of the e-mail.

You don't hire the 19 year old mechanic, or the apprentice watchmaker to repair your Ferrari F40 and your Patek Philippe, so why would you pick a banker who hasn't done XYZ deals to run your process? 

But you do hire the freshly-green plumber who says he can fix your home's pipes in a jiff. 

Not always. I'd rather go for the guy my dad / friend / etc. has been using for years, if that exists.

Same effect on the buy-side. If your firm/fund has a reputation for making being acquisitive, exiting actively, and returning money to LPs... you're gonna fucking print. People will just bring you deals, and some will be the type of quality that allow you to become a rainmaker. LPs will call you and ask when you're going for Fund n+1. High-quality bankers who are in the flow (see anecdote below) will bring you opportunities first. If you're at a firm who only ever goes around kicking tires, produces goose-eggs, can't point to any good exits/momentum.. you will struggle to get anything done (and you better 'update that LinkedIn profile').

Two things:

1). Are LPs ever worth the hassle?

2). What would be the IB equivalent (passive deal flow) for the LM/LMM?

1) Yes (Depending on who you ask), but they are a necessary evil cause they give you that sweet, sweet capital. But they can be an absolute hassle, especially if you fuck up. LPACs are also a necessary evil that I don't love. Fundraising is also not fun. Co-Investor reporting is tedious.

2) I guess the IB equivalent for a shitty/dying PE fund might be a microboutique that only gets business because they're cheap or they're a rubber stamp for some shitty deal or fairness or something. Or its on an underperforming team who only ever pitches for shit and never does anything. There could be other analogies but those two come immediately to mind.

At the PortCo/PubCo level, there are several groups in one of my sectors who have built successful companies and exited them with great success. Any time anybody from these groups is seeding a new venture or seeking financing for a new acquisition, people fucking throw themselves at them until the book is 10x oversubbed. They could be pitching literal manure, but investors/financiers would flock to them because of the track record. Personally, I hate dealing with these guys, because they're always pretentious and act as if WE should be impressing them for the right to give THEM our money. I'll take a punt on their latest SPAC/RTO/PennyStock or whatever in my PA though - Usually prints.

Are there any other pitfalls to being a massive dickhead -- so long as you're still printing money? 

I.e does financial motive always prevail?

Cynically, I think YES, for the most part. If you print it, "they" will fucking come. Whether or not "they" are strong and prestigious investors/institutions, or represent sustainable funding sources, depends on how much of a dickhead you are. Everyone has a limit. If you're riding around rolling coal in a giant truck that runs on Orca Whale Oil and Indigenous Orphan Tears, flashing your unshaven dick out the window at preschoolers, Pension/Endowment money won't flow to you. Retail trader money still might.

As you say, the rolodex is important, but the actionable rolodex doesn't exist without the track record. My anecdote above illustrates that - If I worked for MD and he hadn't done the deals he did, and I hadn't met random senior folks who spoke highly of him, I probably wouldn't speak so highly of him. You can build a rolodex without doing good deals, and you can do deals without having a good rolodex, but you need both to become a "rainmaker" as you put it. 

How likely are you to collaborate with a cold contact -- who has the requisite track record?

If unlikely, what sort of "add-ons" or actions would warm you up (besides a common connection)?

Quite likely. Depends on the deal, the circumstances, etc. If Random Guy A shows me the exact same deal as Former Colleague B, and their respective firms bring basically the same benefits, I'd go with my contact. I would never go with my contact if Random Guy A was objectively better suited for the mandate. 

"rainmaker" as you put it. 

The term is pretentious. I've been hearing it a lot recently, and I don't want to spoil the magic by asking what it actually implies. 

I posted the OP to get a feel for what's going through people's heads when they drink that kool-aid; as well, how to reverse engineer that recipe and find the underlying pattern that makes it "click" in people's heads. More of a marketing/sales question, than an operations/execution one.

Wasn't trying to imply its pretentious or get @ you for it. Rainmaker is pretty common jargon in my experience and I use it

Final thought: There's an element of "right place, right time" to this as well (although I still think it's really up to the individual to put themselves in a position for success). If you're a junior and a complete stud at a shit bank/fund with no deal flow, you won't ever become a rainmaker. Another anecdote: A colleague of mine has been on all the recent exits that team has had over the last 4/5 years, and another colleague (who has been around for the same amount time) has been on 0. One isn't objectively a better associate/grinder than the other, they just got staffed on deals that panned out. One got tapped for VP and the other is 'updating the linkedin' getting active in the job market. Such is life.

Yeah; gotta make your own luck.

Closing questions, if you have the time:

1). What's your favourite exit strategy for a roll-up?

Assumption: there are no strategic buyers large enough.

2). If you had to lead a team composed of only one type of person for a 10-year period, which would you choose?:

• a. Loyal, capable, decent connections, no name recognition
• b. Cutthroat, ruthlessly gets-shit-done, burgeoning rolodex, brand name

Assumption: your one and only priority is to get the task at-hand finished as quickly, efficiently, and confidently as possible.

3). You're a small fish; you can either:

• a. Start out in a small pond, become a big fish very quickly, and then hop to a bigger pond (with some effort)
• b. Start out in a big pond, become a big fish very slowly, but there's no bigger pond to hop to (and your path to being a big fish is straightforward)

4). On a scale from 1 to 10: how foolish is it to vehemently refuse all equity-backed funding?

1) Consolidation plays are not really in my firms wheelhouse so I don't have a playbook or bunch of tombstones to reference. Generally, I say any time you can take multiple similar assets that one team could manage, pick the best team to run the RollCo, and kill the rest, you'll make money. That answer sounds like I googled it or something, but I think my preferred route is to group similar businesses together and remove the shittier management teams. I can't tell you how many businesses and companies I've seen in my short career that could be doing 20/30% more with better teams. People are the weakest link in any organization (lol). I even see this within our own PCs.

2) Depends on who I am and what my role is.

Based on your criteria: If I'm a managing partner with a short-term time horizon, I pick 10 of B. I could care less if they're dicks as long as they get me the best result at the end of the day.

If I'm in the trenches, or if I want to build a sustainable business, I pick 10 of A. I don't want to be involved with 10 assholes.

In practice, I think I'd almost always choose the loyal folks, because efficiency and rapidity can be very short-lived if they're achieved at the expense of mental/physical health

3) Personally I pick small pond. I come from small pond. I learned a shitton that way, sometimes just by being there. In the big pond analogy I feel like you're part of an enormous food chain just grinding away at your niche. Maybe you're a barracuda but you're still in the middle of the fucking ocean with a million other fish to compete with. In the small pond I think you see the entire ecosystem, even if that ecosystem is only a fraction of the size of the one beside it. 

4) Depends on the context. If you've exhausted all other forms of financing and are illiquid, its a 10. If you're getting proprietary knowledge/expertise/access/etc. with the equity investor, it's a 10. If you've got cheaper debt available that you can service, it's a 10.

This was another fun distraction from the grind, thanks for the reply.

Who are some examples of modern-day dealmakers in the "even stronger" camp? If you can share.