KAP’s insights on private equity investor relations and fundraising

What Should You Know About an Investor BEFORE Your Meeting?

Whether a General Partner (“GP”) is raising its first or fifth institutional vehicle, the age-old rule applies: know your audience. Advanced preparation is important to screen out dead-ends and prioritize the strongest leads, maximizing the likelihood of future meetings and, ultimately, commitments.

Once you have secured that crucial initial meeting, what are some key things to know about the prospective investor before you meet face-to-face?

  1. Is the LP currently investing?  Even many active LPs pause their investment programs from time to time. In particular, fund-of-funds might put future commitments on hold while raising their own fund-of-funds vehicle. Government restrictions and blackout periods may impact public pension funds’ activity. Knowing this information will help you prioritize LPs and guide your conversation, even if it means for your subsequent fund.

  2. Know AUM, allocation to real estate and/or private equity, and target allocation to such sectors.  Understanding an LP’s portfolio, along with their target allocations, will provide insight into how you may (or may not) fit into their investment program. For public pensions and endowments, much of this information is publicly available in their annual reports, typically found on their website.

  3. Search recent news articles.  A simple Google search will provide background on the LP’s recent goings-on, any relevant organizational changes, and may turn up more insight on their current investments and/or preferences.

  4. In what specific funds or strategies is the LP currently invested?  Have they committed to funds with your strategy before? Be wary of LPs who are invested with a plethora of funds similar to yours, as well as those who have never invested in funds with a similar strategy. If an LP is invested with many of your competitors, they may lack capacity to invest in additional GPs in the space and may meet you simply to gather competitor insights. On the flip side, if an LP is invested with any of your competitors, they may have an affinity for your strategy and may be looking to add to their portfolio and/or replace some of their current managers.

  5. What are the LP’s bite size and concentration limits?  Research each LP’s typical bite size (i.e., how much they like to invest in a fund) and if they have any concentration limits. For example, if you are a GP raising a $100 million fund, you can’t expect a commitment from an LP with a 25% concentration limit and a $50 million minimum bite size. At the other end of the spectrum, GPs raising very large funds should prioritize larger investors.

  6. Does the LP have co-investment interest?  Some LPs are only interested in investing with GPs with whom they can also deploy co-investment capital. If an LP has explicit co-investment interest, your ability to provide examples of co-investment opportunities (either past or future), could be a crucial selling point.

  7. Know the backgrounds of the people with whom you are meeting.  A quick review of biographies, along with reviewing their LinkedIn profile, will help you identify any shared experiences or contacts, which can help establish common ground, set a friendly tone for the meeting, and build your credibility.