Four Common Fundraising Myths Holding Back Your Capital Raise
Traditional fundraising strategies don’t work any more in today’s ultra-competitive environment. Join this webinar with Alex Rogers, VP of Investor Relations at Performance Equity, to debunk the top fundraising myths and focus on the important tactics.
Myth 1: “Getting the presentation perfect is key.” Making sure the graph on page 24 has just the right bullet points doesn’t matter as much as getting a connection with the right people.
Myth 2: “You have to get in front of the Chief Investment Officer.” There’s a lot of wood to chop before that happens, if it even needs to.
Myth 3: “A pitch equals a sale.” Long term asset classes need long term relationships, whether you have a fund in the market or not.
Myth 4: “The process of managing relationships with investors is not important” Simply tracking conversations in Outlook or Excel is no longer enough.
===Transcript===
Allan Siegert: Hello everyone, I am Allan Siegert of Navatar. It’s a beautiful day on the east coast and we have a great webcast today. I am really excited! Alex Rogers of Performance Equity joins us from Greenwich. He is fresh off the road from weeks of fundraising, he has just closed two funds. Alex will tell us about the four myths of fundraising. Then our Navatar tech, Ketan Khandkar is with us at our headquarters on Broad Street in New York and he is going to show how to use technology to leverage some of these suggestions that Alex is going to make about fundraising, and then we will take your questions. Enter those questions into the Go To Webinar panel on the right side of your screen. I’ve got questions to, like what’s going on with fundraising outside the united states? But first Alex is going to tell us about the four myths. Alex!
Alex Rogers: Thank you Allan and thanks everybody for joining us this afternoon. Like Allan said, I want to go through some of the ideas that Investor Relations and marketing people you hear a lot and the kind of things to work against, work around and work with sometimes. And just kind of lesson from the road I suppose. The first one, myth number one I think everybody has dealt with in one form or another and unfortunately one that’s not going to go away anytime soon. This is the idea that the presentation deck has to be perfect and the truth is, as I said the graph on page twenty-four is just fine. Leave it alone, it has to be good, you have to have high production values. The Presentation has to look good, it has to have accurate information, it has to look professional, but at the end of the day the deck is not the thing that counts. It’s how you present it, It’s the message that you have, it’s the story that your telling and you have to know those things. You have to really internalize the message and the story and it does a lot of things for you. One, it makes the meeting much more interesting because you know what you’re talking about and the conversation doesn’t wonder all over the place. It also makes it a lot easier if you really know your message, if you really know how to deliver it. You’ve really got that story down pat. It makes it a lot easier to talk to the person on the other side of the table from you, because you’re not worried about trying to remember that point four B, that you have to make sure you get out. You can just kind of run the script and pay attention to what they are doing on the other side of the table and what they are taking notes on. It really comes down to knowing who it is that you’re talking to. You got to know your audience, you got to know your what the person on the other side of the table is looking for, what their problems are, what kind of concerns they have and a lot of that is just pre meeting research that everybody has to do. You’re better off spending your time figuring out what kind of issues a particular plan sponsor might have or what they are looking at in their portfolio, rather than spending that time making sure that the colors on the one page match up perfectly. We have in one of our decks, the slide stays in because on very rare occasions become useful. It’s a waterfall chart that we spend, I don’t know how many hours building it. It gets its own footnote in the back of the book. It has been legal reviewed, it has forty-seven lines of disclaimers on it. It’s a fairly ridiculous thing and I think in three years I have talked to the slide twice, maybe three times. It’s one of those things that the amount of time that we spent on putting that slide into the deck really could have been done, could have been used better somewhere else. So it’s one of those things, get a deck that work that tells you the story that you want it to, that has good printed information in it. Really learn your story, learn the message and figure out how you deliver it. Modifications to the deck comes from that experience and then as much as anything else, perhaps more know who it is you’re talking to, know the audience so that you can change the message that you give in the meeting. If you stick strictly to the book, then you’re never going to be able to modify your conversation to meet the person that’s across the table from you, and then figure out what it is that they want to hear. So I think if there is one way to work smarter, not harder, don’t focus quite so much on the deck. It has to be good but it doesn’t have to be a master piece. It has to get the point across, it has to get the message out and its really your delivery and your knowledge of the person on the other side of the table that counts more than anything else. So which gets a little bit to the second myth about the person on the other side of the table is. We hear a lot, I’m sure everyone else does that, that’s not the CIO then I don’t know why we are talking to him. The fact is that yea probably you will end up talking to the CIO at some point eventually, maybe but it’s not a certainty and it’s not always good to have the CIO be your first point of contact. The CIO’s are busy, they are looking at the entire portfolio, they have to deal with the boards, they have to deal with liquidity issues, they have to deal with total portfolio construction and whole host of things that aren’t really investment related and they are not spending a whole lot of time thinking about your particular fund or your product. So you really need to get into the internal team and figure out who is it that can be an advocate. Who is it that makes decisions, where do you need to get in in order to start telling the story and get your message across. You always have to figure out which direction pressure works better and I know in my past history you see suggestions come in from on high and a lot of times your action is so great. Another brilliant idea coming down that doesn’t fit in with anything else that we are doing with this portfolio but somebody saw somebody at a conference and decided it was a great idea. Sometimes that does work though, you got to get an idea pushed into an organization from somewhere and sometime you can go from the bottom and find an analyst who you see at a conference or you just happened to have some connection to and you reach out to them and the idea bubbles up from there. So it’s really important that you figure out the team structure and kind of the right entry point if you focus entirely on going after a CIO or going after a particular level within an organization. You’re not necessarily going to be more successful. Every organization is different, every team has their own kind of structure and the way that they work. So it’s really important to figure out how you get in and honestly a lot of times keeping good notes and keeping your CRM system up to date helps with that. So you can remember who it is that you talked to the last time and what they said and then you get notes from the field in that somebody say somebody else at an LP meeting or at a conference or something else. You can put all that information together to help triangulate what’s the best route to success within that organization and how you get things moving in. It’s also a good way to keep track of who the analyst are, who the consultants are and who’s is doing portfolio management within the group. So you can really figure out who the team is and what they are doing and that’s the key to it. you can’t just go after the CIO every time. I will say that it does work on occasions to catch a CIO at a conference and put a bug in there ear. We have a large state plan that we are working with. It’s really a new relationship, somebody that we’ve been talking to for less than a year now but we saw the CIO at a conference we were at and send a note saying “hey it’s great to see you” all the normal kind of stuff we do and got an outbound from one of the portfolio managers saying “would be great to hear more about what you guys are doing”. So we went to actually go see him because we were going to be in the area and face to face is always good and he had a completely wrong perception of what it is that we do and what kind of investments we do and his understanding from the CIO was not anywhere close to what our reality was. So it actually ended up being a great entry point because we were able to give him the wrong first impression and fix it from there which sometimes a good way to go. So the point of the myth really is to know what the team is, know what their decision making process is and figure out how to get in and talk to the right person. It’s not always the CIO, it’s not always the Private Equity. You have to find an advocate and the champion within the organization and that’s one of the things, it’s probably one of the hardest things to do is to figure out who to go after. Once you do figure out who you need to go after, you get to kind of myth number three and the idea that you talk to somebody and your product is so brilliant and your fund fits so perfectly in what they need that you should bring sub docs with you and get them to sign up with you ate the time. Truth in the matter is and this is one of those hard truths, you wish, it would be nice if it was that easy, but it’s not. It takes a lot of time, Private Equity is the Long term asset class, it’s a relationship building exercise you really have to get in and talk to people a lot. Have meaningful conversations to touch point with them. There is a theory in marketing and this is really much more sort of retail marketing and branding and that sort of thing but I think it fits Private Equity in a lot of ways. The Rule 29 is this idea that it takes 29 meaningful interactions before a consumer makes a purchase decision and its exceptionally true in Private Equity. Nobody makes that decision on the first go round. It takes the introduction, it takes update meetings, it takes talking about the portfolio, it takes answering data requests, it takes just giving general updates on things, kind of useful email tidbits. It takes a lot of interaction to build up that relationship before somebody feels comfortable investing in your fund or with your firm. Going along with that, the best time to fundraise is when you’re not out actually raising a fund and you are doing pre marketing. It’s even more important now I think than it used to be at the number of choices that people have and the amount of inflow there is and the amount of opportunities they have to invest with different groups. People still want to have that relationship, they want to know that their partner in this kind of ten year fund is going to be good and is going to be good for them. So you really have to keep up with everybody that your talking to and keep up those relationships and it becomes critical I think to keep good records and keep good track of who it is that you’re talking to and what you said to them and what the next step is and who it is that you’re working with. Which really gets to kind of that fourth myth, the whole idea that you can manage it all on a spreadsheet. You can, for a while but you really shouldn’t. I think number of people that you have to talk to now, the amount of information that is being requested, the relationships that have to get built up over time. It’s just too many opportunities to drop the ball and to forget something or forget someone and just really keeping track of all that information ends up being a critical part of your job. You got to have meeting notes, you got to know what kind of contacts you’ve had, you got to make sure you’re keeping track of data request or any diligent items that they got, you really can’t afford to mess it up. There are so many options that LP’s have that investors have and so many things that they’re looking at. A lot of times what you are doing is not giving them a reason to say no, because if they have to choose between 50 different options, the easiest thing to do is find a reason to say no. So if they can cut that field down over and over again eventually they get to a decision point. So one of the things that you would have to be super careful about is not giving them that opportunity, that reason to say no, you really can’t afford a footfall. Keeping track of all that information is potentially the most important thing that you can do. Just forgetting to get a hold of somebody after six weeks gives somebody else the opportunity to talk to them. The other adage in marketing right, if you’re not talking to your customers someone else is. People will move quickly. They’re a lot of us out here trying to raise funds and it is a competition and at the end of the day, you have to build that relationship and keep track of the information that you do. This is certainly one area where something like Navatar comes into play, where having a system where you can keep track of that information, where you can know where your next step is, where you can send out a plan and figure out what you’re doing. Its critical these days, you got to have it in some form and I think we chose Navatar because it works well for us. One of the things that I kind of believe and work from is that you can’t have technology driving the process, you have to have the process that works for you and the way that you and your team works and find technology that works with it. If you can get a spreadsheet to jump through all the hoops you need then more power to you but I think something like a dedicated CRM system that works for Private Equity is an important tool and a critical item in your tool chest. I’d love to show you some of the things that we’re doing with Navatar but it’s my data and like I said it’s a competition, there is lots of us out there and I don’t want to give up all of my secret sauce. So I’m actually going to turn it over to Ketan who is good at kind of showing off some of the bells and whistles and a lot of the very interesting things that Navatar does and a lot of tools that we are using internally ourselves but doing it with their data, not mine. So I’m going to turn it over to Ketan for a bit and let him show you the ins and outs of the parts of Navatar.
[Demo]
Alex: Thank you Ketan, appreciate it. So it was a great overview to see some of the interesting tools and things. I still have to get back with you guys and pick up some of those for my own need. There’s a lot of interesting things that Navatar does and as you build out your own process and how you are working with things and figure out what you want it to do. It’s much more usable than excel to be sure. So to kind of wrap up on the four kind of myths and things that we talked about and I will turn it over to Allan to run the Q&A session. I think the thoughts of difficult things and a lot of hard stuff that we have to work through. The good news is that it’s all doable and we all raise funds and stuff gets done and we all fly forward. You just got to keep working on it. You do have to keep the simple truths close to heart, you got to know your message, you need to know your audience and you have to make those match. You have to talk to the right people, make sure that you’re not just talking to dead air and talking to people who make decision who can help fall forward. I talk to them a lot and it’s a lot more that 29 contact in my experience but convenient, clever kind of name for rules. Its 29 but the fact is it takes a lot of conversations, it takes a lot of interactions, it takes a lot of touch points and you have to keep track of all of it. You have to keep track of who you are talking to, what you said to them, what you need next, what the next step is and how you keep moving the process forward, how you keep qualifying everybody up or out. Then figure out who you concentrate on, who you work with and the information becomes critical, it is the name of the game here. You have to know everything that you’ve done and everything that you’ve said and figure out what it is that you’re going to say. It is fun, it keeps us all busy and I think it gets me up in the morning and sometimes keeps me up at night and that’s what we do. So with that, I’m going to turn it back over to Allan to go through some of the questions I know he collects them as he goes along so please pick out some good ones for us.
Allan: Thanks Alex. So everyone on your right you will see the go to webinar panel. Go ahead and enter your questions there and we will have Alex answer them for you but I get to ask the first question. Alex, what are you seeing regarding fundraising outside of the United States right now? I know you’ve done quite some traveling.
Alex: Every region in the world is different which is kind of an obvious thing to say but I think more so now in a lot of ways than it has been in the past. If you look at Europe in particular, if you have a presence in Europe already and you’re fully embedded there, then it’s kind of business as usual to a large extent. If you are not obviously there and if you are AIFMD registered and compliant then it becomes a little bit more difficult. We look at a very large extent as being close to us as a very active kind of marketing standpoint because we’re not registered, we’re not planning on jumping through all those hoops at this point. We are still somewhat active in Europe to keep an eye on things because you do have guidance of reverse solicitation, you do have people that’s going to reach out to you and find you. So it’s a fine balance I think trying to figure out how do you get in front of people without making it obviously that you are trying to get out in front on people. That said a lot of the large investors I know, keep their boiler plate email handy to reach out and say, I’m reaching out to you and this is not based on any of your outreach to me. So you can use that as kind of your reverse solicitation defense. The thing that scares me the most about AIFMD is that nobody has test any of it yet, so it haven’t been any cases to kind of provide guidance. So if anybody wants to volunteer to be the first one to be accused of crossing lines I am happy to see the result but I don’t want to be that person. You’re looking around all other parts of the world, in Japan is an area that’s becoming extremely interesting relatively rapidly as the government investment pension fund, the GPIF rather starts to do Private Equity. The rest of the Japanese country is going to have to do the same thing. GPIF is the benchmark so everybody kind of have to kind of match their performance if they have Private Equity in their portfolio, everyone else is going to have to do it too. GPIF is probably on par with the US thrift is one of the largest pool of pension money and nether one of them done Private Equity. I don’t think the US are going to do anything anytime soon as in Japanese build out that capability and start to invest there is going to be a wave of capital coming out of Japan looking for a place to invest. I’m sure there is a wave of marketing going on. A lot of people establishing office there but it’s going to be a massive draw sometime in the relatively near future I think. Korea continues to be attracting everything but there are a lot of structuring and regulatory issues you have to think about when your operating in Korea. Whether it’s having a broker or setting up feeder funds or getting bank approvals and all that fun kind of stuff but it is a relatively active market if you can get all your structures put together. China has very large pools of capital, we know that there are very large pools of capital. So if you can absorb a 300 or 500 million dollar check then that’s good, if you can do that and keep full control over your firm then it’s even better. The last active area that’s a little bit of frontier I guess in South America, some of the pension funds continue to invest outside or their own countries. It’s interesting in South America because you have a lot of family offices that have lead the way and so as the influence of those and very wealthy families. Its exerted around the country some of the pension plans are starting to notice if they have other opportunities in other ways to find returns and so those are starting to open up. Brazil was shaky last week and not a place I would try to find long term republic money for the time being. I think at the end of the day there are a bunch of different regents of the world and they are all active in their own ways and doing their own kinds of things. So if you can find a need, if you can find a way in, if you can find a message and a sale that works then go for it. It’s worth it but you have to know what you’re doing, you have to know that you are dedicating resources and time and effort into a particular geography and different geographies take different amounts of time and different amounts of headache and there is capital moving around and there is a need for returns. The world is our oyster.
Allan: I just took a note of a tsunami of capital coming out of Japan. So everyone on the right don’t forget you can ask your questions of Alex on the go to webinar panel. We have one from someone else name Alex. In your opinion, is it more effective to reach out to potential LP’s directly vs. being introduced by a paid intermediary? So I guess that’s the placement agent question right?
Alex: Right, that is a big question. I think to little bit of both and it depends on who it is and it depends on not only the prospect but also the agent. I would say that in my experience, agents have not been panacea, they don’t solve all problems, there are places where they are useful, there are other places where they are forbidden. A lot of public plans in the US in particular shy away from talking to Placement Agents, some states they have laws against it but in general I think there is a little bit of a feeling against placement agents from the public plans. But on some of the corporates, some of the small insurance companies and some of the interesting investors, sometimes it’s the only way to get through to them. to get them to actually respond to you. Where we have seen success lately with agents, is having a few kind of a strainer model where we are not paying retainers but they know our firm and they know us well enough to talk about the products and talk about the funds and things that we are doing and things we are looking at with people that they have good relationships with. Placement agents are good at saying that we have these six things, what are you interested in or getting into people’s heads and figuring out what it is they are looking at saying well “ I just happen to have someone that you should talk to about that!”. So to the extent that you can use a Placement Agent for those kinds of introductions, it can be helpful. With that said, you can get to anybody eventually if you work hard enough and kind of find your way in and find the right people but agents can make it easier to get to certain groups of people, if you can find a good agent who does the kind of things you need them to. I think at the end of the day you still have to have that long relationship, they need to know you pretty well, they need to be able to at the drop of the hat talk about your firm and your products and what it is that you’re working on. If they’re more a member of your team than they are just a pure aid agent, they can be a lot more effective that way, you can get through to anybody if you try hard enough.
Allan: Great, we have a lot of Placement Agent clients so I’m glad that you don’t hate placement agents. We got a question from Steve about co-investing and I will read into that question. Is co-investing becoming more popular or more LP’s seeking more co-investment?
Alex: I would say yes to both of those. We have a pretty big co-investment practice ourselves and both for our separate accounts and on the co-mingled fund side so we spend a lot of time doing co-investing. It is interesting as you see a lot of investors looking at co-investing as a way to kind of reduce fees which is a valid reason to look at it and a good way to go. It make sense if you put a dollar into a fund and dollar into co-investments and you can effectively cut your fees in half and that’s a good thing for everybody, the investors anyway. The trouble is that it’s really tough to do, it’s tough to kind of prosecute deals and actually get things done. GP’s are working on very short timelines and a lot of information that needs to be processed, there is a lot of work that has to be done and the difference between doing diligence on a fund and diligence on a deal is huge, it’s not complimentary skill sets. So as more LP’s are interested in doing co-investments and the unfortunate side effect is that more GP’s are going to get more frustrated with LP’s who wanted to co-invest. It doesn’t take very many times in messing up a process and needing six months to do something that’s getting done in four weeks before GP’s just kind of stop asking and stop showing it. So unfortunately we’ve got twenty years of history with a lot of our GP’s doing co-investments with them and spending a lot of time. They know us and know that we are good people and we will get a deal done and I think a lot of LP’s have dreams and want to do it and its good for them to the extent they can develop the capabilities then go for it but it’s not easy, it’s not something you can just kind of suddenly decide that you want to do and work it out. So it’s certainly a popular thing at the moment we’ll see how long it continues to be popular and as more and more research gets done on it, I think it gets better and better to find how it works and how it doesn’t work.
Allan: We’ve got a question from Hebrew. Could you please elaborate more on the Salesforce tool you use to follow the investors and investments? So I guess that could be you Alex or Ketan?
Alex: Yes, I can talk a little bit about what we are doing and Ketan can step in and fill in with all of the myriad things that we are not using that we should be. At the end of the day the main use for CRM of any sort ends up being a place to store data and to keep track of information. The advantage that we saw at Navatar over Salesforce as it is out of the box is that it is structured for Private Equity, it’s a different sales cycle in Private Equity. The longer term deal its different in parts you don’t get kind of step one, step two, step three, step four. You only got to do step one and then do modification A, step four C and then go back to two and then you want to jump to twelve and then you’re back to step nine. So having a tool that is valuable and understands the process and the way that Private Equity works is important. So the flexibility that Navatar has for generating reports for modifying the kind of information you are keeping track of for turning on part and turning off parts it’s been a handful, it’s been a Swiss Army knife in a lot of ways, it’s a really good Swiss Army knife it has a lot of tools that do a lot of different things and at the end of the day you can modify it to fit your process and the way that your team works and the way your own brain works. You can get it to do what you need it to do to keep track of the information so that you don’t drop the ball anywhere. Ketan, would you like to add to that?
Ketan: You’ve covered quite a bit Alex. The only thing I will add is that the Name of the Product is Navatar Private Equity, that’s the tool that Alex and his team has been using and it is pre-built for the Private Equity work flow and then we support our customers in tweaking and changing and modifying things as needed to form to your specific processes. So again, if you want to learn more feel free to reach out to Allan and we can show you the tool in more detail.
Allan: Sure, I would be happy to talk to you about it, of course. Hedge Funds are also out there competing for investments as well and that’s a question that normally comes up in our webinars so I will just go ahead and ask you Alex. Are you seeing a lot of competitions from Hedge Funds?
Alex: We’ve seen Hedge Funds starting to come back a little bit on the liquid side and the most popular thing to have on your liquid side is Hedge Funds, in kind of 2005, 2006 and 2007. I think you are starting to see a little bit more on the liquid from some Hedge Funds as their turn and trying to find a little bit of alpha and A little bit of differentiation. What I do think is happening though, it’s a little bit more intelligent money than it was maybe in the past. Hedge Funds are kind of thought of in the Private Equity world role as fast money and its useful if you need it but if you need kind of patient capital.
Allan: We’ve got another question that’s come in from Frank about the difference between pre-fund raising and marketing or pre-marketing.
Alex: It’s an important little differentiation I think because it’s how you talk about things, like when you’re doing pre-marketing. You’re going out trying to talk to the markets and figure out what’s interesting, what are people looking for, making sure people remember who you are but you don’t have solid plans for fund, at least you don’t sound like you do. We just closed our fund, we are not fund raising right now, we are not doing anything particular, we just want to see what you are working on and be friends. This is when you get to the point where you’ve got terms and you can talk about that next fund and when you’re going to launch it and when you’re going to be on the market with it. That’s when you’re kind of pre-fund raising, its potentially a fine distinction and it’s a different set of language and it’s a different set of tools that you use to discuss with prospects and then you get to actual fundraising and that when you have your BPM and your documents. So you want to tailor your message to what it is that you are trying to accomplish. Whether you are pre-marketing or just talking to people that are interesting or pre-fundraising or your planning what you’re coming to the market with specifically. When you get to actual fundraising, it’s a different set of words and languages that you use.
Allan: A couple of more questions up here. Kevin B says, my apologies I can only join late, how do we access the recording of the session after the call? I believe Cindy Cao of Navatar Marketing and Anurag Rastogi are going to be sending out a mailing that will include a link to this webinar. John is asking some follow-up questions about Navatar and that we are coming towards the end of the session, so if you have questions about Performance Equity, you will see up on that slide Alex’s contact information and obviously if you have questions about Navatar, please feel free to call me. My number is right up there or reach out to me via email. So we are out of time and I want to thank Alex Rogers of Performance Equity and Ketan Khandkar of Navatar and Cindy Cao of Navatar Marketing for setting up this webinar. Again if you have any feedback, if you want to know about Navatar, if you want to know about Performance Equity, please feel free to reach out to us and we will get right back to you. Thank you all and have a great day!