When you are not a brand name GP

by Simon Tang

Fundraising can actually be quite an extensive, drawn out and resource consuming process for GPs to go through. But more so for some than others.

Don’t we all wish to raise a new fund that is oversubscribed and beyond the hard cap in just a mere 3 months? Wouldn’t it be great to have the luxury of having to turn away big LP checks? Being a globally recognized “brand name” GP can really lead to this “problem”.

Certainly, there are a lot of GPs out there who have strong and proven track records, a broad and stable team, industry expertise and many other positive attributes, but becoming a brand name is something different.

Standing out in a crowded market

A GP can become a brand name over time after building up a repertoire of these elements:

  • the firm has an extensive track record and the GP can show superior returns (we’ll get into this in more detail later) across multiple fund generations that go back many years,
  • it previously invested in key landmark deals that really grand slammed and went out of the park, or even if it wasn’t a hugely successful investment in terms of returns, it still received a lot of positive publicity and became a famous household name
  • invests in a market segment that is relatively less saturated by number of peers (for example, the number of GPs investing in global mega buyout transactions vis-a-vis the US middle market)
  • has a broad existing LP base that is loyal and has invested with the firm for multiple fund generations, and most of them consistently re-up in the GP’s next fund.

So when it comes to fundraising, what does this mean for GPs who are strong in many areas? Perhaps even have a couple of the attributes described above, but don’t have the panache of a brand name? Ironically, the answer is leverage. No, not leverage as in debt, but rather leverage your own strengths on a platform that scales your impact on LPs.

First, before you can leverage anything, the key is to identify your own strengths. In terms of importance for LPs when reviewing a GP as a potential investment opportunity, first and foremost is track record (yes, they often flip to the track record page of your marketing slide deck during a meeting while you’re still introducing your firm on page 1). Since it is so vital, you need to identify your own track record strengths.

Whether it’s fund net returns or better yet, deal level returns that are underpinned by strong operating financials of underlying portfolio companies. Demonstrate these strengths to LPs in an easy-to-digest and convincing format. This makes you stand out from out the crowd.

Simon Tang, Partner, CEPRES

It’s all about (empirical) data

Whether it’s the returns of certain deals in certain countries, industries or transaction types as the case may be. On the risk side of the equation, if your strategy emphasizes low risk in the types of deals you pursue, prove to LPs by showing them your deal financing structure, deal pricing and operating growth. Also, make it clear to LPs that you don’t only talk on paper in the PPM about your value add to companies and your experienced team of Operating Partners, but you also clearly show them the actual value creation bridge: Across your portfolio, funds and individual deals to prove with real quantifiable evidence that is simple for LPs to access, view and digest.

But of course, strength is always on a relative basis, so it is imperative to use real empirical market data of comparable peers in the private markets asset class that you can customize and define to compare against. Demonstrate to LPs that your track record outperforms, and not only at the fund level, but also at the deal and company operating level. This is yet another way of making yourself stand out from the market crowd.

Leverage – Scale your strengths!

Next is the leverage part: scale your strengths that you have identified across a digital investment network of over 1,000 institutional LPs that span the globe, who are consistently connecting with GPs, conducting due diligence analysis, underwriting  their investments, and managing their portfolios of funds, all on one consolidated platform. Deliver your story and strengths with the track record aspects explained above. Include your PPM, marketing deck, DDQ, case studies and other files, all in one comprehensive dashboard that you can customize. Then deliver that to the doorstep of LPs by sharing with them the access to your dashboard from your analytics platform.

The CEPRES platform features dashboard sharing to multiple contacts, register to find out!

The advantages of applying this leverage are obvious, but most importantly, it results in more efficient investment decisions for LPs, and therefore, more efficient fundraising for GPs.

There is a practical, efficient and effective alternative way to standing out in a crowded GP market and successfully raise LP capital that doesn’t rely on being a brand name, or other traditional methods that have been used for decades. Fast forward to today and beyond, the answer lies in the empowerment of GPs by leveraging innovation and modern connectivity for the Private Markets.

The CEPRES platform is THE investment decision platform for the private markets.

Want to know more about the complexities of private equity fund strategies and how to get a firm handle on them? Contact us at info@cepres.com

Simon Tang, CEPRES

Simon Tang

Partner, CEPRES

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