After thoughtfully and thoroughly designing and structuring a fund, it is time to bring it to the market, to attract investors and begin investing. Fund marketing happens in discrete, strategic stages (Figure 9), with various key activities occurring at each stage.
Figure 9: Fundraising and Marketing Timeline
During the First Launch phase, a particularly important period, all the concept design and investor targeting takes place. First Launch activities include:
- Developing fund thesis and design;
- Identifying target investors;
- Finding an anchor investor, sponsor, or both;
- Deciding on a placement agent;
- Determining and establishing an operational platform; and
- Preparing marketing materials.
Investor targeting, an essential step in the fundraising process, is initiated prior to launching a fund and approaching investors. This step will include discussion of:
- Investor types and landscape;
- Capital stacking and co-investment opportunities; and
- Understanding investor needs and interests.
Fund managers should not rely on a single, standard pitch or marketing approach. Targeting investors is an art that involves predicting which are more likely to say “yes” and knowing enough about how investors think and operate to make the best first impression. A fund manager must be both strategic and tactical, matching the fund’s thesis to that of their potential investors. A fund manager must be not only familiar with the vast landscape of potential investors, but also aware of the specific interests of different types of investor and how to appeal to these different interests through their marketing.
GPs and LPs find each other in various ways, commonly the following:
- A request for proposal (RFP) process, wherein an LP asks GPs to apply for investment from a specific pool of their capital. This process typically comprises a series of questions that cover most of the information that an LP would need in order to determine if a GP’s fund is a good fit for their investment strategy.
- LP driven: Some LPs do their own research, reaching out to fund managers directly, and do not want to be contacted.
- Serendipitous connections: LPs and GPs may meet through networking at events such as conferences or through referrals.
- Inquiries by GPs to LP offices: A GP starts with a phone call or an email, sharing initial information with hopes of scheduling a face-to-face meeting.