[This is the final article in a 4-part series of articles on fundraising]
Formal investor roadshows work well with large and mature funds and companies. This is largely because the people showing up at these meetings tend to be already aware of the fund managers and investor education is minimal.
If you have worked in an investment bank, you are probably familiar with ‘non-deal roadshows’ — which is basically a short briefing with prospective investors to introduce the company. No formal communication of offers are made at these meetings though there might still be interest and queries on the company’s future direction, strategy and whether they are exploring the idea of raising capital. The same way pretty much works with funds.
Unless you are an established fund manager, the first step of any fundraising is almost always investor education i.e. to get the word out and let everyone know that you are in the market. A few basic approaches are:
1. Curating a fund presentation deck There are no set guidelines, no ideal pitchbooks. Ultimately when you bring your deck into a meeting, investors will see what they like to see. I personally recommend no more than 15 pages: 30% strategy, 30% team, 40% case studies and track record. If you have additional slides, chuck them into the appendices.
Many GPs tend to overload the slide deck with generous servings of macroeconomic and industry data to try and “educate” investors, painting a rosy outlook of the geography or sector. I think many LPs will not say this but don’t you think that as large institutional money managers, they’d have good access to all that macro research?
Case studies on the other hand can be relatively more effective as they are personal, relatable and demonstrate more credibility for the presenter.
The best deck I’ve personally seen so far was at a face-to-face meeting in which the deck comprised of only two pages showing four case studies, each case study highlighting three metrics (i) entry equity (ii) exit equity and (iii) exit multiples. A 1–2 pager teaser also works just as well for less formal or extremely brief meetings, or if you are sending to preliminary prospects.
2. Leverage social media, expound thought leadership Social media platforms such as Facebook and Twitter used to be associated largely with casual and informal information shared by our personal contacts. Today, this is very different. Social media has become a ‘broadcasting’ tool to showcase not only personal experiences but also professional updates — a career move, promotion, transition into a new role or even starting a new venture.
Thought leadership articles such as a written publication on a particular topic or subject can be useful in kickstarting the fundraising process. Write about stuff related to your experience, background and relate them to your investing strategy or industry. While it might all appear to be academic, this can be effective in piquing the interest of your professional circle.
3. Conferences and speaking engagements Investment focused conferences (especially those that have a strong focus on private equity and venture capital) have been fairly effective in elevating publicity for new funds coming to the market. Speaking and sharing your views on a panel discussion is another way to demonstrate thought leadership to the investor community. Because some of these events are covered by media, there is good chance that your new fund gets mentioned as part of the news reporting.
In addition to that, many LPs typically also attend these events to get acquainted with new funds or share their perspectives on the macroeconomic outlooks as well as where they are allocating capital over the next 2–3 years. Some conferences also offer 1-on-1 meetings with other delegates at the venue, so look out for these features when choosing which ones to attend.
While mass events may not be in the format of your traditional roadshows, they serve as an excellent non-transactional platform to meet and engage potential investors and set the stage for a more formal and orchestrated meeting down the road.
4. Enlist a reputable figurehead Getting a publicly renowned senior professional on your fund’s advisory board is a good way to reinforce credibility and galvanize initial interest amongst potential investors. It also aids publicity depending on how influential your figurehead is.
However, many new fund managers equate the presence of a senior figurehead to a successful fundraising i.e. “If I have the former minister on my advisory board, LPs will invest in my fund”. Unlike the initial public offerings in which retail investors flock to buy shares of the company upon the entry of a large cornerstone investor, private funds people are not discerning and will still place emphasis on the executive team’s operating capability rather than the reputation of a few non-executive industry influencers.
Much like any fundraising exercise, it is important to ask “what does this person bring to the table?” and “how does he/she create value or fit into the overall investment strategy of the fund?”. Too many people overplay the publicity card, forgetting that real substance is in execution.
5. Create a digital profile Don’t undermine the importance of a digital identity.
The ease of access to the Internet these days make an online profile really easy to set up. It doesn’t cost a lot of do up a simple corporate fund website even though you have nothing to show for at the beginning.
Sometimes, a website isn’t so much as to showcase (or show off) track record but for establishing some form of legitimacy. Start a corporate LinkedIn page, get on Twitter, and fill them up with content. Good things take time to accumulate and not before long, you’ll find that your fund’s digital profile and credibility will be enhanced by the fact that it has ‘been in existence’ for some time.
Closing thoughts It is true that many institutional LPs do not bank with new funds coming to the market. But don’t get too caught up with the fact that you are a ‘first-time fund’. Many large PE/VC shops started as a first fund.
Perhaps one of the things that many fund managers do is to focus too much on getting the money in and forgetting about building the core business — which is to identify and seek out good companies, invest in them, and then actually selling them or exiting those investment at a decent return. The process itself looks blatantly obvious but it is always not at easy as it sounds.
"Most big recent successes (Microsoft, Apple, Facebook, Google) were started by people with skin and soul in the game and grew organically-if they had recourse to funding, it was to expand or allow the managers to cash out; funding was not the prime source of creation. You don't create a firm by creating a firm; nor do you do science by doing science." - (from the book, Skin in the Game)
And therefore by extension: You do not start a fund by simply just raising a fund.
If you actually need OPM (other people’s money) just to start a fund, then maybe you shouldn’t be raising a fund at all. Good ‘first-time’ fund managers know an opportunity when they see one and moblize their own (financial) resources to invest even if there are no LPs present.
Real track record ultimately speaks louder than marketing pitches and beautiful presentation decks. If you can demonstrate lucrative returns on projects, this is effectively tangible proof that the your team and investment strategy works, and institutional money will naturally come.
Starting a fund can be a costly process — no different from launching a start-up. It will not be easy, so do sufficient homework before taking that leap. Learn from the experiences of others and always remember that the best way to sell is to show that the product works.
I miss Blatage cafe in Shanghai.
Throwback: Blatage Cafe is located on the Pudong new area side, approximately 30 minutes by taxi (off-peak) door-to-door from where I usually stay in Shanghai (which is on the Puxi side). The small cozy cafe is along 滨江大道 on the Pudong side. From Superbrand mall (正大广场), it is at least a 20 minutes cycle on Mobike or a 40-minute leisurely walk along the river. During the spring and autumn mornings, this is an extremely therapeutic exercise especially on the weekends. The indoor seating capacity is no more than 10 and they serve an excellent flat white for 30 yuan. Although situated close to some private condos in the vicinity, somehow, there isn't a morning coffee culture where people get up early to grab coffee. Most times when I arrive at 830am, I am their first customer.
Back home, the "Blatage-substitute" is 40 Hands cafe at Tiong Bahru. A lot of people ask me why I 'spend' so much on coffee when I can invest in a Nespresso machine and enjoy a cuppa from the comfort of home (I have one by the way).
But just as people sign up and spend their money on regular yoga classes, I spend mine on 'coffee yoga' i.e. a faux yoga session where I substitute stretching exercises with sipping coffee (also note that a single yoga class ranges anywhere between $15 to $25 while an artisanal coffee is about $6).
Just as people find inner peace and tranquility in an hour or so of meditation, I find mine through sitting by the street or in a quiet corner where I am able to reflect and declutter my inner thoughts. Not everyone understands this.
But everyone needs their own Blatage coffee place. Similar to how religion provides spiritual closure to occurrences in life that we cannot rationalize, people who do yoga probably believe that it is the antidote to de-stressing from work. For me, this equates to having coffee in an undisturbed ambience even if I have to get up at 6:00 am.
So, there isn't a need to architect a pricey escape into the Himalayas to seek private retreats. A lot of these can be found at your doorstep.
You don’t need to fine-dine in order to enjoy good food. My favourite local hawker fare is the bak chor mee at Tiong Bahru market.
You don’t need to own a car to have convenience. Even if I use Grab everyday my traveling commute expenses will probably never exceed $500 a month. And sometimes all you need is to buy a house in the right place with good access to public transportation.
You don’t need to stay in a private condominium or landed property to enjoy your spatial environment. You just need the right renovation decor at home.
What is the use of real estate if you wear it with a huge financial burden and/or can’t share it with your closest friends and family?
You don’t need lots of money to be wealthy. In fact, you don’t even need to prove to anyone that you are wealthy. The wealthiest people are those who are comfortable in their own skin and do not give a f&*k about opinions from the rest of the world.
Some of my new year resolves include:
* Drink less (no more than a glass day).
* Run a marathon (an offline one).
* Be selectively ignorant to people, projects and information that drain my energy and time.
* Remain focused on my personal goals and the big picture. But above it all, stay humble.