the Five Fallacies of Private Equity Fundraising

© 2017 KAP Group LLC. All rights reserved.
Five
Fundraising
Fallacies

2© 2017 KAP Group LLC. All rights reserved.
Setting
the stage
Each year, we speak with over 100 private
equity managers.
Through this experience, we have identified
common misconceptions and best practices.

50 to 100 meetings
More than 100 meetings
As many meetings as possible
None of the above

It’s a
numbers
game.

Actually, it’s
a relationship
game.
Meetings are more likely to result in commitments if the
manager has an existing relationship with the investor.
Relationships are cultivated over a period of years.
Create a communication plan that ensures you are consistently
building upon your relationships, particularly during non-
marketing periods.
– None of the above

Spend your
time wisely.
Each prospect is time consuming (DDQ requests, onsite diligence).
IR, finance, and investment teams all involved.
Managers need the bandwidth to impress highest probability prospects.
This is job #1.
Over time, your track record is your most valuable piece of
marketing collateral.

Walk through slides sequentially, using the
book to guide the conversation and hit key
points
Flip quickly to your track record and case
studies; LPs want to hear mainly about
performance and deals
Not at all – the best meetings are those in
which you never open the book
Ask the LP! They’ll let you know what’s
most valuable for them

The best
meetings are
those in which
you never
open the book.

Open and
use your
pitch book,
but make it
personal.
Track
record
Case
studies
Time for
questions
Team and
strategy
– Walk through slides sequentially, using the book to guide the
conversation and hit key points

First and follow-on meetings with
prospective large LPs only
Every significant meeting with a
prospective LP
Depends on the seniority of the IR
professional
None of the above

The
Principals
don’t have
to travel.

Investment
partners
need to be at
the meetings.
They want to hear from the ones who are sourcing, diligencing, and running the deals on a day-
to-day basis.
– Every significant meeting with a prospective LP
They help secure meetings, organize the roadshow, and prepare
meeting agendas.
They take detailed meeting notes.
They serve as a consistent point of contact for the investor.
Their knowledge of the entire portfolio can be helpful to both the investor and the investment
team member.

As long as nothing has gone terribly awry
When you’ve provided clear, consistent
communication
When you’ve stuck with your proposed
strategy and met or exceeded your
return targets
As long as their CIO and key investment
professionals have remained in place

Institutional
money
is sticky.

Institutional
money is a
little bit sticky.
Realized performance
(both IRR and multiple)
relative to targets.
Disposition discipline /
timely exits.
Adherence to original
strategy.
Demonstrated fiduciary
capabilities.
– When you’ve stuck with your proposed strategy and met or exceeded
your return targets

Detail the conditions under which you
offer fee breaks
Offer them a 50 bps discount for a
commitment over a certain threshold
Explain that you believe your fees are in
line with market and you’re not
considering concessions at this time
State that fees are negotiable

Fee breaks
are powerful
motivators.

Not in our
experience.
Offer fee breaks strategically to
help generate momentum or
encourage larger commitments.
– Explain that you believe your fees are in line with market and you’re
not considering concessions at this time
Negotiate terms up front with
your lead investors to ensure
marketability.

info@thekapgroup.com
775-737-9500
www.thekapgroup.com
@KAPGroup

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