While there is a lot of emphasis on engagement in the investment thesis, most investors really only roll up their sleeves and get involved if there’s an issue or event that requires additional effort or buy-in.
Without ongoing communication or dialogue from your firm, valuable investors and portfolio members may not have the opportunity to voice their opinion, putting you at risk of missing out on key insights and expertise. By implementing an engagement strategy, you can boost the relationship quality with your most valued LPs.
But how can you effectively measure that engagement and relationship quality? It all starts with strategy.
The Importance of LP Engagement
Before diving into a strategy, it’s important to understand why LP engagement is such a critical component of your firm’s success. Engaging your key investors and portfolio members not only benefits them but also arms your firm with the opportunity to focus on delivering more value to your shareholders while opening the door to new opportunities and more robust lines of communication.
Engaging with LPs on an ongoing basis puts your firm in a position to gain new perspectives, opportunities, and feedback that leads to improved performance and firm practices. What’s more, these members have powerful networks. Engaging with them regularly builds relationships that unlock access to new networks and opportunities you may not have had access to otherwise.
3 Strategies to Improve LP Engagement and Relationship Quality
- Shift How You View Engagement
The first step to improving engagement is to rethink precisely what engagement with your LPs looks like. After all, new strategies require new ways of thinking. If your go-to engagement strategy has always been one-sided (such as press releases and announcements), it’s time to shift to a two-sided communication approach.
To do this, encourage dialogue from the top down, including interactive discussions and invitations to raise concerns and new ideas. While the probing questions may differ based on your sector and firm, the fundamental goal should be to really listen. Be open to feedback and change, so you can leave the conversation with a better understanding of how your LPs view your firm and improve your tactical improvements.
- Engage Through Every Stage of the Pipeline
From outreach to monitoring, engaging your LPs through every stage of your firm’s pipeline is critical. Outline your deal flow process and align engagement tactics for each stage. Whether that means external communications in outreach, meetings during due diligence, and workshops during monitoring, set up how you’ll engage with LPs, and at what frequency, and then act upon it.
To ensure the feedback and conversation dialogue they collect is neutral, constructive, and objective, you’ll also want to identify a neutral facilitator for each of these conversations (like an analyst, for example).
Finally, be sure to document each conversation so you have details, feedback, and tactics to act upon when you’re back at the office. To streamline this process and organize your data in one place throughout each stage of your pipeline, leverage a Private Equity CRM so your team has access to all of the data—and the full story it provides—at any given time.
- Meet Informally
Strong relationships are not built through annual meetings—they’re built over time. So while annual stakeholder meetings are critical for collaborative check-ins, informal check-ins move the needle much further. Leverage your LPs to test and discuss new and infrequent ideas, and gather their insight on a regular basis to fuel your decision-making. This will not only make them feel like more valuable members of your portfolio but will also help foster better relationships since you’ll be in touch more often.
Metrics to Analyze Engagement
Due to the overall qualitative nature of relationships, measuring the success of your engagement strategy can be a bit tricky. To effectively measure and analyze your results, spend some time setting up key metrics and performance indicators (KPIs) that define success for your firm.
In the research phase, this looks like time spent researching, potential investors identified, number of meetings accepted, number of rejections, and number of no responses. Once you move to investments secured, these KPIs unveil insights like total research time per investment to identify the level of effort required to engage with qualified investors long-term.
From a qualitative standpoint, we could argue that the most important metric is gaining valuable insight from your most influential members and ensuring you address their concerns first to enhance your relationships for the long term.
Strengthen and Streamline Your LP Engagement Strategy
As we mentioned earlier, the qualitative nature of LP engagement and relationships makes it a tough strategy to measure. However, the GP-LP relationship is evolving faster with each market fluctuation and performance request, meaning firms need to improve the investor experience to remain relevant.
Through a centralized software designed to bring all of your engagement metrics and conversations into one place, you can begin to turn that data into quantifiable results, while bolstering your relationships and engagement of your investors.
Altvia’s Virtual Data Room & LP Portal, ShareSecure, is designed specifically to strengthen LP relationships through leveraging data, interactions, and market expertise to build stronger investor relationships while providing next-level transparency by letting the data do the talking. Improve the investor experience with market-leading, secure technology, and easy-to-use communication tools.
If you’re ready to upgrade your LP engagement experience, the first step is to contact our team to see how ShareSecure can help.