This is the fourth and final post in our series The Stages of Investor Experience.
In our last post in this series, we covered how to manage investor relationships and keep your investors coming back for more.
While the management stage of the investor relationship is all about earning trust and anticipating needs, the next stage—service—is where best-in-class firms truly differentiate themselves from the competition. Instead of creating a more tactical management style, these savvy firms strategically position themselves to become less about “doing things right” and more about choosing the “right things to do” for their investors.
This approach boils down to everyone in the firm—not just the investor relations team—having a customer-centric perspective. Where maintaining relationships is reactive, providing excellent customer service is far more proactive. Top-tier firms understand this and seek out ways to provide added value to their investors through greater transparency, more co-investing opportunities, and impactful communications, which we’ll cover in more depth for you below.
TAKE YOUR RELATIONSHIP TO THE NEXT LEVEL WITH TRANSPARENCY
In addition to being honest, following up, and delivering more than expected (the keys to earning and maintaining your investors’ trust that we outlined in a previous post), transparency around investments is more critical than ever.
Take, for example, recent events in Saudi Arabia. In the wake of an American journalist’s death, investors who are bought into portfolio companies doing business with Saudi Arabia are understandably asking about their exposure. Historically, not all investors report on each company within the portfolio, but the best practice is to highlight any key issues that might affect the portfolio’s investments.
Best-in-class firms reduce risk and exposure by keeping their investors abreast of any changes affecting the companies within their portfolio. General Partners (GPs) who provide detailed company updates on what is going on with their investments provide the kind of service that leads to investors to come back to your firm during the next fundraising cycle.
PROACTIVELY OFFER CO-INVESTMENT OPPORTUNITIES
Offering co-investing opportunities is another smart way to grow your existing investor relationships. Co-investments, you’ll remember, bypass the standard fund by investing directly in a portfolio company. Technically, co-investments are a minority ownership stake with many co-investors already existing as Limited Partners (LPs).
Both LPs and GPs are actively seeking co-investments, according to Preqin’s latest survey of fund managers and investors. That’s because 80% of LPs have seen their co-investments outperform private equity funds, with 46% seeing their co-investments outperform by a margin of more than 5%.
With co-investments, not only do LPs see higher returns and get to invest directly into the company at a minority ownership, they pay lower fees than when investing in a standard fund.
To stand out from your competition, use today’s Private Equity CRM Management System to track which kinds of co-investing LPs are interested in and what your firm has already presented to them. When opportunities arise, you’ll be well-positioned to target investors who are more likely to be interested.
GO ABOVE AND BEYOND WITH YOUR COMMUNICATIONS
While Investment Relations routinely shares capital and legal documents with investors, this role calls for far more than transactional communication. Besides sending out a K1 every quarter and inviting investors to sit in on a regular quarterly performance calls, you can provide additional value to your investors with newsletters, annual meetings, deal announcements, and opportunities to connect with other investors.
Staying engaged with your investors not only shows that you want them to be informed, but it also demonstrates that you are proactively managing your investor relationship, which over time, is what leads to repeat investments. When you enter the fundraising stage again, you’ll be halfway to the close if you’re managing your relationships in this manner.
Best-in-class firms operating using a predictive approach are already adopting technology to share reports and fund information and then tracking what the investors are doing with that information. Again, software tools such as Altvia’s ShareSecure or Correspond Market Edition can help you improve the targeting and personalization of your communications for a more impactful touch.
The secret to being in the right spot at the right time when the next fundraising opportunity arises? It’s all about providing an outstanding LP experience to your existing investors, so they’ll want to do more deals with you. As we’ve outlined above, if you’re as transparent as possible, tailor co-investing opportunities to LPs’ preferences, and use every chance to communicate added value, you’ll be providing the exceptional customer service that attracts and builds successful relationships with investors for years to come.
If you’re looking for more guidance on ways to improve the investor experience, read our full guide by clicking below and be sure to subscribe here for future insights.