The 2021 Fundraising Checklist for Investor Relations

Predictions say first-time funds will struggle in 2021 as business is done less via handshake and more through Zoom meetings and email. First-time funds face daunting pressure with investor relations in an increasingly digital landscape to convince private equity investors that their fund is worthwhile.

Those that have a clearly mapped out process for fundraising will be able to step into the new reality without losing opportunities or losing touch with existing investors.

We’ve created this checklist to help you to gain exposure and finalize more deals in our digital-only world. Use the list to organize and drive momentum in 2021.

Step 1: Set an investment thesis and source of competitive advantage

An ironclad investment thesis sets a powerful tone for private equity investors. Your fund should be absolutely clear about how it will deliver value. That confidence will make all the difference.

For a thesis to be influential, it must be based on how the money will be made in the fund. The thesis should compellingly define the fund’s competitive advantage as well, illustrating how it is a standout option compared to others.

Don’t underestimate how important the role of technology can be in helping to tell this story nor its role in the story itself — tell a story that is future proof in terms of technology being a differentiator.

This statement should be so definitive it can be described in black and white.

Step 2: Determine the size of the fund

Don’t overlook the size of the fund as a strategic choice in your fundraising process. You want to be responsive to what LPs favor, so you can increase your likelihood of gaining their interest.

Look to previous years’ data to give your team an idea of what AUM size was most popular.

This survey from IntraLinks asked LPs what fund manager AUM size they favored in 2020. Another recommendation is to underpromise and overdeliver – meaning it’s better to set a smaller fund size and raise the target later. Ultimately you must give your fund size a hard cap so LPs can feel confident that your fundraising will close relatively quickly and investing will proceed.

Step 3: Compile an investor list

Your investor list will likely fall into one of a few categories based on common investment behaviors and themes.

One category is patient capital. This long-term capital is usually in endowments and pensions and is not concerned with cycle swings or market shifts.

Flexible capital moves fast and often breezes through due diligence, which is an appealing trait for new funds. However, flexible capital is more fee-focused so they may be more difficult to persuade.

A third category, value-add capital includes corporate investors that have robust networks of their own and a willingness to collaborate and offer potential leads.

After you’ve completed your list, use proprietary data to determine who to target in a fundraise by answering these questions:

  1. Who are my top capital raisers?
  2. What regions are we most successful in?
  3. Where are our best introductions coming from?
  4. What are the characteristics of our most committed LPs?

Funds that segment based on capital allocation goals are most successful. Also, consider prioritizing by most likely to commit.

The most effective fundraising efforts are personalized, using specialized filters to create shortlists based on what you’re targeting.

Today’s top prospects expect that level of customization in any outreach.

Step 4: Secure an investor relations system to store all communications

An excel spreadsheet might seem like the logical tool to use when tracking fundraising communication efforts, but the spreadsheet strategy is dated, unreliable, and doesn’t support the remote work environment we’re in.

It’s not enough to use a scattershot approach to capture, track, and execute your fundraising.

To be competitive you need a client relationship management (CRM) platform or portal specifically for fundraising so you can control your message, maintain a consistent front, collaborate, and personalize.

Leverage a CRM and online portal

Find a CRM platform that has specialized features for IR teams and the fundraising process. A CRM should allow you to quickly see what is happening with each relationship at any moment and allow you to understand where to be focusing for the highest likelihood of conversion.

A fundraising portal will help investor relations grow, even online. The right portal serves as a central hub for data, interaction, investment materials, webinars, and presentations.

It saves time by automating numerous steps, but also provides important engagement information that can help to provide valuable insights on what’s working and what’s not.

A feature that enables digital signatures is particularly useful when working to finalize agreements.

Prepare marketing materials

Remember, when you are fundraising in the digital era, momentum matters. The longer it takes you to close your fund, the less happy LPs get.

The expectation that today’s technology has created requires actions to happen in hours not weeks. With a portal in place, you can ready your marketing materials ahead of time and have them at your fingertips to send.

Follow an investor relations plan, and be flexible

This checklist is meant to be a set of guidelines. Follow these principles and best practices, but be prepared to deviate, improvise, and respond.

Raising funds is a living, breathing process as is any relationship. With this checklist to organize you and the tools and technology in place, you will be able to stay ahead of a rapidly changing landscape.

To hear how top-tier firms are moving to a digital-first approach with fundraising, check out our webinar, The Art of Virtual Fundraising.