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.

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.