What can you learn from reviewing over a thousand private equity fund presentations (also known as “pitch decks”)? Among other things, you learn what works in a fund presentation and what doesn’t. This post contains my thoughts on what an emerging manager should include in a fund presentation.
In April 2005, my article “An LP’s 10 Tips for Emerging Managers” appeared in the Venture Capital Journal. This article offered advice to new managers on how to successfully raise a private equity fund. With the advantage of many(!) additional years of experience evaluating emerging managers, I thought I should update that advice. Below are some tips for emerging managers seeking to raise money from potential private equity fund investors (also known as “Limited Partners” or “LPs”).
1. Have Sufficient Resources for a Lengthy Fundraise.
Raising a fund takes lots of determination, time and money. Some people rush into raising a fund without considering whether they have the resources to successfully raise a fund. Raising a first-time fund can take a long time, in some cases 18 to 24 months (or more), and can cost over $1 million, which the partners of the emerging manager must pay out of their pockets until the fund has its initial closing, at which time fundraising expenses (excluding placement agent fees, see below) are reimbursed by the fund. The partners must have sufficient resources to finance the costs of fundraising as well as the costs of opening and maintaining an office (with staff). In addition, each partner of the emerging manager must have enough resources to finance that partner’s personal household expenses during the fundraising. Having the resources to fundraise for an extended period of time is critical to the success of raising a fund.
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