Marketing Missteps: Insights From Top Placement Agents
I asked some of the industry’s top placement agents what they thought were the most common mistakes managers make in their attempt to raise capital.
Charlie Eaton (www.eatonpartnersllc.com)
People tend to enter the market without being fully prepared: story well articulated, materials included, etc. Often times the PPM isn’t ready for distribution. That’s a mistake.
Managers also tend to approach the broader market without locking down all the capital they can from existing relationships. Another mistake. Early commitments will add a great deal of credibility. Make sure all are in hand before you start your marketing process in earnest.
And of course, line up a quality placement agent. Raising capital is harder than you think it will be.
Mark Marxer (www.mmxmanagement.com)
Too often, managers underestimate the importance of business development in managing the risk of their overall business vs. managing the risk of their portfolio. Although returns and the management of their portfolio strategy are monumental factors in bringing in and keeping assets, attention to and a focus on building a smart, risk-managed business is absolutely critical when focused on long-term success.
Too many times we have seen smart investment teams with a definable edge and niche in managing money either not fully understand, or make poor, novice or ego-driven business decisions that may help a short term situation yet have the ability to derail their success long term.
Unfortunately, I have seen this movie way too many times and no matter how good someone is, or believes they are, it is critical to surround the PM’s with smart business builders to help them make experience-driven decisions to develop and run a risk-managed business for the long term, not just run an investment strategy or fund.
Sajan Thomas (www.thomascapital.com)
Post financial crisis, 20 – 30% of the GPs get 80% plus of the capital. The capital pool you are competing for really is smaller than you think it is: again, 80% of it is predestined to go someplace else straight out of the gates.
Every GP thinks that they are special; however, they don’t tend to listen to what the marketplace is saying. It is amazing how many GPs come up with weird structures, elevated fees, and little in the way of commitments themselves, yet they still expect the money to roll in. A lot of managers have no experience whatsoever running a fund.
Those managers worthy of commitments underestimate the amount of time it takes to raise money. It is also really expensive. Don’t start the marketing process unless you are committed to building a franchise. LPs are really good at figuring this out. If they don’t think you have the resources to endure, game over.
Finally, it is amazing how many times GPs don’t listen. If an LP asks a question, make sure you answer the question that was asked.
Oh, and pitch books should never be over 20 pages.
This is feedback from a very established agent that wished to remain anonymous.
Managers often times fail to understand their competitive landscape. They also spend very little time understanding how they are perceived in the context of the competitive landscape.
I also don’t think managers prepare for investors meetings all that well. They seem surprised when an investor doesn’t take the time to read their pitch book prior to the meeting. How much research did the manager do themselves? My guess: not much. Investors, good or bad, are relatively powerful people. You can’t assume they are going to care about you before you walk into the room. Be prepared.
My two cents
I don’t think managers think about what it means to be a brand. Investors have so many choices these days. They want to invest with managers that represent a nucleus that extends beyond performance.
I also think managers do a very poor job in using technology to nurture relationships and profile interest. There isn’t time in the day to call everyone from A – Z. Nobody picks up the phone anymore. You need to create unique and thought provoking content and determine who is engaging in that content. At that point, you need to follow up in a personalized way very quickly.
1.) Have all your materials refined and in place day one.
2.) Tie down all the commitments you can from friends, family and colleagues before you “go to market.”
3.) Make sure the operating infrastructure, relationships, and back office support necessary to run a risk-managed business are in place.
4.) Understand the competitive landscape and determine if you actually have an edge…and it is surprising how many don’t.
5.) Think of building a franchise, not raising a fund.
6.) Be a brand, not just an asset manager.
7.) Be prepared for a long and hard battle.
8.) Make sure you have a solid marketing budget… and then triple it.
9.) Embrace technology to build awareness and nurture relationships.
10.) Do your homework on investors.
11.) When you do get in a room, listen, and answer questions in a short and precise manner.
12.) Cut out half the words in your pitch book.
By Kyle Dunn