Raising Capital Requires A Change In Mindset
We have worked with hundreds of asset managers, although we have spoken with a great deal more than that. It is amazing how many managers claim that if they put up some good numbers, the money will come.
Guess what… the money rarely comes, especially for new managers.
Perhaps at one point it did, but not anymore. And that is the problem. The industry has changed, but the people haven’t.
People are not considering how competitive and saturated the industry is. The world doesn’t need “another” hedge fund or another private equity fund. In all honesty, it needs less of both. And chances are your strategy replicates dozens and dozens that already exist.
Success requires an entirely different approach, and this starts with mindset.
You can’t “limp” into the business anymore. You need to show up with resources and a plan. This is as much the situation for large funds as it is for new funds. Easy is over. You are entirely naïve if you think you will find success by pulling together a little cash and hitting some good numbers. Guess what, your competition has been doing exactly that for 20 years and manages $500 million – yet they are struggling too.
There are 5 things you need to be successful raising capital:
Humility and work ethic (you aren’t special, best start there.)
Staying power (if you can’t survive for an extended period of time with no income, don’t start.)
A Story (you need to be able to tell and interesting story to differentiate yourself, and most can’t.)
Marketing resources (starting a business without the willingness to invest in the business is insane.)
Raising capital is going to be very hard regardless. Don’t approach the process without resources and a highly differentiated investment strategy. In addition, be prepared to grind it out and have a plan. Leave the sense of entitlement at the door. Like we said a long time ago, nobody really cares about you or your fund.
Get ready for a fight. Don’t just saunter in with a marketing deck and think it is going to come easy.
By Kyle Dunn