The fundraising process can be long and complex, even for investors that you already have a pre-existing
relationship with, they're usually five major stages of this process.
The first is Marcotti, which is when you make the initial contact or allocators, find your materials
online after this becomes the information that we've reached.
This is what allocators require specific information via due diligence questionnaires.
For example, visit the office to know more about you and the team and possibly request more information
usually provided in the form of virtual data rooms.
The first step is negotiation, negotiating the partnership subscription and other documents, as well
as the provisions themselves.
And finally, hopefully you'll receive an allocation.
And from then the focus shifts to investor relationships over time, including reporting and possibly
other specific activities like renegotiations.
Each of these stages contains different steps as well as different traps to avoid.
So it's important to be diligent in every one of them all.
Contact with investors starts with fun marketing.
The fund management team should include multiple channels in their marketing strategy, including,
but not limited to an investor page on their website.
Usually essential, an email campaign for existing contacts with some opinion pieces, maybe some updates
on portfolio companies and others.
Cold calls and emails, partnerships and networks, contacts and events, selected public relations
interviews and press pieces, and possibly social media presence, including LinkedIn, to leverage
the professional profiles and articles to provide the professional perspective to allocators.
For example, as part of the team due diligence process articles and features, including both opinion
pieces and profiles of portfolio companies or CEOs, and also possibly transection or future videos
with similar content to the articles, the video form of said articles, either on the website or on
a dedicated platform like YouTube.
After making contact with an allocator and receiving initial interest.
The information that we've reached stage begins at this stage.
The fund manager usually presents the allocator, the fund offering documents which include, but may
not be limited to the private placement memorandum, which should include the investment strategy,
the team track record partnership agreement and all other relevant information that the public should
know about the books that are usually abbreviated forms of the offering, documents usually used for
sales purposes.
It's important, though, to keep these aligned with the PM.
I see this is many allocators require customized information in specific meetings and some fund managers
in the customising dozens of different projects for dozens of allocators.
But those changes are not reflected in the BPM.
Always remember that this should be a centralized model or relevant information should start in the
BPM and then flow downstream to all forms of the pitch deck.
So whenever there is a change that you're making to a pitch, think don't make it to the pitch deck
itself, make it to the centralized PBM and then reflect it to all forms of pitch deck that you have.
It also includes due diligence questionnaires, for example.
These will probably be what takes most time.
Regardless of the performance and quality that you show, Allocators will have doubts of their own and
shower you with super specific questions.
And these these can take a lot of time to fill in.
Sometimes the fund manager may even give up on some minor allocations just due to the sheer effort you
reduce.
It usually also involves virtual data rooms.
These are private spaces where the fund manager can share specific confidential documents or information
with allocators.
It may include documents answering specific requests, like a summary of all best performance, a list
of all past investments and so on.
If the due diligence is successfully completed, the next step is to negotiate the partnership agreements
and provisions.
These negotiations usually include in terms of documents, the partnership and subscription agreements.
In the case of limited partnerships, this is usually a standardized, limited partnership agreement
and the salaries for specific bespoke provisions.
These are usually the most time-Consuming and challenging.
They're also unpredictable and very customized.
It's completely normal for a group of a fund to have the same Liepa for dozens of different allocators,
but then have a custom negotiation inside letters with every single one of them.
This happens more frequently than you would think.
The best practice here, akin to the beach and BPM, is to centralize anything that is a bespoke term
that can be extended to other allocators, should be standardized and included in the LPA and the simantov
should be discarded as much as possible.
So, for example, if an allocated has a specific reporting demand in the letter, it's not a bad idea
to just follow that reporting requirement for all allocators and put it in the way for every single
one of them.
These negotiations usually also involve the negotiation of the provisions themselves that can include
are not limited to the management and performance fees, including possible hurdle rates or high watermarks
keepers and events or distribution waterfall preferences, including clawback provisions possibly,
and many other possible ones, including bespoke provisions such as most favored nations clauses usually
requested in the five letters.
Once everything is successfully negotiated, the investor will then be subscribed to the fund and available
for capital costs.
After the fund is completely subscribed, then the activity actually begins the to the point capital
to prospect investments.
This is the stage where fund raising ends and investor relations itself begins.
This can include, for example, reporting which is usually quarterly and possibly in specific formats
or aligned with specific requests, for example, with specific disclosure requirements or including
specific calculations such as.
It's not the fees or performance metrics like internal rate of return, but already discounted for the
effect of subscription credit lines.
For example, last week, renegotiations of provisions with investors.
This can happen when an investor has the power to do so.
For example, allocators that came in first and paid high fees at the time, but now see new investors
paying lower fees when they come in can request the fund managers to match those fees, also known as
legacy fees and also possible secondary sales of interest from investors.
At any point, a possible LP may wish to leave and give space to a new LP joining the fund.
It's up to the GP to usually facilitate that transaction known as a secondary.