Significant shifts in private capital markets are redefining the relationship between investment firms and their investors.
We heard that sentiment from IR professionals from large and small firms at the PEI Investor Relations, Communications, and Marketing Forum in San Francisco on September 19th and 20th. IR professionals are navigating raising from non-traditional investors and dealing with changing demands including more communication, more strategic involvement in portfolio companies, more access to data, and more one-on-one engagement in exchange for investor capital and loyalty. They’re also doing it in a world where IR’s success metrics are getting more sophisticated than just dollars raised.
While the investor relations professional evolves into an increasingly sophisticated role—earning a more strategic seat at the table—it’s shifting away from one where IR just relays what investors are saying. They’re now a facilitator: they hear directly from investors about concerns and position firm strategies and portfolio company updates to develop lasting relationships.
Private funds are turning to non-traditional investors
In a market where every firm has to work hard to raise capital, IR professionals are seeking non-traditional investors.
While established fund managers are able to attract sovereign wealth funds that write $100M+ checks, smaller and medium-sized firms with more modest fundraising targets are finding strategic alignment with family offices and capitalizing on increasing interest from retail investors. Many venture firms reported that they’re finding success with family offices of newly-minted tech millionaires, both in the US and offshore. These investors prefer to allocate to industries they understand.
This shift in investor capital is also impacting how firms put their investors to work. While fund managers often view corporates and others as investors with strategic value to their portfolio, they’re beginning to view family offices similarly. And from that investor’s standpoint, part of the reason they invest is because they expect and desire direct commercial involvement with the underlying companies.
Firms large and small reported that retail investors have become the fastest growing channel for new capital, especially now that the SEC is opening up routes for non-accredited investors to participate. The reverse is also true: wealthy individuals (not to mention their advisers) are seeking alternative investments as they look for diversification and better returns than they can get in public markets.
But if family offices require a more nuanced, investor-by-investor approach, retail is a different game altogether. Fundraising is either about teaching private wealth managers how to pitch their clients or building relationships one at a time. And while the retail investor may know that part of their portfolio should be allocated to alternatives, that doesn’t mean they understand the asset class. Expect to spend more time educating them.
Part of that education looks more like marketing and communications rather than investor relations. Marketing and comms are important for institutional investors of course, but become even more important when you need to build brand equity and educate a different audience. Leverage case studies on your portfolio companies and testimonials from existing LPs. Develop earned media by proactively pitching journalists and industry reporters. But most importantly, spend time understanding your LPs and their needs to inform communications and content.
Successful IR and engagement is measured in more than just dollars
One panelist cited a GP at a large, well-known fund: it used to be that you treated your investors like mushrooms. You took them out, asked them for money, then put them away again. But not anymore.
Investor expectations for communication, transparency, and data access have grown more complex. They want to understand how the strategy evolves and portfolio companies perform throughout the year instead of one update in an annual report.
But while the trendline suggests increasing sophistication across LPs, each investor is still unique. The firm needs to listen to each investor and understand what matters to them. Thoughtful relationship management and marketing—proactively communicating meaningful data and giving it context, following up on requests for information or concerns, and not always being in “sell” mode—builds trust, which will pay dividends when it does turn to fundraising.
That thoughtfulness matters when you’re competing for the limited time and attention of current and prospective investors. AGM season is particularly time-intensive for active investors, so they need to be offered something in return for their engagement. It could be a guest speaker whose book you send out in advance, a behind-the-scenes tour of a portfolio company, or a strategic session to understand things like what the IPO market means for the fund strategy. They may simply want more networking time with other investors.
More granular, quantitative measures of success look similar to any B2B enterprise sales and marketing team: the number of meetings booked—particularly solo meetings, as part of IR’s goal is to give GPs some time back in their calendar—attendee numbers at both virtual and in-person events, new capital in the pipeline, new vs returning investors, and more. And for the things that feel so heavily qualitative: survey, survey, survey. Build feedback loops even when results can’t be quantified.
The best IR professionals understand the value of building and maintaining relationships outside fundraising and building a culture where everyone in the firm is proud to represent the brand. Ultimately, being authentic and creative in communications and treating investors as people and not just a check means when it does come time to fundraise, you’ll be well positioned to leverage the relationships you’ve built.
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