If you were at PEI’s Investor Relations, Communications, and Marketing Forum in NYC both last year and this year, you could be forgiven if you experienced some deja vu.
As we said this time last year: the days of easy money are gone.
This isn’t as bleak a sentiment as it seems. While it’s still an LP’s market — that doesn’t look like it’s going to change any time soon — firms represented at the forum in NYC on April 10 and 11 are coming out with much more sophisticated and authentic ways of telling their stories and differentiating their brand, all in the service of building stronger, longer-term relationships with their investors.
The elephant in the room was AI: most firms are grappling with the implications of using versus ignoring it, with neither seeming like a good solution. What is apparent is that they are taking a careful, value-driven approach to implementing it in their operations.
Gone are the days of transactional fundraising. It’s now driven by long-term relationships.
LPs’ inboxes are noisy places. Out of thousands of emails, they may take a meeting with 10-15% of GPs, and commit to only 2-3%.
So as a GP, how do you stand out?
Long-term communication is key. Fund managers rarely expect to get a “yes” from an LP the first time they approach them. But even if they can’t contribute to your latest fund, it’s worth the approach to build relationships and a track record. LPs will continue to watch and appreciate semi-regular updates.Relationships take time to develop and are built on those instances when you’re reaching out without asking for something.
LPs are likely to respond more favorably when you’re concise and you’ve done your homework on them. If their website materials say they’re targeting funds with $3-5B of committed capital but you’re raising $500M without ambitions to get there, you’re wasting your time. One panelist stressed how important it was to see not only the good but also the bad, and how the lessons from failures have been internalized in your firm. Equally important is to tailor your approach accordingly: it's not a good use of anyone's time if your stage or strategy doesn't align with the LP's.
Investors aren’t a monolith, and they have different expectations when it comes to quantitative and qualitative information. Without a story, you won’t resonate with a HNWI, but institutional investors are more likely to dig into how you got to the DPI or IRR you’re presenting and how you benchmark against your peers.
And don't take re-ups as a given. Investors will deeply scrutinize your investment pace from the last fund and your portfolio company valuations if they were aggressive so be prepared. For some fund managers, expect a skeptical underwriting of the fund. But if you avoid those traps, consistently communicate how you're delivering on the partnership and how you're supporting your portfolio companies, your LPs will have an easy decision to make.
Comms and marketing having a seat at the table means the media is telling the industry’s story better than ever
10 years ago, very few firms had a communications or marketing leader, let alone a solid strategy for owned and earned channels. That’s changed, and private capital comms and marketing professionals are working in lock-step with IR to understand exactly how to broadcast a differentiated story of their firm.
While quality content published on owned channels — such as blogs, organic social media, and whitepapers — is becoming an expectation, firms are becoming better at building strategic relationships with the press, with some panelists reporting the media becoming one of their most valuable partners. By getting to a better understanding about what a reporter is trying to get at, you’ll build a relationship that means you’ll become their go-to for quotes, data, and insights, and you’ll likely get the first and last word on how your firm's narrative plays out.
No matter what its detractors may say, the press is still impactful. A well-messaged story carries a level of credibility that owned channels can’t.
But regardless of the channel, authenticity needs to be part of every communication. If you’re trying to project a veneer of something that doesn’t exist, it’s destined to fail. Quotes in press releases, social media content, and everything else that leaves the building with your firm’s name on it needs to be consistent with your overall strategy and brand, not just trying something because you saw a peer have some success with it. Marketing is full of complex moving pieces and what genuinely moves the needle for one firm might be a waste of time and resources for the next.
What are you really good at? Track record is important, but what else?
How do you tell a differentiated story when there’s such high demand for capital? Private equity is clustered, and the differences between one firm and the next can be nuanced.
Communications and marketing teams are relying on IR to be the mouthpiece of their LPs, and in return they’re producing smarter, more targeted and tailored content. One panelist recounted that being deliberate about LP perspectives being woven into their regular content has led to a significantly deeper understanding of her firm’s differentiators. Knowing first-hand why your current LPs invest in you makes it easier to tell your story to new investors in a compelling way.
One panelist borrowed a tactic straight from the traditional marketing playbook: “so what?”. For every value proposition or paragraph in a pitch deck, ask “so what?” Why should a prospective investor care that you invest in emerging health tech, for example? Drill down into the tangible story until you hit undeniable positioning gold, and leave sales language in the trash can.
Work smarter: AI’s opportunities, risks, and challenges
While AI came up in almost every panel at the forum, some panelists cautioned about the typical S-shaped hype cycle of tech adoption.
Most agreed that we’re in the acceleration phase of the AI curve and companies that don’t make moves to adopt it now have the very real chance of being left behind, while emphasizing the need to hone in on finding a real problem for the tech to solve rather than AI for AI’s sake, and making sure every part of the workflow is baked into the solution. One forgotten step could be the difference between a newly minted platform becoming a mission critical product or a total failure.
Of those who said they had adopted AI in-house, their goal is not only to increase productivity, but also to understand first-hand how to leverage AI to become more valuable to their portfolio companies when they look to implement it.
While AI offers a blank canvas for designing ways to reach desired outcomes rather than just point solutions, there needs to be a solid business case and both the upsides and risks of each use need to be considered. For example, using generative AI to create summaries of publicly available data has a different set of benefits and risks to using confidential data to generate an investor pitch deck. Or using AI to personalize mass marketing communications could skirt the SEC’s marketing rule.
Competitive fundraising is here to stay.
The best fund managers are building long-term, investor-centric communications and marketing strategies with the goal of building a sustainable investment firm. Brand equity and being able to have genuine, honest conversations with your investors benefits your firm in boom times, but especially when demand for capital has never been so fierce.
Find out how you can make streamlined investor onboarding your competitive edge in your next fundraise
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