Armando D’Amico, founder and managing partner of Acanthus, spoke at Super Return Middle East 2015 conference in Dubai on 9th Nov 2015, participating in two sessions: a panel discussion titled “How to Fundraise With a Limited/Poor Track Record” and a “Fundraising Workshop”
HOW TO FUNDRAISE WITH A LIMITED/POOR TRACK RECORD
What can GPs do to enhance their fundraising prospects when the odds are against them? How can they prove themselves to LPs despite a limited or poor track record?
Moderator: Armando D’Amico, Managing Partner, ACANTHUS
Janusz Heath, Managing Director, CAPITAL DYNAMICS
Peter Jädersten, Managing Partner & Co-Founder, PYRAMID PRIVATE EQUITY PARTNERS
Prateek Sharma, Head Of Investment, SEERA INVESTMENT BANK
The private equity industry is over 30 years old and most established players have parts of their history that they would rather shy away from. Nearly every established GP has a bad fund. The function of the LP is to decide whether those shortcomings are an aberration or a trend. Private equity is an industry where the fittest survive and Darwinism is healthy for the industry.
The panel’s key conclusions were as follows:
- It is important to distinguish between large brands (e.g. Carlyle, EQT etc.) and smaller middle market groups or spin-outs or emerging managers.
- Team, deal attribution and consistency of strategy, as well as a clear explanation of the poor track record and lessons learned, will be key in LPs’ decisions to commit or not.
- LP responses will differ: local/domestic/existing LPs are likely to be more supportive than international, sophisticated investors.
- As regards solutions and required actions from the GP, first some introspection is required (look at your team, does it need rebuilding or reorganizing? Does your strategy need refocusing? Have you strayed from the segment of the market and the investing that made you successful originally?)
- Second, focus first on your existing investors – they are crucial, have bought into your ideas, have spent years getting to know you and may be more inclined to commit again even with poor performance.
- Other alternatives to raising a blind pool include:
- going deal by deal for a period while rebuilding credibility,
- raising a defined asset pool based on a concrete pipeline and a short investment period (e.g. 18 months) – a route that we have seen recently with a number of first time teams, or spinouts, with a strong, but limited track record,
- raising a pledge fund
The fundraising workshop consisted of three panels following each other in a logical continuum from IR to “in-between funds” to the actual fundraising. Key topics were:
- INVESTOR RELATIONS ROLE & BEST PRACTICES: how to keep LPs happy, understand and anticipate their expectations, tailor your IR program to make into a competitive advantage
- FUNDRAISING CYCLE: building relationships, what to consider before you launch. Pre-fundraising and fundraising strategies, information gathering: what you need To Know about Your Current & Prospective Investors, and what you need to know before you hit the road.
- PITCH PERFECT: MAKING A COMPELLING CASE FOR YOUR FUND: Dos & don’ts of pitching, the elevator pitch, shaping the messages, simplifying the pitch book, presentations and presentation training, follow up post meeting.