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Deal Flow Relationship Management

How to manage fundraising and investor relations

By Dyllan Thweatt

Juggling dozens of calls, meetings, and emails every day can quickly get out of hand. Finding time to update your investors on your progress can often get sidelined, but effectively managing your connections with limited partners is essential to your own success. Not every firm has the luxury of a dedicated investor relations expert or team. 

Learning how to structure your LP update, providing regular updates, and thinking about these network connections as long-lasting relationships will support your fundraising efforts for years to come. Let’s review some best practices for managing your limited partner and investor relationships.

Structure your LP update

Your limited partners have a vested interest in your firm being successful, but they don’t need to see every data point you’re tracking at every point in the funnel. While you may be hyper-aware of specific portco-related metrics–like their burn rate or specific product-related KPIs–you should talk to your investors to make sure the information you’re sharing is what they want to see. Investor reporting can look wildly different across industries and even from company to company, but here are a few key things to gather for your next check-in.

KPI updates

Even if your investors aren’t looking for day-to-day, granular data from your portcos (and some may, so ask), they do have a keen interest in your firm’s performance. Your Key Performance Indicators should not only be your north star metrics, they are tied directly to your investors’ goals.

Make sure that you’re tracking information like portfolio valuation updates, the number of deals currently being evaluated, and the number of deals you’ve closed in ways that can be easily visualized and shared. 

Talk to your investors to make sure the information you’re sharing is what they want to see.

Highlights and Lowlights

Again, most investors don’t need (or want) a stream of consciousness of everything going on in your office. Consolidate your update to a few relevant highlights and lowlights. A few points to consider including may be portco IPOs, big award wins, or major deals for your team like closing on a fast-growing company. 

On the flip side, lowlights that you should include may be related to poor-performing portfolio companies, bankruptcies, and other disappointing exit-related news that directly affect the potential ROI.

One additional metric that investors are interested in seeing–that can feel more qualitative than quantitative–is portco feedback. Give your portfolio companies a way to transparently rate your work; both you and your investors will benefit from clear feedback, and you can take steps to maintain or improve your work with your portcos together.

Asks

This section doesn’t need to be present in every update you send, but your LPs need to know if you need additional support. If you’ve uncovered an amazing opportunity but need help co-investing, your LP update is the perfect place to let them know. Transparency is essential to maintaining your relationship with them, and they want to help you succeed.

Speaking of transparency, our next step involves providing these updates regularly and consistently.

Provide regular investor updates 

Now that you’re thinking about what to include in your communications with your investors, start to consider how frequently you should provide updates. A good rule of thumb is to send an update with the above information (and anything else they ask for) once per quarter. 

Regular updates help you to solidify your firm’s brand reputation with your investors. If they come to see you as the data-driven firm that routinely has the insights they’re looking for and updates them frequently, they’ll be more likely to help when it comes time to raise your next fund. 

Another essential piece of the investor relationship puzzle is maintaining the relationship over a long period of time.

Consider the long-term relationship

Long-term investing means that relationships with LPs and GPs can last for many years, even as roles and titles change. Part of managing your relationship with your investors means maintaining a detailed contact record and following up with them in addition to your more routine updates. According to PitchBook’s 2020 Private Funds Strategy Report

...because many in-person meetings between fund managers and LPs were canceled due to the ongoing pandemic and growing uncertainty, LPs tended to favor and commit capital to GPs with whom they have strong relationships and that have solid past fund performance.

This is also reflected in PitchBook’s Analysis of Public PE Firm Earnings report from Q4 2020. Smaller US GPs met massive challenges when it came to forging new relationships and acquiring new funding. Fundraising for smaller firms fell nearly 33% in 2020 when compared to 2019, but the largest firms had record fundraising years. KKR brought in $44 billion in new commitments–a 72% increase over their 2019 figures.

Obviously not every GP can appear as attractive as Blackstone or Apollo, but finding ways to consistently support your relationships with your investors, especially in a digital world, can be a massive differentiator. The strength of that long-term relationship can be the deciding factor in your next round of fundraising.

Relationship management has always been a core function of successful firms, but now there are tools to help support that process and provide your investors the kinds of easily viewed, at-a-glance insights that they expect of the world’s top firms. Investor relations experts rely on tools like Affinity that make their jobs efficient and simple so that their data and reporting are just as digestible. Scale your reporting functionality and keep your entire contact network at your fingertips with Affinity’s reporting tools and automated data entry.

Set, track, and manage team KPIs to share in your next update, set reminders for your investor follow-ups, and show up to your next meeting with all of your contact history so you can provide the best experience for all of your investors.

Deal Flow Relationship Management