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With challenged exits and shifting investor priorities, securing commitments has become more complex for growth equity investors, who aim for quicker portfolio company exits than other alternative asset classes. However, with a targeted approach to sourcing LPs, you can increase your chances of success.
Segment prospective investors by type, interest, and stage
Naturally, different types of investors have varying objectives and requirements—some are primarily concerned with financial return, while others invest for more strategic reasons. By establishing the criteria of your ideal investors upfront, you can target the most suitable investors for your fund and tailor your communications to meet their specific objectives.
Eileen Tanghal, Founder and General Partner at Black Opal Investments, recommends following the fundamental marketing principle of “segment, target, [and] position” before reaching out to potential investors. For example:
- Categorize prospective investors by type. Growth equity firms typically focus on large institutional LPs, so further segment your investor list by type, including pension funds, insurance companies, endowments, and sovereign wealth funds.
- Consider each category’s investment objectives. Does each segment care more about financial return or do they invest for more strategic reasons? Typically, growth equity LPs seek more stable, moderate returns so be sure to consider the return expectations of your fund.
- Understand what each segment invests in. You don’t want to pitch a growth equity fund to an LP who only invests in seed-stage companies, for example. Also consider risk tolerance, as growth equity LPs tend to have lower risk profiles.
Lastly, during this stage, it’s important not to be overly selective. For example, Katharina Porenta, Fundraising Manager at Speedinvest, advises, “One pitfall, if you're starting a new fund, is thinking you need to raise from the big names and the big institutional [investors].”
Streamline your investor search
Affinity helps you identify LPs more efficiently by automatically creating CRM records for every person and company your firm interacts with via email or meetings. By enriching these records with key details—like industry, job title, location, and past funding activities—Affinity enables you to quickly filter LPs who align with your fund’s strategy and access this information on the go with Affinity mobile.
Start with your existing network
The most valuable investor relationships are often the ones you already have. Brian Smiga, Partner & Co-founder at Alpha Partners, says, “I truly believe that one's relationship set is the most important data in their life. It's the most important piece of data on your hard drive, and for the most part, it really belongs to you as an individual, and you want to nurture it and build it through your lifetime.”
Once you’ve clearly defined your target investor profiles, the best place to start is your firm’s collective network. Using your existing network—whether that be LPs who previously invested in one of your funds or referrals from your portfolio companies—increases your likelihood of securing commitments because you already established a baseline of trust and familiarity.
Reflecting on the early days of their first fund, Speedinvest’s Katharina Porenta highlights the importance of using strong, existing connections for fundraising in the first instance: “You always want to start with your local network [...] Even today, about a third of our LPs are domestic.” By this, she meant the firm’s LPs were sourced from a first degree network of founders and referrals.
Unlock hidden opportunities in your network
Affinity maps your firm’s entire network to uncover valuable connections you might otherwise miss. Inferred Connections expands the size of your network even further by pulling in data about former colleagues from previous companies, helping you identify the most promising connections to investors.
Assess gaps in your network for outreach
After evaluating your existing network, determine if there are specific industries or investor types you want to target for your fund but currently lack strong relationships with. Identifying these gaps will help focus your outreach efforts more strategically and inform where and how you make those connections.
Given most growth equity LPs are large institutional investors, consider attending industry conferences, seminars, and networking events where they’ll be present. From there, it’s often a case of casting a wide net and engaging with a large number of potential investors to support the larger fund sizes typical of growth equity. Substantial investments are needed to fuel the growth of portfolio companies through expansions and large-scale operations.
Joe Schorge, Founder and Managing Partner at Isomer Capital, advises, “In fundraising, it's a numbers game. You have to contact 100 people in order to get two or three, who will ultimately go to invest in your fund.” This is where leading with warm introductions and accessing your firm’s collective network can make all the difference.
For example, Jonah Surkes, Growth Equity Investor at Generation Investment Management, says, “Affinity has allowed us to do a few really important things. The first is to be proactive. We're now able to see around corners a lot more, whether it be someone's meeting with somebody next week or actually, someone's flagged a company as ‘I need to unlock this and someone else on my team knows somebody on the board.’ These are all things that are automated and have made the proactivity of our team a lot better.”
Lead with warm introductions
In a competitive fundraising market, a warm introduction can significantly increase your chances of getting meetings with LPs. Affinity’s AI-driven algorithms evaluate the strength of relationships in your firm’s network to calculate relationship scores, helping you identify the most promising paths to potential LPs.
Given high interest rates and stalled exits, competition for raising new funds is tight. To stand out, growth equity firms must highlight their unique value propositions. In particular, PitchBook notes that LPs are focused on fund managers with “a differentiated point of view, access to a unique network, relevant industry experience, and personality attributes.”
Nail your investment thesis
Arguably, the most important aspect of a fundraising pitch is your thesis. It sets the stage for your conversations with LPs by providing concise information about your fund. When crafting your thesis, focus on what sets your growth equity fund apart, which typically boils down to your specific strategy and the strength of your team.
Joe Schorge, Founder and Managing Partner at Isomer Capital, notes: “The LPs are spoilt for choice. They might invest in your fund, but there are 100 other funds that they also could invest in [...] What I want to hear is why you're the best; why your thesis is powerful; why you have some competitive advantages to what you're doing.”
Be sure to clarify:
- Market opportunity: Define the size, growth potential, and attractiveness of the market you’re targeting (and how you’ll target it).
- Strategic focus and objective: Detail your unique strategy, value proposition, and key elements of the fund’s structure, like the investment horizon, risk tolerance, return expectations, and fee structure.
- Track record and expertise: Highlight your team’s experience, successful deals, industry expertise, and your proven ability to support your portfolio companies.
- Due diligence: Emphasize your firm’s operational expertise and how your approach to diligence enables you to scale existing businesses while mitigating risks.
The goal is to showcase your fund’s unique strengths so that potential LPs can see why your fund stands out and why it’s a worthy investment.
Fast-track your market research
Accelerate your research and enhance your pitch with Affinity’s AI-driven market intelligence tool, Industry Insights. It generates a curated list of competitors and related companies in a given market, along with essential data on market maturity and saturation. Quickly identify high-growth opportunities and gauge investor sentiment with detailed funding and investor histories.
Craft a narrative with a personal touch
LPs aren’t just looking to understand your investment history and strategy. They’re also looking for a meaningful connection with your firm and team. After all, investing is built on relationships and trust. Schorge echoes this sentiment: “We always say we're in a people business, but fundraising certainly is a people business.”
Telling an authentic story that illustrates your team’s unique journey, expertise, and impact helps establish a personal connection with investors. Consider referencing anecdotes in your pitch, including:
- Success stories: Show how your firm has driven significant growth and value for specific portfolio companies, including successful exits, executive hires, or big award wins.
- Resilience and adaptability: Reflect on your past successes and challenges to show how your firm navigated times of market stress and opportunity.
Lastly, be prepared to explain notable investment decisions. PitchBook notes, “How a VC navigated dealmaking during the 2021 market frenzy became an important consideration for many LPs when evaluating their existing managers. A lack of prudence and discipline from chasing hot deals or trendy sectors amid the market exuberance flashes a warning light from an LP perspective.”
Tailor your pitch to your audience
While showcasing your firm’s strengths, operational expertise, and differentiation is important, understanding your audience can help you secure commitments. This is where you can customize your pitch to each LP’s specific needs and interests.
Jolynn Vallejo, Chief of Staff at Kapor Capital, emphasizes the importance of tailoring your approach:
“LPs are looking for different things. Sometimes they're not just looking for returns; they're looking for your network. They want to understand impact, or they want to get an opportunity to co-invest with you.”
Before pitching, thoroughly research prospective investors to learn their:
- Industry, geography, and investment stages
- Current portfolio
- Investment objectives
With this information, you can tailor certain parts of your pitch to align with LPs’ interests. For example, emphasize steadier return expectations, heightened due diligence, and the lower risk profile of your fund to make your pitch more compelling and relevant.
Using technology can streamline this process and reduce time spent gathering this information. For example, Eileen Tanghal, Founder and General Partner at Black Opal says, “Affinity is helpful because it allows you to say, ‘This is a family office; this is an institution; that's a university or a fund of funds or a fund family office, and this is what they care about.’”
Simplify your pitch preparation
With Affinity’s Deal Assist, you can quickly access past deal data, success stories, and key anecdotes to enhance your pitch. This AI-powered tool allows you to easily pull information from your CRM, like notes, transcripts, emails, and attachments—without spending hours digging through your inbox and spreadsheets.
Completing a fundraise is a significant achievement, but maintaining and nurturing your investor relationships is equally important for the ongoing success of your fund. This requires continuous, strategic communication, clear reporting, and a long-term mindset to ensure lasting partnerships.
Provide consistent communication
Establishing a regular cadence for updating and checking in with your investors helps build trust and keeps your investors informed. This is especially true in this market environment, as PitchBook notes, “With the power balance tilting toward LPs, GPs are incentivized to further cement their relationship with LPs in ways such as reflecting on their past communications with LPs and looking to improve their communication styles by becoming more proactive and transparent. “
Communication should be an integral part of your overall fundraising and investor relations strategy, ensuring you maintain strong relationships with your LPs throughout the life of your fund—and beyond. Porenta highlights the critical role of transparency: “What’s important in retaining LPs is a certain honesty and communication.”
This is crucial during times of market stress or when your fund isn’t performing as expected. Porenta says, “We always try to communicate why something has been valued down and why we've adjusted a valuation, then also show them what we're working on currently to change that.”
This approach helps manage LP expectations and reinforces investor confidence. By prioritizing transparency and regular updates, you can effectively navigate the complexities of fund management and foster long-term investor relationships.
Retain your best investors
Affinity’s automated triggers notify you when relationship scores for key contacts fall below set thresholds, ensuring you stay connected with your most important investors. With built-in reminders, you can ensure impactful follow-ups and maintain strong, lasting relationships with your LPs.
Establish a regular cadence for reporting
Pitchbook notes a theme amongst LPs starting last year was “LPs wanting to get a deeper understanding of their underlying portfolio.” Clear and regular reporting is essential for maintaining strong relationships with your LPs and ensuring they're well-informed about your fund’s performance and portfolio progress.
For growth equity, a quarterly reporting cadence with annual meetings is standard, though you can always provide more frequent or ad-hoc updates depending on major market movements and LP preferences. The key is to strike a balance between keeping your LPs informed and inundating them with information.
Isomer Capital’s Schorge notes, “LPs want sharp, relevant news that's of interest to them. Let them know when you’ve closed a deal, when you’ve hired someone. All of that is welcome news, whereas the same news weekly—just raising something to the top of someone’s inbox—is when it gets repetitive.”
While LPs may not need day-to-day, granular data, they do expect to see how your fund’s performance aligns with their investment objectives. Regular updates on portfolio valuation, portfolio company IPOs, the number of deals you closed, and deals you’re currently evaluating are important.
It’s equally important to report on any underperforming portfolio companies and any disappointing exit-related news that directly impacts the fund’s ROI.
Automate your reporting
Create customized reporting dashboards with Affinity Analytics using enriched data on funding, firmographic, and growth, alongside manually tracked information. Automatically share detailed reports on deal flow performance, thematic investing progress, and updates on portfolio companies to keep your LPs well-informed and engaged.
With Introductions Summary Reports, you can instantly pull data on the number of introductions your firm has made to external contacts—like customers, vendors, and talent advisors for your portfolio companies—so you can show your firm’s value to current and prospective LPs.
Adopt a long-term perspective
Building a successful growth equity fund doesn’t happen overnight. It’s the product of years of meticulous strategy and execution. Similarly, sustaining strong connections with your LPs requires ongoing effort and attention. This long-term perspective is especially crucial in growth equity, where funds typically have life cycles of 3-7 years—although current market conditions have stretched these timelines.
Isomer Capital’s Schorge says, “It’s a good thing when you are fundraising if you can form partnerships, rather than just looking for money. I'm looking for people I can work with over the long term. It's not about one fund. It's about the next one or the next round. And if we work really well together, hopefully we'll still be together in twenty years.”
To foster long-term relationships with investors, focus on understanding their specific needs and preferences. In addition to reporting, schedule periodic reminders to check in with your investors, as this helps build and retain trust with investors.
Elevate your fundraising strategy with Affinity
Affinity redefines how you manage LP relationships and helps drive successful fundraises with relationship intelligence at its core. By integrating advanced CRM capabilities into your workflows, Affinity enables you to:
- Accelerate your funding rounds: Affinity is a purpose-built CRM designed for private capital firms to streamline their unique dealmaking workflows, making it easier to efficiently manage and expedite fundraising processes.
- Expand your LP network: Relationship intelligence helps you identify and nurture valuable connections within your firm’s network, driving better outreach and warmer introductions.
- Strengthen investor relationships: Maintain and deepen connections with automated updates, activity alerts, and insightful reporting, ensuring you consistently engage with your LPs and prove your fund’s value.
The magic of Affinity is that everyone's growing together and you really get transparency on people's relationships, emails, and meetings with others so that it's team intelligence, and that's a big force multiplier.
