Unfocused, Surface-Level Strategies
Typically, when an emerging manager begins the fundraising process, they target their closest friends and business contacts, or “low-hanging fruit,” to get their fund launched. When the committed capital from their warmest relationships falls short of the goal, the manager must then reach outside their network to source additional commitments. Unfortunately, rather than engaging a professional, these managers often purchase a database of potential investors with the hope of widening the net. With this database, they gain access to thousands of names, numbers, and e-mail addresses all purportedly belonging to investors and allocators.
While some of the data is reliable, depending on where it comes from, it remains of very little value unless a warm connection or relationship with the contact exists. Many of the phone numbers lead only to the main switchboard at the investment advisor’s front desk, while the person of interest is “currently in a meeting.” While some are able to disperse their marketing collateral to the correct email addresses, they must resort to hoping (on a long-shot) that the email isn’t ignored or flagged as spam. By reaching out to these cold relationships via phone or email, the manager opens themselves up to the quick, “No thanks, I’m not interested” even before the material is reviewed.
Simply put, blasting people who are not warm leads or referrals with multiple emails and calls eventually leads to an unwanted result: the manager gets recognized, but for all the wrong reasons. Rarely does this strategy yield anything except angry recipients and a growing “do not contact” list. With a low success rate, managers begin to destroy their reputation among the investment community. This is what we refer to as the “Scorch & Burn” approach to fundraising. And, while it may lead to a few successful results, this “quantity over quality” approach to marketing makes it difficult to overcome the reputational damage created by thoughtlessly blasting information to folks without a relationship in place.
For Many, It Is Too Late
After employing a scorch and burn strategy, many managers then decide to reach out to the marketing community and are surprised to learn that most quality professional marketers will turn down the opportunity because so many bridges have already been burned. This is because the only thing harder than raising first-time fund capital is trying to raise first-time fund capital for a manager that has already created reputational damage in the marketplace.
Prepare and Focus
The key is to put the shotgun back in the closet and grab the rifle. Begin by defining the market that will likely be most interested in hearing about the manager’s strategy. This requires thoughtful research on the LP community, as well as careful consideration of referral strategy. A laser-focused campaign is critical, as it will ensure that their information reaches the right eyes and ears in the investment community. The manager must dedicate undivided attention to developing the proper positioning and collateral, and then communicate the defined brand and value to allocators. Managers should utilize their networks to get favorable/warm introductions to potential investors. If the perfect audience is difficult to reach, the manager should respectfully ask what their protocol is for looking at new opportunities.
Keeping the Long-Run in Mind
Thoughtful follow-up is crucial, and it needs to be personalized, even when the response was “No.” Everyone who is marketed to ultimately becomes a spokesperson for the brand of the manager. When investors who have declined to invest this time around are asked about the firm, their response will be positive if managers have gone the extra mile. The goal is to begin to create relationships with people that eventually become brand and strategy evangelists. Treating everyone as a potential evangelist will leave the door open for future conversations. By treating every moment like a branding moment, managers will develop a rapport that can play a role in future success. Having a well-prepared and defined approach to conversations will often lead to subsequent conversations in the future.
At AciesGroup, we believe the best way to approach fundraising is with patience and a long-term approach to relationships. Managers should take the necessary time and dedicate the appropriate resources to define the market, dial-in the messaging, and treat every moment like a branding moment. Every step influences a potential investor’s decision-making process, positively or negatively. Search for alignment of values in relationships and conversations with a targeted audience instead of firing off a poorly-planned, one-size-fits-all email campaign. The Scorch and Burn strategy is a direct reflection on the manager and the firm. Peppering hundreds of names on a spreadsheet with emails has a much lower success rate than one conversation with the right person, done the right way.
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