Look Beyond the Rolodex

When managers engage a third-party marketer to assist in raising capital, many are quick to rush to an agreement with someone perceived to have a large Rolodex, who claims to know these investors well and presents their value proposition to managers purely as a tool for introductions. Having access to a large Rolodex can be helpful, but will only get you so far. It’s far more important to find a marketer who can provide more than just a bunch of names of investors who may or may not be allocating to your asset class. A professional marketer should be involved in all aspects of the fundraising campaign, including strategy research, collateral development, and diligence assistance, in addition to the typical cap intro aspect of the relationship.

Managers should forget about the vast spreadsheet of names and email addresses and look for a firm that can help prepare a well-planned approach that will set the manager apart from others while properly communicating the value of the offering. Strategy research must be done to identify the kind of services that will be required, helping a manager locate the right partner. Understanding the marketer’s strengths and capabilities is paramount and will help establish expectations of the partnership. Ultimately, allocators invest because of their belief and trust in the manager. While the marketer can help influence the decision, they do not play a role in the final decision. Managers must have clear expectations of the marketer and success must be able to be viewed and measured along the way.

Things to Look for in a Strong Marketer

There are many desirable attributes to seek in a marketer. Here are some of the most important qualities that successful fundraising partners will exhibit:

  • Properly Licensed – The days of unlicensed marketers is over. It is important to ensure that the marketer is properly licensed and is engaged with a reputable broker-dealer. If not, all discussions with the marketer should stop here. The federal securities laws require that an individual who solicits investments in return for transaction-based compensation be registered as a broker. It is important to ensure that the funds that are raised are done so lawfully.
  • Market Relevance – Firms should be in the market with other offerings, with relative frequency. A marketer should have an understanding of current trends in the LP community. With a solid knowledge of the audience, the marketer is able to position their clients to meet the interests of allocators. A bonus is market coverage for the benefit of understanding the strengths and weaknesses/needs of the LPs they reach out to; further lending to proper positioning and ensuring the correct audience is selected
  • Work on the Front End of an Engagement – Great campaigns always start with clear expectations and open and honest communication. It is important to understand what you can expect from this engagement. Find out what kind of deliverables can be expected, collateral created, the timeline proposed, and if you can agree to their terms of the engagement.
  • Marketing & Communications Strategy – Messaging strategies are critical. Managers should look for a defined system with creative assets that will help set their firm apart. A time-tested, well-thought-out process will provide a framework to tell the manager’s story.

Our Advice

The bottom line is that not all marketers are the same, nor do they provide the same level of service. Some provide nothing related to diligence support, some focus only on collateral development, and others may not have acceptable experience with a strategy. It is important to do your homework and make an informed decision to engage a partner with the right background, coverage, and capabilities.

The fact of the matter is that it will be difficult to get another chance after terminating an agreement for non-performance. Managers paired with the wrong marketer can damage their reputation with investors to the point that it will be challenging to overcome. No manager wants to be in a situation where months have already been wasted, and he/she must now try to raise a fund that has gotten off to a questionable start.