I've decided to dedicate one blog per month to providing unsolicited capital raising advice. This is the first in the my "Two Cents From The Peanut Gallery" asset raising series.
Over the past three years, I have had the opportunity to speak with more than 200 emerging managers about their marketing efforts. In my prior life, I was engaged in manager selection for a fund of funds. Needless to say, I’ve seen a lot of pitch in my day. And unlike pop music, for emerging managers there ain’t no auto tune when it comes to finding the perfect pitch.
During the actual pitch or in the midst of a capital raising triage exercise, I often hear the same refrains:
“We haven’t focused on our pitch book.”
“We have a pitch book, but we really don’t use it.”
“No one is going to invest with us because we have a good pitch book.”
And I couldn’t disagree more. A very good, if not great, pitch book isn’t a “like to have.” It is a “need to have.” And here’s why:
1) Your pitch book helps you refine your message. Many of the managers I worked with who chose not to focus on their pitch book gave disjointed or rambling presentations in person. It wasn’t at all unusual for a manager to get caught up on their bio for example, and skimp on telling me about their secret investing sauce. Thinking through and honing your written pitch establishes a cadence and sequence to your fund raising message. It’s also what helps you refine your message so you can clearly articulate your competitive advantages. Having a pitch book in this case isn’t about taking potential investors on a death march through the deck, it’s about taking the time to think about what you want and need to say to differentiate your fund, while checking all the boxes you know investors care about.
2) Your pitch book helps an organization “sing from the same hymnal.” It’s true that many emerging fund managers may be simultaneously wearing their fund’s money management and marketing hat. It’s also true that lean emerging fund organizations usually draft a variety of players into roles outside of their core competency. I have often seen emerging hedge funds where the portfolio manager(s), IR staff and CFO’s all get into the fund raising game. Having a strong pitch book helps anyone from your organization that finds himself or herself in front of a potential client tell the same story. Otherwise, each individual is likely to spend the entire meeting focused on what they know, and not make the key points that generate investor interest.
3) Your pitch book works for you when you’re not there. Investors get hundreds of pitches from emerging managers. Sometimes a manager gets a full hour of undivided attention, and sometimes you get a scant 20 minutes at a “meet the managers” event. Often, emerging fund managers may get only a few minutes of distracted attention at a cocktail party or industry luncheon. Whether you get an hour or 90 seconds, the pitch book you provide during or after this meeting is your fund raising proxy. If you have a great deck that clearly articulates your competitive advantages, your performance, your strategy and your organization and operational infrastructure, you will have a much easier time getting future meetings and pushing follow up with an investor. If you don’t, getting back off the slush pile post meeting or conference can be difficult.
4) Your pitch book forces you to think about your brand. The emerging manager landscape is like the MMA of the investing world. In the hedge fund space alone, industry watcher Preqin has found the 500 largest managers control all but roughly $33 billion of invested capital (as of June 2014). Today, there are more than 5,000 managers with less than $100 million in assets under management, and on average these funds raised less than $500,000 each in 2013. To say the emerging manager landscape is competitive is hyper-hyperbole. While it is true that no glossy pitch book will make up for lackluster performance, craptastic operational controls or an alpha-less strategy, an institutional quality deck can help differentiate your firm and fund. The mistake many managers make is to think their brand is simply their bio, strategy or performance. It’s not. Your brand is not just the data about your fund, but the way in which you present it. Over the past 16 years, I’ve seen clip art, quote overload, typos and other pitch book missteps not just lengthen the capital-raising cycle, but stop it in its tracks. With online graphic design services like www.logomyway.com and www.inkd.com, and with the increased accessibility of professional design services firms, there’s no excuse for not building a strong brand.
Think of it this way, all other things being equal, an emerging manager who is thinking holistically and long-term about growing a business is more likely to get the investment than one who slaps materials together.
In the coming weeks, I'll be talking about how emerging managers can execute a marketing plan like Sherman marching through Georgia. In the meantime, don’t forget to follow me on Twitter (@MJ_Meredith_J) for news and views on emerging managers and more.