The  New  Rules  of  Private  Equity  Fundraising    

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Based  off  Privcap’s    Exclusive  BrieBing  

In  this  slideshow:  

• Is  fundraising  getting  easier  or  harder?  • Who  has  to  be  more  insightful:  LPs  or  GPs?  • How  do  investments  change  over  time?  • How  can  cash-­‐on-­‐cash  help  valuations?  • Why  does  the  GP  model  have  to  evolve?  

GPs  Must  Work  Twice  As  Hard  to  Raise  Half  as  Much    

fundraise.”  

“If  you’re  going  to  raise  about  $3.5  billion,  there  are  basically  20  investors  globally  that  will  constitute  the  main  portion  of  that.  If  those  20  don’t  common-­‐rate  your  number-­‐one  core  holding,  you  have  gaps.  And  the  only  way  to  Bill  them—because  there  is  a  lack  of  other  mega-­‐investors  is  by  going  to  a  broader  list.  And  that  completely  changes  the  topography  and  the  dynamic  of  the  fundraise.”  

-­‐  Mounir  Guen,  MVision  

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GPs  Must  Demonstrate  Deep  Insight  

“From  a  due-­‐diligence  point  of  view,  it  is  the  challenge  of  the  limited  partners  to  verify  that,”  he  said,  “to  understand  what  those  operating  skills  are,  and  how  and  if  they  add  value.  Because,  like  proprietary  deal  Blow,  operating  skills  can  be  elusive.”  

                       -­‐  Russ  Steenberg,      Blackrock  Private  Equity  Advisers  

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Your  Next  Fund  Will  Be  Different  From  Your  Last  Fund  

“We’re  seeing  investors  showing  up  with  lists  and  saying,  ‘You’re  not  going  to  get  to  the  Birst  close  without  us.  This  is  our  list  of  conditions  of  what  your  business  will  look  like.  We  don’t  want  you  in  the  fundraise  more  than  12  months  or  even  nine  months.      If  you  don’t  make  your  marker  in  terms  of  what  you’re  trying  to  raise,  we’re  Bine  with  that,  but  we  also  want  a  minimum  amount,  and  we  want  to  understand  what  your  business  looks  like  at  that  point,  in  terms  of  how  you’ll  run  it  if  you  don’t  hit  your  target.”  

   -­‐  Mounir  Guen,  MVision  

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Cash-­‐on-­‐Cash  Has  Maximum  Cachet  

“The  beautiful  thing  about  cash-­‐on-­‐cash  is  we  can  all  understand  it.  It’s  a  full-­‐cycle  measure  of  how  an  investment  has  performed.  It  takes  away  the  complexity  of  trying  to  wrestle  with  valuation  issues,  the  impacts  that  time  can  have  on  IRRs  with  relatively  short  hold  periods.  Being  able  to  demonstrate  that  you’ve  bought  a  company  as  planned,  developed  the  company  as  you  planned,  and  were  able  to  successfully  exit  that  for  cash  is  really  the  full  cycle  that  we’re  all  looking  to  understand.”    

-­‐John  Greenwood,  Pantheon  Ventures  

 

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LP  “InBluencers”  Are  More  InBluential  Than  Ever  

“The  GP  model  has  had  to  evolve  to  meet  the  intricacies  of  the  world,  “and  where  you’re  seeing  it  the  most  is  on  transparency  and  communication  and  in  dealing  with  a  limited-­‐partner  base.  In  the  old  days  it  was,  ‘Give  me  the  money  and  go  away  for  10  years.  I’ll  just  send  it  all  back  to  you.’  Those  days  are  long,  long  gone,  because  you  have  to  stay  right  on  top  with  this  constituency  group  so  that  you  can  maintain  that  re-­‐up  rate.”  

 -­‐  Russ  Steenberg,      Blackrock  Private  Equity  Advisers  

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