Private equity fund raising can be an intimidating (but essential) part of starting up a new investment company. To find LPs and reach your goal, you should build your network. This requires a deliberate approach to managing relationships with the right tools and procedures.
For a private equity company, LPs are the investors that back your fund with committed capital. They are typically large institutional investors like pension funds, endowments, and mutual funds. Sometimes, they are wealthy individuals or family offices seeking a return on their investment in a fund of private equity. Also some LPs are funds-of-funds with the ability to invest in a range of private equity funds. They can assist you in building a diverse portfolio of alternative investments.
You must meet certain requirements in order to be a LP. Generally speaking, LPs seek out an investment strategy that aligns with yours, a track-record using a similar strategy and a commitment to invest. They will also want you to have a good understanding of how your fund operates and be able to communicate the reason why it is worth investing in.
It’s a good idea to allow your legal team to create the offering memorandum and partnership terms prior to beginning to look for potential LPs. It’s also a good thing to evaluate your internal capacities in investor relations and to consider hiring an agent to place your offer.