New Fund Managers Must Be Realistic

LAGUNA BEACH-Starting with their area of expertise is the first rule for new fund managers to win private investors' trust and be successful, said panelists at last week's IMN Winter Forum on Opportunity and Private Investing here. Being able to tell a compelling story to investors is key to helping emerging fund managers capture their attention and win their trust in a deal, “Understand your business and what you want to do,” summed up Jesse A. Criz, a partner with DLA Piper.

Be sure you're covered legally, said Adam Gale, a member in the corporate and securities practice and co-chair of the investment funds group at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C. “Make sure you're not saying anything untrue or risky.”

Rather than focusing on a specific deal, William Jackson, a partner with Pircher, Nichols & Meeks, recommended figuring out how you'll go about being in business. “Investors may not want to invest with a new fund. Know what you're going to do first before figuring out how much you'll raise.”

Gale added that it's important to be realistic and be sensitive to the fact that many investors don't want to make up more than 10% of your fund because the risk is too great. Jackson added that 90% of funds will not have a successful capital raise, so be aware of the odds.

Above all, work the relationships you currently have before approaching new potential investors. That also means sticking with an area of the industry that you know and have experience with, rather than jumping into uncharted waters. “Be true to what you've done and where you've had relationships,” said Jackson. “What makes sense?” And Andrew Yoon, partner and COO at Greenoak Real Estate, added, “Use your track record as your angle.”

Transparency is also key in order to manage expectations, said Criz. “Disclose as much as possible.” He also recommended understanding your own business and relationships.

Gale said it's important to be prepared for successful fundraising to take a really long time, but working with investors, being flexible and sensitive to their needs and concerns will help move the process along.