How I Invest with David Weisburd
E158: How to Find the Right LPs for Your Next Fund w/Meghan Reynolds
Podcast summary created with Snipd AI
Quick takeaways
- Understanding the difference between capital formation and investor relations is crucial for GPs to effectively attract new investors.
- Strategic investors provide essential support through relationships and flexibility, making them more valuable than simply large financial commitments.
- Maintaining transparency and clear communication regarding performance metrics is essential to prevent LPs from disengaging or decommitting.
Deep dives
First Movers Advantage in Asset Management
In asset management, there is a recognized first mover advantage, although historical track records ultimately determine long-term success. Many early firms in the space have failed due to their inability to adapt and maintain performance over time. For instance, significant buyout firms from the mid-2000s have since disbanded, illustrating that initial market entry does not guarantee sustainability. Thus, while being first can create initial benefits, the capacity to deliver consistent results is paramount.
Strategic vs. Non-Strategic Capital
A strategic investor is characterized not just by financial backing but by the value they add through flexibility and relationships. Such investors can scale their investments with a firm, evolve as funding needs grow, and provide introductions to other potential investors in their network. This strategic support is vital as it significantly enhances a firm's ability to navigate new opportunities and markets. Non-strategic capital, although abundant, does not provide these added advantages that can be critical for growth.
Differentiating Investor Relations from Capital Formation
Investor relations primarily focuses on managing relationships with existing investors, providing them with required updates and support. In contrast, capital formation is dedicated to attracting new commitments and involves actively seeking and securing new investors. As investment strategies evolve, understanding this distinction allows firms to tailor their outreach to the right prospects. Adapting both strategies effectively ensures that firms can meet their changing needs and targets over time.
Navigating Changes in Investment Strategies
Investment strategies can fluctuate significantly over time, requiring firms to reassess their investor base continually. A firm expanding into a new asset class may find that past investors are no longer suitable, necessitating the identification of new prospects aligned with the new strategy. Furthermore, awareness of market dynamics and investor preferences is crucial when launching new funds, particularly in areas with historically lower investment activity. This strategic reorientation is vital for maintaining relevance and securing capital in a competitive landscape.
The Importance of Transparency in Investor Relationships
LPs are likely to decommit if they perceive poor performance or lack transparency regarding their investments. Clear communication of performance metrics and any anticipated changes is essential for maintaining trust and investor satisfaction. This not only involves sharing good news but also preemptively addressing potential concerns before they become publicly known. Ultimately, the level of transparency a firm offers can be a decisive factor in whether investors choose to continue their partnership.
Highlights:
- The difference between capital formation and investor relations—and why many GPs get it wrong
- How fund strategy changes impact the investor base
- Why the most strategic capital isn’t always the largest check
- Lessons from educating LPs about private equity in the early 2000s and private credit in the 2010s
- The real reasons LPs don’t re-up: performance vs. transparency
- Why geography, regulation, and timing matter in capital campaigns
- How investor communication has evolved with tools like WhatsApp and Zoom
- The enduring value of warm introductions in LP fundraising
- Why small LPs might one day become your biggest supporters
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Guest Bio: Meghan Reynolds is a Partner and Head of Capital Formation & Talent at Altimeter, a technology-focused investment firm. She leads the firm’s capital formation efforts and has previously held senior roles at TPG and Goldman Sachs. Over her two-decade career, Meghan has built deep relationships across the LP landscape, spanning sovereign wealth funds, pensions, endowments, and family offices. She is known for her insights into how firms scale, evolve their strategies, and communicate effectively with investors.
Our Podcast now receives more than 300,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at david@weisburdcapital.com.
We’d like to thank @Carta and @Republic for sponsoring this episode!
#VentureCapital #VC #Startups #OpenLP #AssetManagement
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Sponsor: At Carta, we’re on a mission to connect the participants in private capital — from investors and LPs to their portfolio companies — through a suite of financial intelligence and reporting software that’s purpose-built for venture capital and private equity. Since 2018, we’ve been empowering GPs, CFOs, and CEOs to escape obsolete systems of disconnected FP&A tools — all in favor of a single, unified software suite that helps them make impactful strategic decisions and deliver outstanding results for their investors. Learn more at: www.carta.com/fundtax
Sponsor: Republic is the leading global investment platform making premier private market opportunities accessible to all investors. With over $3 billion deployed across its network of investment platforms, funds, and affiliated firms, Republic opens the door to new asset classes typically reserved for institutional investors such as—private equity, venture capital, and even sports teams and your favorite film producers.
All securities, including the Hamilton Lane’s Private Infrastructure Fund, are offered through affiliate Republic Broker-Dealer, OpenDeal Broker LLC Member FINRA & SiPC. All securities come with specific risks not limited to a total loss of your investment. Past performance is not indicative of future results. Please review the risks specific to this investment on the HLPIF deal page hosted on http://republic.com/hlpif.
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Stay Connected: X / Twitter: David Weisburd: @dweisburd
LinkedIn: David Weisburd: https://www.linkedin.com/in/dweisburd/ Meghan Reynolds: https://www.linkedin.com/in/meghankreynolds/
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Links: Altimeter: https://www.altimeter.com/home
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Questions or topics you want us to discuss on How I Invest? Email us at david@weisburdcapital.com.
(0:00) Episode preview (0:38) Strategic investment and capital formation (3:13) Launching and evolving fund strategies (5:28) Identifying new capital sources (8:52) Educating investors in private markets (12:25) First movers advantage vs. track record (18:13) Reasons LPs leave a fund and the importance of transparency (23:00) Enhancing LP communication and trust (27:27) Building trust through transparency and empathy (29:06) Equity and involvement in investor relations (31:31) Streamlining LP communication with tools (33:18) Capital allocation strategies and diversification (37:06) Geographic diversification strategy (41:47) Accessing and developing new LP relationships (47:00) Leveraging media and social media for fundraising (51:05) Internal and external communication strategies (55:00) Insights for LPs and staying connected (56:52) Closing remarksRemember Everything You Learn from Podcasts
