Does your private equity pitch book impress investors? Or does it make you look like every other fund?
Paul Farrow, of Benjamin Ball Associates (BBA), and Ashley Breed of Bison have teamed up to collate six tips that will make your pitch book stand out. Incorporating this framework will ensure you deliver a powerful, persuasive, and memorable first impression with investors.
Paul tested these tips at the recent SuperReturn conference in Boston. He asked a series of successful LPs what they do and don’t want to see in GPs’ pitches and private equity pitch books, and you can read their insights below. The feedback from LPs reinforced the practical help that BBA and Bison provide GPs to make them more successful when they fund raise.
Six tips to make your private equity pitch book stand out:
1) Keep your messages simple and get them in early. No LP wants to be talked through a 60-page pitch book. If the LP has lots of questions, you may not get through much of your deck. So make sure you deliver key and consistent messages at the beginning – that means the first couple of minutes – and again at the end.
2) Give your performance up front. LPs are (naturally) wary when performance is not presented on an early slide. They suspect that you’re trying to hide something. It is more advantageous to talk through your performance than to make the LP work to find it. And don’t put adjusted returns with a tiny asterisk and a footnote about real returns.
“Performance should be at the front of the presentation. Then keep it simple. Define your strategy clearly.” – Eric Albertson, SL Capital Partners US
Show, don’t tell, agree the experts at Bison. A succinct yet dynamic historical performance display speaks volumes. The more detail you give at the get go, the less foraging your LP has to do, and the more trust you build up front.
Overview of Historical Performance – Example
3) Talk about your portfolio companies. These stories are much more interesting – and memorable – than a dry outline of strategy. And not all of them need to be successes. What are the lessons that you have learnt from the failures? LPs are wary of GPs who claim to have never made a mistake.
“Find something that went wrong and talk about why it went wrong and how you changed your strategy going forward. We like to see what GPs have learnt. Don’t just highlight the one or two best-performing deals.” – David Punda, Nippon Life Global Investors Americas
Showcase your investment story with numbers in addition to the qualitative side, suggests Bison. Using data to highlight and punctuate your story indicates a level of transparency and ownership that’s appealing to LPs.
Company level performance data identifies strengths and shortcomings – Example
In this case Company C is taking up nearly 41% of the invested capital but has only returned a 0.49x TVPI. What’s the story there? How can you discuss this potential misstep in the broader context of your portfolio?
4) Show how your fund strategy has evolved. Share your journey and why you’re uniquely positioned today. Successful GPs craft a simple narrative around their fund’s strategy to help investors understand what they do and why it works. Use your private equity pitch book to own your story.
“If a GP has been around for a while and has changed their strategy and/or organisation, then I don’t want them to skip over that bit. It’s really important for us to understand the starting point of the GP and how their strategy and organisation have evolved.” – David Punda
Performance by Sector Identifies Strengths and Weaknesses – Example
The above chart illustrates why this GP chose to stop investing in the energy sector. Whether sharpening your focus on a few core sectors or expanding your focus to include an additional sector, it is important for a GP to explain the reasoning behind their investment strategy decision with LPs.
5) Use your private equity pitch book to demonstrate your fund’s point of difference. Out of the hundreds of GPs investors hear from each year, why should they remember you? What is the unique trait that enables your team to drive above-average returns? Bison espouses that quartile rankings only scratch the surface when it comes to telling the story of your fund.
“Funds need to prove that amongst the managers and the players there is something that makes this team and this opportunity more attractive and transactable.” – Paul Manias, Managing Director at OMERS Platform Investments
A strong understanding of your fund’s performance in relationship to its peer set is paramount. Below is an example of GP (Bison Fictional Fund IV) that was a 2nd quartile performer at best versus their peer set. However, this fund showed strong value creation over the past three years in relation to that same peer set. The GP is able to say that they may have been a late bloomer but their recent performance is helping them separate from their peers and be one of the best performers in the set.
TVPI Momentum Shows a Fund’s Performance Trend – Example
6) Look through the LP’s lens. At successive conferences we regularly find LPs very willing to point GPs in the right direction – after all, it’s in their interests too. Make sure that you listen to them and put those ideas to work in your private equity pitch book.
Bison underscores the importance of this view: Data always speaks louder than words, but make sure your data speaks to your audience, in this case the LP investor. How are THEY evaluating you? For example, LPs are increasingly using PME to analyze your fund’s performance. Do you know what your PME is? Do you know what your peers’ PME is?
LPs Use PME to Analyze Outperformance: Fund IRR vs. Russell 3000 IRR Over Last Three Years
Do you know how your fund compares to the public markets? Click here to download Bison’s PME whitepaper.
The bottom line is that LPs want to see transparent and differentiated private equity pitch books that prove what GPs claim, and don’t duck difficult issues.
It’s clear that LPs want GPs to be properly prepared for their fundraising. In many cases, that means preparing exactly as an athlete would prepare. It takes training, practice and dress rehearsals. Only then can you be sure that you are ready to compete for capital amongst the toughest of LPs.
About Benjamin Ball Associates
We work with private equity firms to help them impress investors and polish their portfolio companies. Our clients include Permira, ECI, Sovereign Capital, Deutsches PE and Frog Capital.
We can work with you to strengthen every element of your fundraising, including your:
- Investor proposition.
- Private equity pitch book.
- Meeting performance.
- Presentation materials and visual aids.
Talk to us about your current situation and we’ll recommend the best way to get your fund’s pitches investor-ready.
Founded in 2011, Bison is a fast-growing startup company focused on developing innovative technology for private markets. With roots in solving complex challenges within private markets and venture capital, Bison’s mission has been to use the power of nimble technology and transparent data to bring unmatched, creative software solutions to the market.
Headquartered in Boston, MA, Bison’s products currently serve an impressive roster of some of the industry’s leading private equity firms and investors, including large buyout and venture capital firms, leading endowments and foundations, as well as private and public pensions. Learn more about Bison at www.bison.co or contact us directly: +1-617-982-6096.Read More