With high interest rates and stalled exits, conditions for raising new funds are tight. According to our research, 45% of private capital dealmakers see the same or less opportunity to raise a fund in 2024 than the previous year.
However, fundraising remains a priority for a number of growth equity and private equity firms this year. To source Limited Partners (LPs) and secure commitments, growth equity firms will need to adopt a clear, differentiated fundraising strategy.
Keep reading for five expert strategies to help you source LPs, craft a compelling fundraising pitch, and retain your best investors. For a deeper analysis, check out our Growth equity guide to fundraising.
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Key considerations for growth equity fundraising
Growth equity, like other investment strategies, has distinct characteristics and objectives that are important to consider when fundraising. In contrast to venture capital (which often focuses on early-stage startups) and private equity (which typically involves leveraged buyouts (LBOs) of mature companies), growth equity investing takes minority stakes in businesses that are more established but are still growth-stage companies.
For example, growth equity funds tend to include companies that:
Are late-stage companies (Series C through pre-IPO)
- Have scalable business models, robust financial metrics, and show potential for significant market expansion
- Demonstrate clearer paths to profitability and sustained revenue growth
- Have strong management teams and are entering new markets or developing new products
These characteristics shape the composition of a growth equity fund, including its lower risk profile, shorter investment horizon, and larger fund size compared to venture capital. Growth equity funds also typically involve higher capital investments and require careful consideration of valuations and exit strategies, like IPOs or acquisitions.
Understanding these factors can help guide your fundraising strategy—from the types of investors you approach and the points to emphasize in your pitch to how you communicate with LPs once commitments are secured.
With these distinctions in mind, let’s explore five growth equity-specific strategies to successfully raise a fund.
1. Segment prospective growth equity investors by category, interest, and stage
According to 57% of dealmakers, the most challenging aspect of fundraising in 2024 is that LPs are investing in other asset classes, a trend that has intensified in recent years. The shrinking pool of private investors poses liquidity challenges and means it’s becoming increasingly difficult to source investors for your growth equity fund. However, this is where a targeted approach to sourcing LPs can make a difference.
Eileen Tanghal, Founder and General Partner at Black Opal Investments, recommends you “segment, target, [and] position” prospective investors before reaching out. For example:
- Categorize investors: Growth equity firms typically focus on large institutional investors, but be sure to further segment your list of prospective investors by type, including pension funds, insurance companies, endowments, and sovereign wealth funds.
- Consider each category’s objectives: Think about the investment objective of each category. Consider which type of investors tend to prioritize financial return and which invest for more strategic reasons, as this will help tailor your outreach and pitch later on.
- Understand what each category invests in: Make sure you understand what each LP typically invests in. For example, you don’t want to pitch a growth equity fund to an LP who only invests in seed-stage companies.
Lastly, cast your initial net wide when reaching out to potential investors. For example, Katharina Porenta, Fundraising Manager at Speedinvest, advises, “One pitfall, if you're starting a new fund, is thinking you need to raise from the big names and the big institutional [investors].”
2. Start with your existing network and address gaps for outreach
Once you’ve created a list of prospective investors for your fund and categorized them by category, objective, and stage, start with investors who are already in your firm’s collective network.
For example, prioritize LPs who have previously invested in your firm’s funds or are referrals from your portfolio companies. These investors are ideal because you’ve already established a level of trust and confidence with them, so they’re more likely to invest again than new LPs.
Then, identify your gaps. Are there certain industries or investors that you lack relationships with but would be well-suited to your fund? This will help focus your outreach efforts more effectively.
For new contacts, outreach volume is critical. As Joe Schorge, Founder and Managing Partner at Isomer Capital, advises, “In fundraising, it's a numbers game. You have to contact 100 people in order to get two or three, who will ultimately go to invest in your fund.”
3. Nail your investment thesis
Your investment thesis is the cornerstone of your fundraising pitch. It distills the most important information about your fund and sets the tone for discussions with LPs.
To craft a compelling thesis, focus on what differentiates your fund. This typically boils down to your specific strategy, track record, and team’s experience. For guidance on the specific points to clarify in your investment thesis, view our Growth equity guide to fundraising.
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As Isomer Capital’s Joe Schorge notes, “The LPs are spoilt for choice. They might invest in your fund, but there are 100 other funds that they also could invest in [...] What I want to hear is why you're the best; why your thesis is powerful; why you have some competitive advantages to what you're doing.”
4. Tailor your fundraising pitch to your audience
Once you have a solid thesis, make sure you understand your audience’s specific needs and preferences. This way, you can enhance the relevance of your pitch and increase your chances of securing commitments.
Before pitching, research your audience so you understand what matters to them most and can highlight these aspects in your pitch. Gather information about their industry focus, geographic preferences, investment stages, current portfolio, and objectives.
Then, customize your messaging by focusing on aspects of your fund that resonate with each LP’s interests. For example, if an LP prioritizes steady returns, highlight your fund’s risk management and return expectations. If they value thorough due diligence, showcase your firm’s rigorous approach.
Tools like Affinity can help streamline the process of gathering and categorizing key information for your pitch. Eileen Tanghal, Founder and General Partner at Black Opal, says, “Affinity is helpful because it allows you to say, ‘This is a family office; this is an institution; that's a university or a fund of funds or a fund family office, and this is what they care about.’”
5. Effectively engage with your LPs
While securing commitments is a significant achievement, maintaining strong relationships with your LPs is equally important to the ongoing success of your fund. It’s also an opportunity to foster long-term relationships that could lead to repeat investments in future funds.
Start by establishing a foundation of strong communication. Providing consistent updates on key events in private markets and addressing challenges transparently helps manage expectations and maintain trust with your investors.
A balanced approach to communication is key. Isomer Capital’s Joe Schorge notes, “LPs want sharp, relevant news that's of interest to them. Let them know when you’ve closed a deal, when you’ve hired someone. All of that is welcome news, whereas the same news weekly—just raising something to the top of someone’s inbox—is when it gets repetitive.”
In practice, this involves regular reporting combined with timely, fund-relevant updates to keep your investors informed without overwhelming them.
Fundraise more efficiently with Affinity
With tougher market conditions, growth equity firms looking to fundraise right now face increasing pressure to secure commitments. The right tools can make all the difference, helping you streamline your fundraising process and strengthen investor relationships.
Growth equity investors turn to Affinity to:
- Accelerate their funding rounds: Affinity is a purpose-built CRM designed for private capital firms to streamline their unique dealmaking workflows, making it easier to efficiently manage and expedite fundraising processes.
- Expand their LP network: Relationship intelligence helps firms identify and nurture valuable connections within their network, driving better outreach and warmer introductions.
- Strengthen investor relationships: Maintain and deepen connections with automated updates, activity alerts, and insightful reporting, ensuring firms consistently engage with their LPs and prove their fund’s value.
“Affinity has allowed us to do a few really important things. The first is to be proactive. We're now able to see around corners a lot more, whether it be someone's meeting with somebody next week or actually, someone's flagged a company as ‘I need to unlock this and someone else on my team knows somebody on the board.’ These are all things that are automated and have made the proactivity of our team a lot better.” — Jonah Surkes, Growth Equity Investor at Generation Investment Management
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