Fundraising and investor relations dynamics are ever-evolving, and today’s market is proving tough for many. According to our research, 45% of private capital firms see the same or less opportunity to raise a fund in 2024 than the previous year.
In our survey of 700+ private capital dealmakers, investors noted that the primary challenges to fundraising are as follows:
- 57% said the relative attractiveness of other asset classes
- 41% said the fundamental perceived lower value in venture capital and private equity growth
- 40% said that Limited Partners (LPs) won’t reinvest as long as funds have significant levels of dry powder
Right now, many changes are also being driven by LPs who want more involvement as well as financial and high-impact returns. General Partners (GPs) are rapidly adapting in line with these expectations.
We heard this story—and more—during a recent discussion with Speedinvest’s Fundraising Manager, Katharina Porenta. We also gained a more granular understanding of private capital fundraising best practices, investor relations dynamics, and what it takes to cultivate long-lasting relationships. Here’s a selection of the insights she shared, along with timestamps to help you dive deeper at key moments.
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When fundraising, start with your strongest investor relationships
Speedinvest is a pan-European pre-seed, seed, and early-stage tech venture capital firm founded 12 years ago and headquartered in Vienna, Austria. Today, the firm invests in six different sectors, with LPs located across Europe, the Middle East, and the United States. Currently, they have roughly 1.2 billion Euros assets under management, with their latest fund coming in at over 500 million Euros.
Reflecting on the early days of their first fund, Porenta explained how the firm really leaned on their strongest connections. She said, “You always want to start with your local network,” and this meant the firm’s LPs were from a first degree network of founders and referrals. She said, “Even today, about a third of our LPs are domestic” and advised fund managers to make the most of their home networks before venturing further afield.
While your existing network is a great place to start for sourcing investors, Porenta cautions against limiting your search. She says, “One pitfall, if you're starting a new fund, is thinking you need to raise from the big names and the big institutional [investors].”
Open and transparent communication fuels LP retention over time
Now more than ever, effective communication should be part of a firm’s fundraising and LP strategy. Porenta said, “What’s important in retaining LPs is a certain honesty and communication.”
In reference to some of the common macroeconomic challenges impacting the fundraising environment over the previous year and a half, Porenta stressed the importance of transparency, even when conveying negative news. She said, “We always try to communicate why something has been valued down and why we've adjusted a valuation, then also show them what we're working on currently to change that.”
A well-communicated strategy is critical to fundraising right now
In Porenta’s experience, today’s macroeconomic climate is making it more difficult to raise capital. She said, “The more chaotic it is out there, the more important that is actually to have this really good plan and strategy and to be able to communicate it to LPs.”
Timing, luck, and relationships nurtured over the long term all factor into a firm’s successful fundraise. Porenta said, “We were quite fortunate when we started our last fundraising round. It was still a good moment. But in the end I think the fundraiser is the result, not really of the last 12 months but of the last 12 years.”
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Relationship intelligence can drive efficiencies and desired outcomes
Porenta credits the Affinity CRM as the tool Speedinvest uses to track key workflows, from portfolio and fund management to deal flow management. As a newer member of the team, Porenta leaned on Affinity to better understand the firm’s many relationships that have developed and strengthened over the years. “When you have roughly 300 companies in your portfolio it’s hard, after only eight months, to know all of them well.”
As Porenta explained, what helps is making the flow of information as easy as possible. She said, “The fundraising team really depends on that information because LPs want to know…at the same time, you don't want to bother investment managers too much because they have a lot to do already.” To help with these types of insights, Affinity’s Formula Fields feature can quickly make calculations that LPs want to see such as portfolio company runway, EBITDA margin, and other key metrics.
AI can increase fundraising efficiency
Many industries, especially those in private markets like venture capital and private equity, are investing in artificial intelligence (AI) to optimize workflows and glean the most from internal data. The market is competitive right now and the effective use of AI is one way to gain a competitive edge. According to Affinity’s research, 84% of firms plan to increase their use of AI in 2024.
The team at Speedinvest is exploring ways and initiatives to better integrate AI into systems, including the development of a VC copilot. Porenta shared, “Creating our own AI that we can use across teams will really make things much more efficient because we're a big organization.” With the volume of data at their fingertips, she hopes AI will unlock new insights and efficiencies in the year to come.
Learn more about how Speedinvest plans to incorporate AI when you watch the full webinar.
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Accelerate your fundraise with Affinity
Affinity, the CRM built for private capital, redefines how you manage LP relationships and fundraising. With Affinity, fund managers can:
- Fast-track market research: Quickly identify high-growth opportunities and gauge investor sentiment with Affinity’s AI-driven market intelligence tool, Industry Insights. It generates a curated list of competitors and related companies in a given market, along with real-time, essential data on market maturity and saturation.
- Source more LPs: With Affinity’s relationship intelligence, you can identify and nurture valuable connections within your firm’s network, driving better outreach and warmer introductions.
- Retain the best investors: Affinity’s automated triggers notify you when relationship scores for key contacts fall below set thresholds, ensuring you stay connected with your most important LPs.
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