There’s plenty of dry powder available to fund Australia’s most exciting new investment structures with A$26¹ billion available for investment by private equity and venture capital funds. But a great opportunity is just one ingredient for a successful raise. Intangible factors are just as critical when it comes to securing capital for your fund. Here are five essential elements you need to raise your first $25 million.

1. Begin by establishing trust

Investors have to have faith in you to back you. The best way to gain their trust is to give them a good reason. The idea is to show them how you have acted in an ethical way in the past and address the elephant in the room before they do. Conflicts of interest are a good example.

Let’s say you’re raising money for a fund but you also run a tech start-up looking for investors. If the start-up has received money from the fund, you need to be able to show the due diligence the fund did on your start-up before it committed money to it.
Articulate any arms’ length processes you followed and ongoing procedures to maintain adequate separation between the fund and the start-up. Investors are likely to be impressed by your thoughtful, candid approach. Especially if the start-up performs for the fund.

2. Build a connection from the start

You need to get on with your investors if you’re going to work closely together. You don’t need to be best friends, but the most successful relationships are based on a level of mutual respect. You need to get each other.

You’ll get a good feel for whether you can work together from the outset. Yes, you can build rapport over time. But if there’s no natural chemistry, there probably never will be. Don’t be afraid to close down an opportunity if you feel there’s no real connection. This will free you up to pursue relationships where you do have genuine rapport. In meetings, relax, back yourself and tell a few pertinent yarns.

3. Turn potential investors into true believers

• Show them you have deep domain and product experience.
• Prove you know the numbers back to front and the variables that could impact them.
• Practise before you meet investors and anticipate their questions so when you get a tough one, you can handle it with ease. Work through a range of scenarios for the fund – good and bad – and be able to talk these through.

4. Communication is the key

If there’s one thing you need to hone, it’s your elevator pitch. You should be able to explain what you do, why you do it and how you do it in 30 seconds. Getting this right requires practice. Record yourself and objectively critique your performance. Ask yourself whether you would invest in your fund, based on your elevator pitch. Get your friends and family to give you feedback and ask your existing investors what you can improve.

Make sure you support your elevator pitch with a succinct one-pager that clearly describes what the fund does and develop a concise pitch deck that addresses the what, why and how of your business. You’ll also need a social media presence and web site to give your fund credibility.

5. Map the road ahead

Investors want to know where you’re going and how you’re going to get there. This means developing a strategic plan and a purpose to your raising. If you’re aiming to raise $25 million, your plan could be to raise $1 million from 25 investors. Then you need to break this down further. You may need to build a list of 100-plus potential investors and outline a schedule to contact them all. Be procedural. Do research into the type of fund they have invested in before, to give your fund the best chance of success.

Raising capital is a combination of art and science. Be persistent, learn from your mistakes and seek advice whenever possible. That’s the way to give yourself the best chance of reaching the $25 million milestone.

Polar 993 provides a complete one-stop solution for investment managers including licensing, structuring advice, corporate trustee, corporate CCIV directorship, online application & registry, fund administration and capital raising.

Please do not hesitate to contact us if you would like any assistance related fund establishment, fund administration or capital raising.

references

1 Preqin & Australian Investment Council Yearbook, 2023

Disclaimer: The information contained in this paper is of a general nature only and is not to be taken to contain any financial product advice or recommendation. Nothing in this paper is intended as financial product advice and it does not take into account any person’s investment objectives, financial circumstances or specific needs. This paper is neither an offer to sell nor a solicitation of any offer to acquire interests or any other investment and should not be used as the basis for making an investment. Polar 993 Limited (ACN 642 129 226) (AFSL 525458) and Polar 993 Advisory Pty Ltd (ACN 649 554 932) (AFSL 531197), their directors, officers, employees, agents or associates do not guarantee repayment of capital, the performance of any fund or any service. Past performance is not a reliable indicator of future performance.