Making the leap from friends and family to institutional partners.
For the developers and syndicators out there that started out raising equity from friends and family, how did you make the leap to institutional partners? How did you find them? What kind of deal terms are they looking for? What have been the pros and cons of working with them?
[{"id": "glp51p3", "text": "Great question. The fact that you're even asking means you've done well so far. You might not believe it, but most of the massive firms that are out there started with friends and family money. Sure sometimes their friends and family are uber-wealthy, and sometimes the Family is actually a family office, but it's unlikely they went straight to institutional partners.\n\nFor someone that's only just beginning to explore the space, you're probably gonna want to start with a database. Something like Preqin that can give you a run down of a large number of institutional partners and their investing preferences.\n\nFrom there, I would try to find those with Emerging Manager programs, which I would assume you'd qualify for. They will allocate capital to up-and-comers from a different allocation bucket in many instances.\n\nYour also going to want to find out which managers tend to try new managers out. Manager preference varies widely across institutions. \n\nYou are also going to have to get cozy with Investment Consultants (Townsend, Cambridge, etc.). They control the purse strings of many IIs, especially public pensions plans. You can find these relationships on a database like Preqin.\n\nYour track record is going to be the most important thing. It needs to be solid and it needs to be a few years old -- even if you are an \"Emerging Manager\"... that is, of course, unless your thesis is unique enough to warrant additional conversation.\n\nTerms are going to be less aggressive than what you are going to get from F&amp;F, because they are cutting you a much larger check. They are also probably going to try to negotiate fees. Nor sure if you are doing a Fund, or deal-by-deal, but fees are important to them because they end up getting reported to their members (public plans). But they aren't unreasonable. Most large institutional funds are still in the ballpark of 2&amp;20 for VA-Opportunisitic Funds (maybe a little less, there has been some fee compression).\n\nThey best part about working with them? Even though the are cutting you bigger checks, they are waaaaaaaayyyy more hands off. I use to field calls daily when I was working with HNWIs. That's not the case with IIs in almost every case. Their manager due diligence can be brutal, especially with they are vetting a new manager, but because they do all of that DD, they trust you to do the work that you say you are going to do. They also have a tendency to re-up if you perform well.\n\nI think that is a good primer. Let me know if you have any questions.\n\nSource: I've worked in capital raising for PERE firms for the past decade.", "replies": [{"id": "glpywzm", "text": "Thank you very much for that insightful response. That was very helpful.", "replies": [], "depth": 2}, {"id": "glum9gz", "text": "Literally working on building out a pro forma with II money right now. What % of fees do they normally want? Also, what does the promote structured normally look like on deals like that?", "replies": [], "depth": 2}], "depth": 1}]