Relationship Advice of the Investor Sort with Meghan Reynolds of Altimeter | E2008

Meghan Reynolds takes the stage at Liquidity Summit 2024 (0s)

• It is currently the most challenging period in 25 years to secure capital. (34s)
• Limited partners (LPs) possess a sophisticated understanding of investments and will carefully assess deal size and market conditions. (19s)
• When pitching, avoid referring to deals as bets. (30s)

Meghan Reynolds’ talk, “Relationship Advice: Of the LP / GP Sort” (3m7s)

• The most important factor for investors is not returns, but rather effective communication, which fosters trust, mutual benefit, and shared insights. (5m50s)
• When conveying negative news, prioritize informing employees first, followed by Limited Partners (LPs), then portfolio company CEOs, and lastly, potential employees and other relevant parties. (8m49s)
• General Partners (GPs) should avoid assuming that LPs thoroughly read annual reports and should instead highlight important information through various channels like texts, WhatsApp messages, and multiple emails. (9m20s)

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• LinkedIn is a valuable marketing channel for startups because it allows precise targeting of business decision-makers. (9m57s)
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Client service in investor relations and fundraising strategies (10m59s)

• Client service in investing involves empathy, understanding that investors have their own stakeholders to communicate with, and treating all investors equally, regardless of their investment size. (11m25s)
• Transparency is crucial in investor relations, and providing clear information about portfolio risks and potential upside can earn significant goodwill from investors. (12m12s)
• Fundraising success is heavily influenced by word-of-mouth and the satisfaction of existing investors, making good investor relations essential for attracting new capital. (12m42s)

The complexity factor in raising capital (15m7s)

• Limited Partners (LPs) will provide the necessary capital if a fund has a rational size. (15m39s)
• General Partners (GPs) should clearly articulate their differentiation in five key areas: sourcing, picking, portfolio construction, adding value, and exiting. (16m5s)
• GPs should prioritize investor relations and treat it as a continuous process, similar to sales and customer service in a company. (18m37s)

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Rationalizing fund size, securing re-ups, and worst pitching practices (20m36s)

• Fund size should be determined by market opportunity and optimal portfolio construction for maximum returns, not arbitrary goals. (20m48s)
• Secure re-ups from existing investors and seek referrals, as warm introductions are more effective than cold outreach, especially with institutional investors who often face an overwhelming volume of unsolicited inquiries. (21m0s)
• Avoid underselling investment performance, clearly articulate successes, and refrain from claiming disinterest in financial success, as investors seek motivated fund managers. (22m7s)

Market sentiment and single deal SPV dynamics (25m55s)

• Single deal Special Purpose Vehicles (SPVs) are becoming increasingly prevalent, offering investors access to specific deals with minimum investments as low as $55,000. (26m18s)
• Limited Partners (LPs) are expressing skepticism towards Venture Capital (VC) firms that offer SPVs for a significant portion of their fund investments, questioning the VC firm's conviction in the deal if they are willing to offload a large amount of the risk. (27m7s)
• While there is still a significant amount of dry powder available, LPs are hesitant to invest in venture capital due to concerns about high valuations, particularly in the context of artificial intelligence (AI), leading to a "wait and see" approach. (28m11s)

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• Beehiiv is affordable, starting at $39 a month, and offers a 30-day free trial plus 20% off the first 3 months. (30m46s)

VC allocations, private credit, and market dynamics (31m2s)

• Private credit is currently experiencing a boom, but tougher times are expected in the future. (31m9s)
• Two years prior, very few people in venture capital were familiar with the term DPI (distributions to paid-in capital), but now it is a widely understood metric. (32m0s)
• Limited partners (LPs) are now primarily interested in investing in funds that can demonstrate a track record of successful exits and distributions. (32m27s)