Building a list of IR clients: go after new sponsors or ones already on their third fund?

Question

I've got a list of maybe 30 sponsors in two markets and I'm trying to work out which half to actually call.

First-time sponsors: they have nothing. No template, no portal, no schedule. You get to set everything up your way and you're there from investor one. But they have eight to fifteen LPs, almost no budget, and half of them won't do a second deal at all.

Established sponsors on fund three or four: real budget, 150 plus investors, and they already know missing a quarter costs them. But they've got some system in place already, usually one they half hate, and somebody internal owns it who may not want help. Getting in means either replacing that person or working around them.

I've read that investor retention is the whole game for repeat capital, which points at the established ones since they have a base worth retaining. But the new sponsors are the ones who'll grow with you if they make it.

Where would you spend the calls.

angela_burke · Answer

Established, and it isn't close for me. First-time sponsors negotiate on price because price is the only thing they understand about the service yet, and they churn when the deal stalls. Sponsor on fund three has a number in their head for what a missed K-1 costs them.

The internal person you're worried about is usually the sponsor's spouse or an ops hire drowning in it. They're not defending the territory. They want the quarter-end weeks back.

monica_tran3 · Answer

Five years in and my best clients came from the middle, which @bramble didn't list. Fund two, 40 to 70 investors, just got burned by doing everything manually on the first one. They have money and they have a fresh memory of the pain. First-timers don't know what hurts yet and fund four already solved it somehow.

nataliehsu · Answer

@thatch that middle group is a smaller list though. If bramble has 30 names maybe four are there.

ryanmck27 · Answer

Thirty names in two markets isn't a list, it's a start. I'd call all of them just to hear what they say about quarter-end, then decide. You're guessing at their pain from the outside right now.

mitchell_ray4 · Answer

@halyard that's how I got my first trade clients. Called everybody, learned which complaint came up most, then built the pitch around the complaint.

tonyv88 · Answer

A definition first, since the thread is using it loosely. Investor relations for a syndicator means the investor-facing work after the money is in. Quarterly and annual updates, the portal where LPs see their documents, onboarding paperwork for new investors, distribution notices, and answering the questions that come in. It's separate from capital raising, which is about attracting the money in the first place. Some sponsors hire one person for both and that's where scope arguments start.

On @bramble's question, the thing that separates the two groups is whether the sponsor can name a cost for doing it badly. A sponsor on fund three usually can. They've had an LP decline a deal, or spent a week rebuilding a contact list. That named cost is what makes them a buyer. A first-time sponsor with 11 investors often genuinely doesn't need a service yet, and telling them they do is a hard sell that stays hard.

@halyard's point about calling all 30 is the practical one. You can't tell from outside which sponsors have a system they hate. One question does most of the work: ask what last quarter-end looked like. The answer sorts the list for you.

One thing to keep straight as you go. If any part of the work involves soliciting investors or touching compensation tied to a raise, that can pull you into securities licensing territory, and that's a conversation for a securities attorney before you sign anything.

Building a list of IR clients: go after new sponsors or ones already on their third fund?

6 replies