By Bryan K. Johnson, Managing Partner – Johnson & Company

A fund serious about raising assets, must differentiate between “suspects”, “prospects” and “relationships” when marketing. The “pipeline” should largely be composed of “PROSPECTS” and RELATIONSHIPS that are “allocation-ready” or being nurtured to that point. Most new and smaller funds have a large inventory of suspects, few REAL prospects and a phantom “pipeline” of relationships.

When a new or smaller fund is marketing, it must restrict time, energy and money to the ACTIONS, PROSPECTS and RELATIONSHIPS that offer the best results. Wasting time and resources “chasing institutional unicorns” or with “suspects” takes away from focusing on “prospects” to build the RIGHT “relationships”. Also, there are different marketing strategies and types of engagement based on the designations. If they are a “suspect”, they are in the “profiling” phase. If they are a “prospect”, they are in the “cultivation” phase and if they are a “relationship”, they are in the “nurturing” phase until they are allocation-ready. We coach this approach as standard practice to efficiently, effectively and economically move through the allocation pathway. Let me share how we differentiate between these 3 critical steps and groups:

The Profiling Phase – What is a “Suspect”?

  1. Suspects are what you get when you buy a list of investors, gather contacts from conferences or you assemble a broad list of personal acquaintances, professional contacts as well as others you feel may have a genuine interest in your fund. After researching and mapping (“profiling”!!) determine if they are REAL and MAY be receptive to a BRIEF initial introduction of your fund. (Note: Don’t let ego convince you a “suspect” may be REAL by sheer force of your charisma or will! – DISCARD THE UNREAL & UNSUITABLE QUICKLY!)

The Cultivation Phase – What is a “Prospect”?

  1. You have a BRIEF initial introductory conversation, you “feel” (remember ‘feelings are NOT facts’!) they may be “appropriate” given your fund profile. Although you don’t know all the key details regarding their suitability (asset allocation, intermediation, experience, finances, etc.) and ability to allocate.
  2. You’ve had a brief but QUALITY conversation with the DECISION-MAKER(S) and made an offer to send “target front-end collateral” (what you send here is key!) and a “promise” to follow-up. Btw, “send me what you have” without follow-up is NOT a quality touchpoint.

The Nurturing Phase – What is a “Relationship”?
Three (3) criterion must be met to consider someone a legitimate RELATIONSHIP:

  1. You’ve had a face-to-face QUALITY discussion. This is a big one! In order for someone to be a RELATIONSHIP, you’ve formally met and discussed the finer points of your fund in terms of their asset allocation and portfolio structure with the DECISION-MAKER(S) and most critically, you have gathered deep investor insight.
  2. Relationships need to be investors that you feel would be ideal: Long-term large sticky assets. It’s that simple. You know key details such as assets, experience, intermediation and attitude, which all need to be pointing in the RIGHT direction.
  3. They were receptive when you broached the allocation issue, they want to move forward with a level of higher-conviction interest (monitoring) or ideally formal due diligence and YOU make a commitment to THEM to follow-up on a disciplined, customized contact schedule until they are “allocation-ready”.

Most new and smaller funds use the terms “prospect” and “relationship” too loosely. Look at your “pipeline” and triage it into the 3 groups – suspects, prospects and relationships. This is critical to determine next steps with each group. Moreover, this action provides an essential reality check for marketing and fundraising. Some may find it time to get rid of the suspects (“stop chasing unicorns”), start better engaging the RIGHT “prospects” to form the RIGHT “relationships” to raise assets.