Investing Billions - EP268: Inside LP Psychology: How Great GPs Raise Capital in 2025

Episode Date: December 23, 2025

Why do so many strong GPs struggle to raise capital today and what actually separates fast, oversubscribed fundraises from stalled ones? In this episode, I talk with Alexander Russ, Senior Managing Director at Evercore and Head of North America for the firm’s Private Funds Group, about what really drives fundraising success in today’s crowded private markets. Alex breaks down the psychology of LP decision-making, why momentum in the first close matters more than almost anything else, and how the best GPs differentiate themselves through narrative, preparation, and credibility rather than fee discounts. We dive into why fundraising is ultimately a momentum machine, how to engineer demand early, and why trust—built over years—can be lost in a single raise.

So for those who don't know you, give me a sense for your role at Evercore and how you engage with GPs. So I'm a senior managing director at Evercore and I am the head of the Americas for our private funds group. So our PFG business, we advise general partners on all aspects of their competitive positioning and their go-to-market strategy and then we execute, we work with them to execute their capital raise through our global sales team. What's the most differentiated GP platform that you've helped with? And how do you go about helping GPs differentiate themselves? I've been really fortunate to be out with several GPs of fundraisers this year that have, you know, moved incredibly quickly and have been, have reached their hard caps. It's sort of record time, have been, in many cases, two times oversubs.

And I think the things that those, you know, raises have in common, those GPs have in common, there's a pattern, right? They, first of all, they're offering something that the market wants and maybe even more specifically they're they're nailing their narrative right they they are proving to people that they're they're differentiated um and uh you know that they're bringing something additive to to lp portfolios um that they're excellent on what they do i think you know the second thing they they all have gotten right is they um they they anchor with uh they they anchor with early momentum um you know in all the cases of the funds i'm thinking about this year that have had these

tremendous outcomes. They've had incredible support from their existing investors, and they've had really incredible support early from existing investors. It's the ultimate situation where there's, you only get one chance to make a first impression. So you can't go to the same LP and A-B test. Well, here's 20% of my capital closed. Here's 50% of my capital closed. You have to go in with your strongest hand. That's right. I think when we start to think about, you know, what makes a really successful fundraise, it's sort of the three-stri-gold. and rules, right? It's like, be prepared, focus on what you can control. Like, not every GP is going to have a perfect hand, but every GP can be really deliberate about how they show up.

Nail the narrative, like I talked about, you know, go into that first meeting, really being able to articulate what your edge is, quickly and clearly. So know who you are, communicated with conviction. And then I think what you were alluding to, like pre-wire with momentum, to an extent, fundraising isn't that complicated. It's, in our opinion, in our experience, it's really all about nailing your first close. So your whole process should really be engineered around achieving a really successful first close, which, as you said, we sort of tend to define as like, you want to be able to put yourself at a position to hit 60, 70% plus of your, whatever the cover target is for your fund in the first close. And that, you know, that generates

that generates momentum. You know, it's, it's a lack of momentum that is the killer in, in fundraising. And I think, you know, I had GP say this to me the other day, sort of pointed out, well, what's the incentive, you know, for LPs to come into a first close? close. If you're not offering a fee discount, let's assume you're not. Why don't they just wait? I was like, that's the, that's the right question to be asking. And, and, you know, they're really, there isn't necessarily an incentive. So figuring out through a bit of art and science, a little bit of magic how to, how to get people in early, it's going to really dictate your velocity, your time and market. And it's, it's probably going to have a pretty meaningful impact on your end result. That was exactly the question I was going to ask, which is how do you get people in that first close? without doing fee concessions. I'm sure there's some tricks to trade. Where are some of those tools that GPs have

in order to have a very successful first clothes? Back to the point of like preparation, right? And I think it starts with running a really smart process and going in in terms of just, you know, telling a great story, right? You know, before you go into those first meetings, before you start going out to the market, really assessing, ideally with third-party validation.

Like, what are your investors, you know, think you're doing well that they want you to lean into? What do they want to see more of? what are they concerned about, right? What are you doing that when you just stop doing or what are the shifts they want to see? And using that to, you know, inform the narrative. And so I think, you know, in any market, investors are obviously, they're focused on returns. But I think in this market, in particular, having a really strong narrative is sort of more acute than ever.

It's broadly being really well prepared in terms of how you go in and having the best possible story, right? That's sort of point one. And I think the other bit, you know, is bear hug your existing LPs, right? They should form the foundation of that first close every time. And I think, you know, we see this a lot. I think GPs can often, it's a common mistake we see GPs make is they will, even with their close relationships, they can, you know, it's human age, they can take it for granted. Our rule is like, you know, don't, don't assume, ask, right?

You know, validate that your investors are going to be there, that they're ready to go, clearly communicate where your plan is and make sure you've kind of got that bedrock built up. And then I think it's about, you know, this is where a good agent can really add value in terms of attracting new capital into a first close. Because we don't, you know, we don't want the first close to be reliant exclusively on the existings. And I think that's about if you've got a great, you got a great story and a great product, right? And you've got existings, you know, lined up and supportive. That's about going out and communicating to the market that this is, in our experience, like that, you know, and I think that this is a raise that's going to go quickly. I think back to your, back to your fundamental question, like, how do you get people?

and move early. Well, one way is just articulating you need that the need to move early to secure an allocation, right? I think you only get credibility with LPs with that message if you've earned it over time. So from like our perspective, I think with, for example, like our sales team, our LP coverage team, and it's taken time. I think the market has seen us at Evercore work on a number of oversubscribed processes. So I think when we go to investors and tell them, look, this might not be a one and done close. And, you know, often that's not the plan. There will be a second close. But what we can tell you for certain is there's going to be really strong demand for this fund. And if you're interested, you should be in the first close

because that's going to be the best possible way to protect your allocation. Prioritize that work early. And again, it's not, there's no silver bullet there. I think it's about credibility of relationships, which takes time to build. And getting people also, again, back to the, are really excited about the story. Obviously, that's where it starts. Now, there are other carrots and things that we could talk about like, you know, obviously things like co-investment and other things that can, you know, for certain LPs and programs, be really meaningful to move the needle for participating in a first close to get your sort of PPM to the top of the stack. But I put back to it. I really think it's about a great story and credible relationships. So many jumps to unpack there. You talk a lot

about what's upstream to wanting the LPs to close. I want to actually go downstream to the LPs and their psychology. Rastacks, Real Talk. Do you want the LPs? to be almost driven by fear of missing out more than excitement. Is the A-plus version of what the LP walks away from the meeting in is we need a focus on this fund or we won't get in? Or is there something above that that we're so excited about that? Is fear the driving emotion behind why LPs are going to invest in a first class today? Just brass tax.

All the LPs invest in a fund out of fear. It's sort of similar. I also don't think LPs buy things for reduced fees or to save on costs. They invest in funds because they're excited about it. the return, right, the return potential. So I think I'd actually say it starts from the standpoint of getting people excited and convinced that this is a GP that is doing something different, you know, that is that is doing something that is repeatable, right? And fundamentally, again, is bringing, I think particularly in this market, right, where, which is so competitive and where there's

this massive oversupply of GPs, right? There's sort of a three to one oversupply right of GPs versus the LP capital going out. It's about articulating what they're going to bring to the portfolio that the LP does not already have or how they are going to upgrade exposure that the LP has. So I do think it's grounded, not so much in fear, but first and foremost in excitement to participate in the fund because, you know, it's incredibly high quality and it brings something that they are, it helps them solve a problem that they have. It brings a solution that they are looking for in terms of the exposure. And then I think in terms of, you know, your comment on fear, I don't know if I'd use the word fear. It's actually good advice because, you know, they have to make, the LP has to make

that decision that they want to be in the fun on the front. They're excited enough or they think they're going to get there enough to engage in real diligence, right? And then I think we're talking about timing and bringing them forward. The way our coverage team would think about it, look like on the LP side of our business, our salespeople, like their least favorite thing to do is, well, it's great if we have a fundraise that goes really well and has an oversubscribed final close. The worst call a salesperson on my team has to make is to an LP to say, you know, you're not going to get your full allocation, right? And so I think that they've internalized that over time. And it's actually good advice when we know a raise is going to go

quickly to move early because that's a way for an LP to differentiate themselves, show that conviction early with the GP and to put them in a better position to sort of get what they want in terms of exposure. That's where credibility comes in, right? Because you're playing recurring games with the same LPs, if you say this is the hottest fund and then they come 50% short of Target, you're not going to get another call with that LP, where the GP, they're willing to bet their entire reputation sometimes out of desperation. And they'll say and do anything sometimes to get to that close. Yeah, I think using smoking mirrors and deception is you might win the battle, but you're going to lose the war, right? I just, I think that really backfires for GPs and

certainly for agents over time. So I do think this all starts with the credibility of the relationship we have with the LP, right? And if we tell them something's going to happen and it doesn't happen, they're going to remember that. And that's taken, that takes a long time to develop that credibility. And I wouldn't say that's something we were born with or had when we started the business 16 years ago. I think it comes down to the model, like, you know, who you represent on the GP side.

You're only as good as who you represent. So really being thoughtful about who you partner with and picking funds that people want to buy, right? And then develop, you know, developing things. through reps and over years, credibility and trust with the, with the LPFU relationship, that if you say this is happening, that that that's the reality and that, you know, these are these coverage relationships are always, always built on trust and transparency. And that takes time to build.

What's that quote, reputation takes decades to build and could be lost in a single day? I want to double click on this excitement versus fear. I think LP psychology is such an underrated aspect. What you're essentially saying is that it's sequential, is that the excitement brings them to the table. In psychology, you call this endowment effects. So they kind of see that fund already in their portfolio. And then FOMO will actually maybe get them to work on that and prioritize working on that fund versus another fund. I think that's right. I think that's a good assessment. It definitely starts with they got to be excited about the return they're going to make

on the fund, right? That's why people, that's why people invest. That's why people ultimately come into a first close. And you're right. There's the FOMO element. I think, look, these are professional investors and they know how the world works and they know how the market's working right now and I think they can sniff out right it's a it's a very bifurcated market right now the tail of two cities right it's a huge way more GPs raising capital and then capital is available so I think LPs to their credit also have a good sense for is something going to move quickly and do they need to be there and they know that they've also had the reps they've also heard the narratives they're seeing everything from from the by side yeah that's right it's hard for them not not also to get the

same pattern. We all do through trial and error. They've probably, you know, we've certainly, we've made every mistake in the book over 16 years and we've learned from it. And I think limited partners are this are no different. They probably felt like, I'm sure they've had experiences or they felt like they had more time. And that's understandable in this market. I mean, the average fundraise right now is taking, I think, 17 months, right? So with most GPs, you do have more time. Really talented LPs, experienced LPs are able to also make their own assessment of like when that's the case and when they need to move. You said something really interesting.

You said that it's not just about the returns, about the narrative, which sounds reasonable, but then why isn't it about the return? Why isn't about the risk adjusted return? Could you double click on that? Yeah, well, look, I think returns have our performance. Let's be clear. Performance is pretty crucial, right? And that's always been the case.

And it still is. You know, we're not, we always say my partner was tables toast. Yeah. And we're not alchemists here at Evercore, right? We can't turn led to gold, right? You have to have good performance, right? Or if you're a first time fun, you have to be able to articulate the promise, a good performance at least. Being able to articulate an investment strategy is also always been important. But I think what's just changed is that as I've talked about, like the market's just so much bigger or more crowded now, right? And that supply demand and

imbalance is so massive that I think nailing the narrative is more is just more important than ever. And, you know, I define that as like, you know, again, fundraising, storytelling. You got sort of 60 minutes, right, with an LP to make that first impression. And, you know, in my role, I probably meet a dozen managers a month. Most LPs are certainly meeting a dozen a week, maybe maybe a half a dozen a day, right? And nailing the narrative in terms of what does success look like. I think I always say to GPs, it's like, nailing the narrative means when the LP walks out of that room, you know, your fund XYZ. First of all, they can tell you after hearing that 60 minute pitch exactly what a fund

X, Y, Z deal looks like, right? Very clearly. Like, they understand that. And they walk into that room, understanding how you are differentiated, right? How what you're doing is repeatable. And I think that's really important. You know, not sure you didn't just have one great deal,

but you've got a playbook that's sort of hard code in their mind at the meeting, how you're going to continue to achieve the performance of the past with the performance of the future, right? And that you've really just connected with them early. I think, you know, nailing the narrative is, I always say to GPs, like, I would ask GPs, like, do you have, do you have one to two slides in your pitch book that just clearly articulates the first few things that I just said? If you don't, it's probably time for a rework. You know, you need to, a lot of GPs will bury the lead and sort of plod through the story. And I think nailing the narrative is like, you've got to hook people in the first five minutes, you know, to get them excited about, or you're risk losing them for the next 55, right? Set another way, if the LPs meeting dozens of GPs a week,

they have to conserve their mental energy on the GPs that are most worth their energy, and you have to hook them earlier else they kind of go into this default. Yeah, that's right. That's right. And look, I'd say the other, like, the narrative is a topic I could obviously talk about a lot. And one of the things that we see is I think GPs often feel like they're telling a really different, differentiated story. And there's, because they're so close to it.

But for us, you know, for RC meeting a lot of GPs, for LPs who meet so many more, for so many GPs that you're actually saying the same thing as the person who was just in the room before you. You know, and I think that a lot of the work that we do, and I think is important for any GP to do in terms of, yeah, doing a 360 assessment on themselves ahead of a fundraise is really pulling out, what are you actually doing that's different, right? existing LPs in a fund, you know, when we talk to them, they can often articulate a manager's differentiation better than the manager, right? Because as I said, they're meeting a ton of funds.

They have other GPs in their portfolio they can compare it to. So we actually, in the work we do on shaping the narrative with GPs, the biggest, the most valuable input we get is from talking to the market, talking to existing investors, prospective investors, and existing investors in particular can often give the pitch better than the GP and we learn from that and when we advise our clients

around that. When it comes to building the narrative, is there a balance between simplicity and complexity and how do you balance us to? I think there is and I go back to what I said, I think you have to, you have to start simple, right? My mind goes to like a bunch of example of a GP I met

the other day who they had their hour with us and they got on the phone and it was very informal and they just sort of started talking about deals and going into like real detail on some case studies and they were sort of all over the place. And what they missed was like they didn't ground us in again like the hook. Like high level, why should we care? What is your pitch in the first five minutes to get us excited about that what you're doing is is unique and and repeatable and bring something to the table that isn't already there in droves, right? So I think simplicity, the balance,

You have to keep at high level and get people engaged to then care about the complexity, right? And I think the complexity comes in like once you've got their attention and investors' attention, then of course they want you, they want to dive deeper and they want you be able to go into like intricate detail. Okay, we understand your playbook now, right? We understand what you're looking to do. Now take us through a case study. Now take us through a deal and show us how you applied that. and get into the portfolio company metrics

and how you changed out the CEO, but you did to augment the company. But too often, I think, GPs who day to day live in a different world, right? They're working with management teams and they're in the weeds. There's a risk of getting too much into the weeds too quickly before you've gotten people's attention.

So I think that, to me, is the balance, simple and a complex. It just goes back to the same thing. They're meeting 14 managers. They only have so much neurological investment to brain damage to invest into managers, figuring out what they should be diligent thing, what they should be figuring out.

So if they could at the top either discounted managers and say I don't need to listen to anything and I don't need to deal with this complexity, that's one thing, if you could hook them in the beginning and they're like, okay, this is one of the five managers out of these 14 that are most interesting this week, then they'll take the mental investment to dig deeper into that manager.

So it's about like sequencing the investment. Yeah, that's exactly right. And again, you've got to do the work to understand like what is actually going to come across as differentiated. I think, you know, so many GPs roll out the same playbook without realizing it. And you're just talking about operating partners and you're kind of page turning and, you know, LPs are humans. And if you hear the same thing, your eyes glaze over and you sort of disengage. I think that's often the risk, especially in today's market, you know, particularly for GPs who have had success in the past, right? Maybe

they haven't raised a fund in the last couple years. And they try to apply the same playbook that worked for them in 2020, 2021, and they try to run that playbook today. You know, they don't take the time to evolve their story, sharpen their pencils, really get that feedback. And they're often in for a rude awakening in this environment. There's a paradigm in investing, whether GP or LP, where you shouldn't do a deal in the first year. So you should spend a year listening to pitches to understand what good looks like. If you use the same, here's say, 14 a week over a year, let's say that's, you know, with weekends and with holidays, it's about 500 pitches after 500 GP pitches with most GPs never get in their entire lifetime. Then only

after one year, you can know what good it looks like and now compounded out by 15, 20 years when you got to look at the decision makers. They've had 20, 25 times more reps in what good looks like than the GP that's focused on their business. Yeah, that absolutely resonates. And these LPs get a lot of reps. Like there's a lot of people out there asking for capital. One of the factors that you said, you need to know what the market is looking for. Obviously, there's a lot context and nuance to that. But what are some themes in the market for what LPs are looking for today, Q4 2020. The good news for all of us in this industry is, despite all the challenges and how tough the fundraising market in, LPs are still committed to this asset class, to

private markets, right, to private equity. So that's the good news. I think that's a good starting point. And if I'm struggling a little to answer this, I think it's, I think it comes from the standpoint of like, it's not the same for every LP, right? It goes back to, I think with every LP that what they're consistently looking for is, you know, the things that I've talked about, which are, you know, they obviously want the promise of great returns. Like, clearly that is what LPs are playing for. They want to back groups that are going to deliver good returns so that they deliver good returns for their, for their investors or their fiduciaries on the LP side.

And they're looking for in this environment, you know, I've used the term differentiation a lot, but maybe another way I might say that is they're looking for domain expertise, right? They're looking for a hook or a specialization of some sort that convinces them that this This GP has a right to win, right, in their lane. One of the areas that's sort of fallen out of favor is like a generalist strategy, right? A generalist strategy. Let's define that as a GP that's investing in three or more sectors, right?

There's been a long-term secular trend on the LP side towards favoring specialization. And so, you know, and that could be specialization by sector focus or it could be specialization, you know, by strategy, like doing, you know, value and complex deals. like carve outs and things like that. And that could maybe that be a cross-actors. But they're looking for something that evidences domain expertise. And then I, again, this is maybe more from the LP perspective. But they're, you know, I think we're very cognizant of this and how we build coverage relationships with investors and how we build credibility is

they're looking for ideas that are relevant and additive to their portfolio, right? And so a little bit of the art and fundraising, and I think a big part of the value that an agent can add and we looked at at Evercore is knowing who those people are that are going to be a good that are looking for what you're selling, that are shopping for what you're selling, right, that are actively looking to add exposure in their portfolio that you, that you are offering.

I think that's, those are sort of broadly three things that, uh, three things that, you know, LPs are looking for. There's a, there's a much longer list, you know, obviously like they're looking for alignment. I think they're also looking for. for partnership, which is a very overused term, but it comes up regularly. They're looking for GPs where their capital is going to matter, but that the relationship is going to matter. They're looking for transparency. They're looking for sort of institutional quality investor

relations and back office. But again, what strategy is going to appeal to them? I think so much of that can be informed by the individual investor. Again, what are the problems they have that they need to solve in their portfolio. And for us, our big part of our job is like delivering that solution. And that means from a, I'm going off the resume, but that means from a coverage standpoint, right? Working with LPs, I would say like, it's just building that credibility and also being effective for your GPs. It's just as much about, for an average sort of salesperson on our team, it's just much about what we don't show certain LPs or what we don't send them as it is what we do, right? Limited partners want a relationship where

when they describe their program and their portfolio and their priorities, that the agent or the GP internalizes that and understands it and brings them relevant ideas for their goals. To put another way, what you're saying is there's also sequential process on the LP side. They have their portfolio. They have holes in their portfolio. Let's say it's secondary just to choose a random ask class. They know that they want to add a secondary manager. And then you double click on that secondary manager. Let's say they want somebody specific in a certain vertical with a right to win that's been doing it for many years, that has the returns, but also wants to partner with them. So it's kind of the sequential thing, whereas if somebody sent them a growth equity fund,

it could have all these things, they could have a right to win. They could be highly transparent, highly partnership focused. But if they're good on their growth equity exposure, there's nearly a zero percent chance that they're going to add to that exposure. 100%. That's exactly what I'm talking about. You say better than me, David. I think, look, it's like, so we work with the spectrum of GPs from funds that are 200 million up to 20 billion.

We work across private equity, buyout, growth equity. credit infrastructure and then some really opportunistic strategies like aviation sports etc and our job is to sort of figure out back to the relevance to the LP like who to show what to right who's looking who's shopping for what and I think you know we're going to there's going to be certain LPs that everyone's looking for great managers in the buckets they're looking to fill but they're going to be certain LPs who are more focused on we want to work with really established GPs you know that are on a high Roman numeral and have a long track record and maybe we're okay with larger fund sizes that come along with those things

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Get more with Northwest Registered Agent at www. northwestregisteredagent.com slash paid invest. You have another segment of the market, LPs that are, they want the opposite. They want to focus on, you know, the lower middle market or they want to go, they're hunting for emerging managers and groups that are earlier in their life cycle as a GP because they maybe take a view that that's where some of the best alpha is and some of the great returns are. You have LPs who are exclusively looking for sector specialists, right, and are not interested in in meeting with a multi-sector firm no matter how good it is. So whatever their flavor is, whatever they're looking for, I think this just goes back to also for what we do for living, like building that credibility. If an LP tells us, it tells us we don't have an infrastructure program, we're looking for middle market buyout. That's in the U.S. And the next week, our salesperson or coverage person, you know, sends that LP an email on a European infrastructure fund.

You've just immediately lost credibility. Because you've wasted their time, you've wasted ours. you haven't listened. I think that's, you know, really important from an LP perspective. I think that's really key for building and cultivating relationships. Again, is like, are you a good listener? Are you bringing them solutions to the problems that they have? Or are you bringing them ideas that are that fit the list that they are shopping for? And that's a not an egotistical thing where an LP just wants people that'll pair back what they're asking for. It's a time efficiency thing. If I'm spending time on this infrastructure deal I don't want to deal with, that's

time that takes away from that middle market the opportunity that should be that you should be sending me and that should be spending my time on. I think about how managing my inbox, right? My email. In our modern time, like, that's such a big piece of everyone's life. It's managing your inbox. And then I think about, I don't even have capital

to invest, right? What if I had money, right, and capital to invest? The inflow of pitches and proposals and ideas is ludicrous at this point. And I think, are you adding to that problem? as an agent, are you, are you sending people things that are not relevant for people's portfolios? That's something that they have to take time on and respond to. Or are you being a value

added, you know, are you being a value added partner to them? You know, are you listening to them and are you picking your spots accordingly? Right. So I think it's about everyone's most precious commodity in our job. It's like, it's just time, right? And are you being respectful of their time and thoughtful? And by the way, I've talked about the LP side, but it's also, are you also of being respectful and thoughtful of your GP client's time. We hear horror stories all the time of GPs we talk to, haven't maybe worked with an agent before, and we'll ask them about their last fundraise, and they'll tell us stories about how they showed up to meetings with investors, all excited. And, you know, let's say they're a U.S. healthcare fund. And in the first five minutes of meeting,

do their intro, and the investor says, it's great to meet you. We don't have any allocation this year, and, you know, we actually don't invest in health care funds. You know, great, you got the meeting, but it's, you know, you've ultimately wasted your time and you've wasted the LPs time. So I think it's on both sides of the GP and LP equation. We started the conversation with the exact right framing, which is there's a lot of noise, but it's all about that first close and having momentum on that first close. That solves 80, 90% of the problems. So on that first close, does it ever make sense to have fee discounts or is that also negative

signaling in the market? And how do you reconcile these two different philosophical approaches? It depends on the fund and the asset class in the situation to an extent. Where we see things like fee discounts for first closers as more common practice is first and foremost maybe on really large funds, like large cap funds, right? Because you're hurting a huge number of cats there and you've just got a huge quantum and capital arrays. Again, not clients that we work with, but I think we see that in the market.

I think it's also more common in certain strategies and asset classes. For example, infrastructure and credit, I think, particularly in credit, I think we see that it's more common. It's not universal, but it's more common. And because of that, I think with those categories, I don't think it necessarily signals weakness to the market. I think because it's more accepted standard practice, I think it's just viewed as a tool of driving a more efficient fundraise. I think where it's less common is in the middle market and the lower middle market, you know, in buyout and growth equity, which where we're we have an active practice. And it's less common, and we typically do not advise it.

In fact, we usually advise against it because for, I think sort of in that asset class, I think two fundamental reasons. I think we take that for you. First is back to something I said earlier, just philosophical point. I think in these equity strategies, you know, I think people are investing and moving early because they're excited about their return, right, that they can make. they're not moving early because they're saving on cost. You know, net net in the context of their whole portfolio and they're signing up to these funds for 10 years, these are big decisions.

Saving some basis points on the management fee isn't a reason for people to buy something. I think the second reason is to use that, David, just because it's not common, I think there's a risk of negative selection bias. If you're doing that in a market where it's much less common, so I ask, why, well, why do you have to do that? And you mentioned that they're moving to get returns. They're not focused on the basis points. Why do they care about getting the first close? Is that just about getting their allocation? It sort of depends on the situation.

I think what we talked about is like the sort of a big example we were both referring to is a scenario where it's a really sought after fund and it's credibly going to move quickly. And then, yeah, I think often a big part of the practical incentive is to secure allocation. I think there is also maybe a softer point, but it's a real one. I talked about the idea of partnership and relationship between LPs and GPs. And I think that goes both ways. And a lot of LPs recognize that it's really helpful to the GP for people to move quickly, right? It means less time in the market.

It's really valuable. We always say, like, dollars in the first clothes are the most valuable dollars in a fundraise. And I think LPs know that. And I think some really forward-thinking LPs, you know, who want to, have a differentiated relationship and care about that. I think they're proactive in moving early because they know it's going to be meaningful, really meaningful to the GP. The GP is going to remember that for a really long time. Do you find that impact us that that's an effective strategy as an LP? Absolutely. Absolutely. I mean, look, GP is fundraising is hard, right? Fundraising is

hard and it can be long. It can be a big drain on time and energy and folks who show up early, I absolutely, GPs remember that, right? It's meaningful to them. And again, I think LPs know that. And so I think that's often also, also a driver. But going even more upstream of that first close, that first 60-minute meeting with an LP, you only get one chance to nail it and get a second meeting. What are the best practices there? We talked a lot about nailing the narrative, right? And so, and we talked about running a 360 on your, on your firm on yourself, right, so that you don't go in blind. Like, and again, the reason to do that for that first meeting is, so you've already gone out and checked with the market, especially if you're

an established fund he's raised before, right? You have existing LPs. You're, you're just getting unvarnished feedback of what investors really think about you, right? And again, what are the things they think you do well, what are there, but also you get a sense for like, what are sort of the things that chat, what are the areas they're going to challenge you on, right? Or if they're a prospective investor,

like, why haven't they, why didn't they invest last time? And I think knowing that going in and taking the time to do that work, you know, which can be scary, I think to a lot of GPs, like getting it like,

it's like performance reviews for all of us the end of the year, right? It can be scary to open yourself up and listen to what the market says. as what, it's incredibly valuable because you're not going in blind, right? And you can then use that time to, again, figure out how you lean in your strengths or bring out the differentiators or for the things you're going to be challenged on, the people, things that the things that people maybe haven't liked in the past, you're going to be

prepared on the front foot to talk about that, to address those concerns. And so I think that's, you know, that's really important. The other things that we maybe haven't talked, I don't think we've really talked about yet. Again, how do you set yourself up for success and be prepared for those, that first meeting. It's kind of like, I'll use that as an August, like, how do you set yourself up for a good raise? We talked about building early momentum. And we talked about, you know, the importance of our first close. So, you know, focus on what you can control ahead of that meeting. And one of those things, one of the things that a GP can control in this environment, right? There's a lot of things we can't

control, like how the market, how the person's going to react, et cetera. But one of the things a GP control is where they set their target fund size, right? Upstream of momentum. So if you're 50% to a $500 million raise, you technically would be 100% to $250 million raise. I know it's not one-to-one, but you actually could control your momentum in that matter. I think that's right. And really, it's about, I think the mistake, again, that we see, you know, regularly is GP's just setting a target in a vacuum, a target based on what they worked last time, like how much did they grow last time, let's do the same, or just a target that's based

on what they think that they deserve or that they should raise. And I'd flip it around and say, well, if we want to get 60 to 70% of the first close, of the target, excuse me, in the first close, let's work backwards from that, right, and figure out, talk to our existence, figure out where they are really at, right? What support do we have? And start to sort of get a sense, hopefully from an advisor, what do we think demand is going to roughly be from new? We're not always going to have, be able to predict that perfectly. But with the existings, with the existings, you can get a good read early. And then let's set a target that's real, where we can realistically, we have kind of line of sight that we can hit that goal of achieving 60 to 70% of it in the first close, right? Let's do that work. Let's be informed about that decision, right? Based on data and based on the assessment, let's not just set a number and walk into the meeting, right?

And I get surprised on the negative. To further that, instead of going after this hypothetical $500 million fund, which if maybe miraculously you'll raise in 24 months, why not raise? half of that in six to nine months come in with momentum and then two to three years later be back with another fund. Everybody's happy. The LPs are vouching for you versus kind of these unrealistic goals that you would have never, you would have never hit anyways, but even if you would have hit, you'd be in a weaker position. I think that's, that's right. I've talked a lot about what the GP can do to prepare themselves in their story and, you know, the fund

size. Maybe I haven't talked about, but that's super important. A huge part of, I think, what our value proposition is to general partners going into a fundraise. is like you also want to go into that meeting with like an educated understanding of who that LP is right at the organization at the institutional level but also the individual you're meeting with right what's the role in the business

and you know again what is their portfolio look like what problems do they need help solving doing that work to sort of understand your audience and to sort of and and to really to an extent tailor your your presentation and tailor where you talk about that can be really really valuable, right?

I think it's sort of like, one of my colleagues said this to me the day, I thought it was great. It's like, we want GPs going and understanding like, what's the question behind the question, right? So that they're prepared. When an LP goes into a certain line of questioning,

if you understand their program, what their experiences have been, who else they're invested with, right? Why they haven't gotten there before on your fund, you go in more informed of like, what are they really getting at? Like, what's their fundamental, what do they fundamentally care about here

that I need to make sure that I hit on it? that I address head on in that first conversation. So I think that education on the LP program going in is really important. It could save everyone a lot of time and lead to better outcomes. To operationalize that, who are the people that get all this research that spend the 10, 20 hours on the LPs? There's people that have a lot of belief in the fact that that LP is actually interested in their strategy. So obviously working with an Evercore, but in general, just getting high integrity information on the LP could actually lead you to do that homework, which will lead you to better results,

which is this kind of upward spiral. An opposite happens as well. You spend, maybe you spend five times doing all this research and then you have the meeting and you realize that they're not even interested in this space. You start to do less and less research, which has a downward spiral as well. Yeah, absolutely.

Private market's fundraising is like, it's an incredibly inefficient process, right? Sort of why we have, why there's any, what justifies our existence as an agent, right? It's an opaque market. It could be really, really inefficient use of people's time. So I think what you're talking about there is like, how do you just make that more more efficient?

And I wanted to double click on that hypothetical example of this $500 million and the $250 million fund. So tell me about that and give me some examples. And your question there was basically my point was, you know, another way to say fundraising is a momentum machine. That's the theme of it's all about momentum about this, about the fundraising the first close. But the franchise itself, if you zoom out, is also about momentum.

How do you get a great fund two? Do a great fund one. That's oversubscribe. How do you get a great fund three? You have to build this momentum with these recurring games with all the actors in the space. So what I'm saying is instead of coming up with an arbitrary 500 million, if you truly have 250 million demand, which is very impressive in this market, then sequence in the right way.

It was more of a thought experiment. I'd love to get your thoughts on some real world experiences of how you see that in the market today. Yeah. So if I get your question right, I mean, it's a little bit of, it's sort of like, I guess one way we think about it is, you know, We'd much rather set a conservative target and get that slightly wrong in terms of there being more demand and generate momentum than the other example, which is to be really foolhardy on the target or almost overly aspirational and get stuck in the doldrums, right? We talked about what happens when you get to this great first close. But we didn't talk about what happens if you don't. And I think you see a ton of examples of this in the market.

If you don't hit 60 to 70 percent, if you're like less than 50 percent of your first close, for whatever reason, right? But you set a big goal and you can, you know, that is what, what happens at private equity fundraising. If you have a weak first close, you're just getting caught in the doldrums, right? Now you don't have momentum. Now you don't have scarcity value. And you've, you know, the market sort of will take the stance. Okay, you know, they set a cover of a billion dollars and they have a $200 million first close. Like, I've got time, right? I could sort of see how this plays out. I can wait for the final. And that's what we're, I think GPs and certainly we, the work we do GPs, that's what we're looking to avoid, right, when we can. Because of all the reason, all the obvious reasons, you know, being out in the market a long time is a drain on, is a drain on everybody. So we'd always rather be more scientific about it. And to an extent more conservative on the target to generate that momentum. You also kind of talked about, you know, something, you also referred to something else, which gives me a thought like in terms of, you know, is it basically better to, aren't you better served to almost raise a smaller fund and get it done, quickly than to go for a bigger target is you might get there, but you're out in the market for

two years. And I think generally speaking, and I'm going to generalize here, I think the answer is not surprising is like, yes. I was talking to a GP the other day about this. And they actually have a great hand and we have high conviction that they're going to get to where they want to be. But what I was articulating to them is, look, for us, the way we think at Evercourt about partnering with GP is it's not just about this fundraise, right? It's not just about fun one or if it's a fund two in this case. It's about we're immediately thinking about fund three and fund four. How a fundraise lands and

how it's, how it unfolds in the market really does matter, even if you get to the end goal. And I think if you can the sweet spot is if you can run a raise where you're in and out of the market in an expedited fashion and you also are, even if you do have a lot of demand,

you're really thoughtful about you know, which LPs that you prioritize and how you curate the list of investors for that raise. Like, hopefully you're doing a couple things, right? You're going to a couple things, right? One, I just think when you have a raise that moves quickly and it's oversubs subscribed, people will remember that, right?

So it kind of establishes a good fundraising brand for your GP for the next time. It means next time you come back, LPs will remember that it, you know, it moved efficiently last time. And they like that because you're, what LPs really want, of course, is, I mean, it shows them demand. Yeah, it shows them it's a good product. but also investors want GPs, they don't want GPs out on the road forever, right? They want GPs focused on the portfolio and on delivering returns and adding value.

So I think there's a lot of like cascading benefits to getting in and out in an expedited time frame. And so if doing a slightly smaller fund is going to achieve that, I think that pays dividends for you, you know, down the road for your next race. I think there's just sort of an aura effect with that. I wanted to push back on something that you said earlier in this context, which you said the worst call to make to an LP is that they're going to get cut back. is there not a golden ratio. If you cut back an LP from 20 million to 15 million, don't they net, net, have a better experience than if they got the full 20 million?

If you cut an LP back from 20 to 15, do they have a better experience than they had gotten the full? It's the truest signal of being in a hot fund. Yeah, I think that's a good. I like that framing. I mean, obviously, if you cut them back to five, they might be unhappy. But it feels like if you take the same heuristic as rounds or IPOs,

that getting cut back, they may not never admit it, but it's actually a pretty good experience for the LP. That's a really glass-s-half way of framing it. So I appreciate that, David. I might use that. I might steal that one from you. I think that's right. I mean, look, I think if I just think about in the LPs that I know well,

I think that's a big part of their value out. And I think it in terms of how, you know, frankly, it reflects on them internally and individually within their organization. You know, if they're able to get, show that they got an allocation, even if they were cut back, they participated in a fundraise that was oversubscribed. And this other LP down the street didn't get any. and, you know, it was a select number investors, I think, you know, maybe oddly, but I think accurately, that reflects really well on them. Like, they've probably made a good call. And hopefully

that plays out in returns, but it certainly reflects well on them that they, that they secured an allocation. And I think that's sort of, to your point, if there are cutbacks, it's probably indicative of a really high quality GP, right? Now, there are really high quality GPs that, you know, we work with and in the market, by the way, we should say that are, where we go in knowing it is going to be a longer race, right? Because we're building a brand and we're building a story. And those can also reflect great on LPs when they sort of take a chance and they do go into a fund that maybe doesn't even reach its hard cap because they believe in it.

And I don't want to get a short shrift to that. It's not all about just following the crowds. But I think that's right. And look, allocations are always, you know, allocations for funds that are in demand. We always start with like, from the GP's perspective, let's be honest, it's a high quality problem to have. Like, you would like to find yourself in that position every time. time, right? You have access to demand. But it's still a problem if you've got, you know,

give your 2x over subscribed and you've got to deliver some tough messages to LPs, especially if like those are real relationships that are value. Like our, you know, our business, we have clients on two sides, right? Obviously, we have the sponsors and the work we do for them, but equally we have our limited partner relationships. And if we're not treating, if we're not treating our limited partner relationships with respect and integrity, you know, they're going to go away real quick. And, and frankly, we lose our value to the GPs in the first place. So it's very circular. And I think the ideal situation often is, you know, for us is, and for GPs is like, look, we, we, GPs want a diverse

LP base, right? They would, they would like as many high quality names as possible. And so if we've got a lot of demand, it's often, how can we sort of get as many people in as possible, assuming they all want in, um, at an allocation that works for them. It might not be, you know, their perfect allocation, but at an allocation where it's not painful, it still works for their program. And so we've sort of delivered a high quality product and gotten the LPN at a number that works for them and then they can build on that relationship and future funds that hopefully they feel good and they feel well treated. And we've delivered the GP, you know, really great diversification across a number of LPs

and a successful fundraise. From a GP perspective, from agent, but that's sort of the perfect, the perfect outcome. One thing I just reflect on all the time and, you know, case and point, just getting to have these kind of discussions with people like you is I love talking about this stuff because I, you know, I'm really one of the lucky people who's ended up in a career that I just really, really enjoy. I mean, you've heard me talk a lot about storytelling and nailing the narrative. I sort of love, I love storytelling. I always have. And we've talked a lot about relationships. And I've always just loved. coverage and getting to know GPs and LPs, what makes them tick. If I was to sort of sum that up for all shapes and sizes of GPs, the analogy I was used, you know, is raising a fun today without a placement agent. It's kind of like running a marathon in dress shoes. You know, you might get there, but it'll take longer, it'll hurt more, and you probably

look worse while you're, while you're doing it. And whether you are a, you know, a GP who's in a great position and has had successful fundraisers in the past and has strong numbers and a great story. You know, I just, I advise you to think about the fact that, like, even the best Olympic athletes who get gold medals, they all have a coach, right? So there's probably somebody out there who can work with you to make what's maybe already a really good story even better. If you're a GP who, you know, is established, has been around, but just isn't getting the traction that they think they deserve right now or feels lost in the shuffle of where the markets evolved to. I think an agent, you know, for you can really do that

work to help you elevate your narrative. And if you're building your business for the first time, if you're raising a first time fund and an emerging manager, you know, a great agent can partner with you to go out and establish your brand in the right way and build your customer base from the ground up. And I really, really appreciate you having me on. David, it's been an absolute pleasure. Thank Alex. That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person your network who'd find a valuable or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your

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