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Best Practices for Pitching LPs: How can fund managers without exits demonstrate value?

10 August 2016

McComma Grayson, Vice President at Harbourvest Partners discusses how fund managers without exits can demonstrate value to LPs during the LAVCA VC in NY in April 2016 at Civi Hall, New York, NY. This content is made possible with support from Omidyar Network and Telefonica Open Future_.

This content is made possible with support from Omidyar Network and Telefonica Open Future_.

Telefonica Omidyar

TRANSCRIPT

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McComma Grayson: I would say two things to look at would be validation from other investors, companies that have been able to raise follow on capital either from other credible local institutions or international investors, then two, looking to see whether those companies have been able to gain some type of traction in the marketplace ideally with revenue.

We look at first time managers. In most of our funds we probably have one or two first time managers and this is a bit of an aside, but recently we purchased a team out of Bank of America where most of their track record was focused on first time managers. But when we look at first time managers, if someone has a track record that’s great it may not be in their current strategy with their current team but having some type of track record it would be key.

But if that’s not the case I think showing that the companies have been able to add customers, add revenue that hit whatever plans the board and the management teams have set up would be really key because without evidence of realization you at least want the companies to be growing and performing according to plan. I think if you don’t have those then it probably leads to some other questions.

I would say a lot of traction on that burden side and cross validation from other investors that have come in and have invested after you have made those initial investments.

Audience: Is it a good sign for you that government agency or development institution put money in a pot? Is that good for you?

McComma Grayson: If they put money as a limited partner in the fund? Yes, I think having strong limited partners, that’s one thing that we look at when we evaluate the fund, just who the other limited partners are for a variety of reasons.

One, we’re going to make sure that the other limited partners are rational, that means a 10-year plus marriage, so being in the partnership with other rational actors is pretty important, everyone is acting in the best interest of all the other limited partners and not their own interest. But also I think having credible investors helps just validate the investment thesis, frankly gives the other investors comfort.

McComma Grayson: Diría que dos cosas que observar sería validación de otros inversionistas, compañías que han podido levantar nuevas rondas de capital bien sea desde otras entidades locales fiables o inversionistas internacionales, y la otra sería ver si esas compañías han podido ganar algún tipo de tracción en el mercado idealmente con ingresos.

Nos fijamos en gestores que estén levantando su primer fondo. En la mayor parte de nuestros fondos es probable que tengamos a uno o dos gestores iniciantes y, como comentario, pero recientemente hemos comprado un equipo de Bank of America, donde la mayor parte de su trayectoria se enfocó en gestores iniciantes. Pero cuando nos fijamos en estos, si alguien tiene una muy buena trayectoria puede que no sea en su estrategia actual con su equipo actual, pero tener algún tipo de historial sería fundamental.

Pero si ese no es el caso, creo que demostrar que las empresas han sido capaces de añadir clientes, de generar ingresos de acuerdo a los planes de la junta y del equipo directivo sería realmente clave porque, sin evidencia de realización, usted al menos desea que las empresas crezcan y se desempeñen de acuerdo al plan. Creo que sin ello, entonces usted probablemente podría llegar a enfrentar otras situaciones.

Diría que una gran parte de la tracción en esa parte de la responsabilidad y la validación de otros inversores que hayan invertido después de que usted haya hecho esas inversiones iniciales.

Público: ¿Es una buena señal para usted que una agencia gubernamental o instituciones de desarrollo pongan dinero en el fondo? ¿Es bueno para usted?

McComma Grayson: ¿Si ponen el dinero como LPs en el fondo? Sí, creo en tener LPs fuertes es algo que observamos cuando evaluamos el fondo, quiénes son los otros inversionistas debido a una variedad de razones.

Uno, queremos asegurarnos de que los otros LPs sean racionales, es decir, es un matrimonio de 10 años, por lo que estar en la asociación con inversionistas racionales es muy importante, todo el mundo está actuando con el mejor interés de todos los demás LPs y no su propio interés. Pero también pienso que tener inversores fiables ayuda simplemente a validar la tesis de inversión, y francamente calma a los otros inversionistas.

McComma Grayson: Eu diria que duas coisas a serem examinadas seriam primeiro, a validação por outros investidores, empresas que foram capazes de levantar novos aportes de capital, seja de outras instituições locais confiáveis ou de investidores internacionais, e a segunda, procurar ver se essas empresas foram capazes de ganhar algum tipo de tração no mercado, idealmente com receitas.

Olhamos para gestores que estejam levantando seu primeiro fundo. Na maioria dos nossos fundos, provavelmente temos um ou dois gestores iniciantes e, isto é um comentário à parte, mas recentemente adquirimos uma equipe do Bank of America, cujos registros históricos em sua maioria eram concentrados em gestores iniciantes. Mas olhando para gestores iniciantes, se alguém tem um histórico excelente, talvez não faça parte de sua estratégia atual com sua equipe atual, mas ter algum tipo de histórico seria fundamental.

Mas se esse não for o caso, acho que mostrar que as empresas foram capazes de adicionar clientes, adicionar receitas que alcançaram qualquer planejamento estabelecido pela diretoria e pelas equipes de administração seria realmente fundamental porque, sem evidência de realização, você quer que as empresas pelo menos estejam crescendo e com desempenho de acordo com o plano. Acho que se você não tem isso, então provavelmente abre espaço para outras perguntas.

Eu diria que muito da tração sobre esse lado da responsabilidade e validação de outros investidores que entraram e investiram depois de você ter feito esses investimentos iniciais.

Público: É um bom sinal para você que órgãos de governo ou instituições de desenvolvimento também colocaram dinheiro? Isso é bom para você?

McComma Grayson: Se eles contribuem com dinheiro como LPs no fundo? Sim, acho que ter LPs fortes, isso é algo que devemos pesquisar quando avaliamos o fundo, exatamente quem são os outros investidores, por vários motivos.

Uma, nós vamos garantir que os outros investidores sejam racionais; isso significa uma parceria de mais de 10 anos, portanto, fazer parte da parceria com outros atores racionais é muito importante, todo mundo está agindo tendo em mente os melhores interesses de todos os outros LPs e não apenas seus próprios interesses. Mas eu também acho que ter investidores confiáveis ajuda a validar a tese de investimento, e francamente acalma os outros investidores.

Best Practices for Pitching LPs: How can fund managers without exits demonstrate value? was last modified: May 18th, 2017 by Claudia Rosenbloom
ExitsHarbourVestMcComma Grayson III
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Methodology

LAVCA’s fourth annual list of Emerging Women Investors in Latin American Tech includes 135 junior- and mid-level investment professionals from Latin America-based firms, as well as from global firms with Latin America-dedicated investment teams.

Every year since 2016, LAVCA solicits nominations of top women investors in tech from the investment community. In 2018, complementing the peer nomination process, LAVCA reviewed the investment teams of all active Latin American VC funds. Our inaugural list of  Emerging Women Investors in Latin American Tech had 47 investors. The list has been constantly growing – from 87 investors featured in 2019, to 97 in 2020, and to 116 in 2021.

NOMINATE AN INVESTOR

This list is not exhaustive; if you know of a junior- or mid-level investment professional working on Latin American tech deals who should be on this list, contact [email protected]

TOP WOMEN INVESTING IN LATIN AMERICAN TECH

LAVCA’s companion list of Top Women Investors in Latin American Tech includes 140 senior-level women investment professionals who are deploying capital in early and growth stage tech deals.

About LAVCA

 

LAVCA is the Association for Private Capital Investment in Latin America, a not-for-profit membership organization dedicated to supporting the growth of private capital in Latin America and the Caribbean through research, education, networking and advocacy.

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