Opinion

I was disheartened to read the following in a recent trade column: “Fundraising is fast becoming a modified version of Cloak and Dagger, pitting GPs vs. LPs.” The phrase “cloak and dagger” conjures images of spies, deception and assassins. How did relationships founded in the concept of trust fall into such language of distrust? As fundraising has become more challenging, more of our clients have elected to create or enhance their focus on improving relationships with their existing and prospective LPs. The demand for Investor Relations professionals has been growing dramatically and we have been developing these roles with many clients concerned about their short- and long-term fundraising success. Not too long ago, I attended a panel discussion on How to Improve LP/GP Relationships. At the time, I wondered how this panel discussion could possibly last longer than a couple of minutes. In my mind the answer was, “Be nice to the people who give you money” and “Be nice to the people who make you money.” It seemed like an easy open-and-shut kind of session. To paraphrase the opening lines from the movie Casino, Robert DeNiro says; "When you trust someone, there is no other way. You give them the keys to everything that's yours, otherwise what's the point.” For me, those words sum up a lifetime of relationships for the very essence of any relationship is quite simply, trust. Having been helpful to a number of private equity and venture capital firms in staffing their existing or newly formed Investor Relations teams, here are seven tips for how to improve those relationships.

There has been a great deal of recent press regarding the gulf between buyers and sellers of private equity interests. The disconnect is usually attributed to some analytic model—the vagaries of FAS 157, a lack of information, uncertain outlooks, etc. As a buyer of private equity interests, I believe that there is validity to many of the commonly-cited explanations. Nevertheless, focusing on the financial metrics alone imagines a world in which price is the only driving force in markets. It is important to remember that institutions never sell private equity. People within institutions sell private equity. Many of the individuals tasked with managing private equity portfolios have recently suffered through traumatic professional experiences. Buyers of private equity need have patience and understand the personal nature of private equity partnerships.

VCs lamented the dead IPO market 'round the clock at the AlwaysOn Venture Summit two weeks ago, where the theme of conference was the search for liquidity. Yours truly participated on one of three panels dedicated to raising the four horsemen from the dead. The NVCA has published a position paper on the national IPO crisis, recognizing the need for a viable underwriting ecosystem -- and even calling for government intervention. So we are to understand that VCs, in their infinite wisdom, altruism and patriotism recognize that a sound IPO market is critical for the economy. So critical, in fact, that they are ready to champion government involvement to fix the machine. I completely agree that our IPO market needs fixing. But the venture community needs to get out of its Aeron chair and pitch in before calling the “Obama Phone.” Benchmark, Integral and Impact threw another shovel of dirt on the IPO market with OpenTable, when they paid 70% of the deal fees to Merrill Lynch – a firm that is too big to care about small cap IPO’s. Does anyone with half a brain think that the OpenTable deal fees will have any effect on Merrill’s allocation of resources? Big banks like Merrill, Goldman, JP Morgan, Morgan Stanley can not afford to focus on the small-cap IPO market. You don’t need a calculator to do this math!

June is innovation month in New England and it has started off with a bang. A few weeks ago, Business Week named Boston the 3rd most inventive city in the world. This week, The Deal declared that Route 128 is well-positioned to continue its leadership in innovation, despite the economic crisis, due to its diverse economy and robust enterpreneurial environment. All month, there are numerous high-quality events going on, including an Unconference run by Mass TLC, MIT Deshpande Center's IdeaStream and MITX 2009 Awards night. Much thanks to Scott Kirsner for catalyzing this energy around innovation month! With all this attention being put on innovation in New England, I thought I would throw out a top ten list. If there were ever to be created an Innovator Hall of Fame, these 10 would get my vote for the first inductees. With apologies to Edwin Land, Ken Olsen, and others, this is not a historical view. These are currently active players in the innovation scene. I solicited input via Twitter and Facebook on this and got great (and fairly consistent) responses. In no particular order:

Sometimes, I envy public market investors; occasionally I think, “wouldn’t it be nifty to actually see your investment theses play out in less time than a presidential term or two?”  But then I remind myself how cool it is to watch portfolio companies flourish and strive and struggle and dream.  It’s like watching your nieces […]

Thanks to considerable drops in the stock market, private equity investors face the Denominator Effect, an issue Landmark Partners addresses in a new white paper. The Denominator Effect has caused overcommitted private equity investors to refrain from making new commitments or dramatically reduce their future investment page. The Landmark Partners white paper addresses why, in […]

Millions of words have been written on the bankers, traders, regulators and CEOs who helped trigger the current economic correction; and countless articles have been published about firms who either lived on the edge or were pushed over the edge as a result of this financial reversal. Much less has been said about the boards […]

At this year’s CTIA and Bowen, JohnBarcelona’s Mobile World Congress conferences, the buzz was about existing and alternative mobile platforms (e.g., Netbook, MID), mobile applications, and enhanced bandwidth capabilities. I am convinced that the convergence of these three areas will have profound changes on the market place. The M4 – A New Mobile Category. The […]

What is a private equity firm to do in the current leverage constrained market? The days of bidding up the prices of profitable and growing businesses in robust auctions -- fueled by stapled financing featuring PIK/toggle covenant light terms at 7x EBITDA -- are a thing of the past. The debt crisis has largely eliminated the availability of debt financing for LBO transactions, and owners of healthy businesses are holding their properties off the market rather than attempting to gain liquidity against the headwinds of wounded private equity buyers and introspective lenders. Obviously, many private equity professionals are devoting a significant amount of their time and energy nursing the hangovers in their own portfolios from many of these deals. But for the more intrepid PE professionals with dry powder, there may be an opportunity to pick through the carnage created by the debt bubble of the early part of this century and turn some of the lemons into lemonade. The auction process in this new world order may be in the form of sales pursuant to Section 363 of the Federal Bankruptcy Code.