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The LP perspective – what makes a fundraising data room LP-friendly?

Lucy Nicholls, Stafford Capital Partners

The key point regarding data rooms is that LPs are often both time and resource constrained; it is also very true that an individual within the LP organization will usually need to justify his/her recommendation to a Board or an Investment Committee: a GP should aim to make this process as straightforward as possible for the individual.

Sections within the data room should therefore be clearly labelled, so that it is easy for an LP to find the specific information that it needs.  The data room should also be easy to access and not too complicated from a technical perspective, allowing the LP to download individual documents which can then be circulated within the LP’s organisation if necessary/required.

With regards to the content, the GP should consider the following points:

  • AGM materials and quarterly/annual Investor Reports: These are always very interesting: they give the LP an indication of the quality of a GP’s reporting; do the reports contain all of the information that an LP needs on a regular basis? How ‘user-friendly’ are the documents?  How much additional, useful information (such as market reports) is usually included in the reports?
  • Track Record Information: Include comprehensive track record information in the data room, with as much data/as many data points as possible for each investment. LPs usually want to manipulate the data themselves, so give them as much information as possible in order to make that process as straightforward as possible; this also reduces the risk that an LP will ask for additional track record-related information or ask the GP to complete the LP’s own template (which can be very time consuming).
  • Market reports and third party industry reports/analysis: These can be very helpful to an LP, particularly if they give specific details of the opportunity that a GP is planning to address; LPs are usually required to present a recommendation to an Investment Committee and will/may/can use these reports to support their recommendation.
  • ESG: ESG (and adherence to UNPRI) is much more important to LPs than it was in the past; it is important for a GP to have policies in place and to demonstrate its compliance with relevant guidelines.

The general partner should also consider how and when to keep documents up to date during (often prolonged) fundraisings.  If an update is necessary, make sure that the document in question is updated in the data room and notify all of the LPs with access that the document has been changed.

It is preferable if as much information as possible is in place when the data room is launched, rather than adding items on a “drip feed” basis.  It is probably unavoidable that there will be some amendments and up-dates, but an LP can find it frustrating if a) it cannot find what it wants/needs initially and b) the LP does a lot of work and then finds out that something important has changed.

Respond to requests for additional information quickly.  Most LPs will not have a preference for this being done by a placement agent, or other service provider or by the GP: the key is that the person responding understands the request and delivers the relevant information in a timely manner.

Follow up with an LP when it has had access to the data room for a period of time; is there anything else that the LP needs?  Is everything in the data room understandable?  Does the LP have any questions?  This will also remind him/her to focus on the opportunity, in the event that it has slipped down the To Do list…

Lucy Nicholls is a Partner at Stafford Private Equity and also undertakes independent consultancy work.  At Stafford, where she has worked since 2012, she is involved in investment sourcing, due diligence, manager selection, portfolio construction and existing relationship management for private equity and private debt in Europe.  Prior to Stafford, Lucy spent seven years at Pantheon, three years at Adams Street Partners and most recently, two years at Graphite Capital.  In these roles, Lucy focused on all aspects of European private equity.

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