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1、John CookExecutive Director WJ Hopper & Co. LimitedChairman Thunderbird Private Equity Center Executive Advisory BoardRaising Venture Capital: An Entrepreneurial & GP/LP PerspectiveApril 2 & 4, 2008WJ Hopper & Co. L q Boutique Investment Bank with global representationLondon, Zurich, San Francisco,
2、BrusselsTokyo, Tel Aviv, Sao Paolo, Reykjavik q Focus: International Private Placementsq Clients: Leading Private Equity Firms and Private CompaniesqInvestors: Institutional, Government and Private Investorsq John Cook: Purdue University BS; Thunderbird MBA; International Harvester, Merrill Lynch, S
3、ecurity Pacific Bank What are effective strategies and tactics to raise capital, both for entrepreneurs and fund managers? Vision, strategy, tactics and lessons learned“Raising a new fund is an event of singular strategic importance for a private equity fund. The firms future is, in effect, placed i
4、nto the hands of institutional investorswhose capital allocation decisionsare a key influence in shaping the private equity industry. These investors will, by choosing whether or not to participate in the fund, either provide a mandate for continued growth or cast a collective vote of no confidence
5、from which very few managers will ever recover.”Importance of FundraisingSource: “Fundamentals of Private Equity” - PEI 2008 Fundraising EcosystemThree Layer CakeGeneral PartnersPortfolio CompaniesEndowmentsInsuranceLimited PartnersGovernmentsBanksPension FundsFoundationsFamily OfficesCorporationsAB
6、CDHGFEFund of Funds(USA / EUROPE / ASIA / LATAM / MIDEAST)Sovereign Wealth FundsUSA / EUROPE/ ASIA/ LATAM/ MIDEASTCARLYLEGOLDMANNEACVCSecondaries Stakeholders$500 MM Thunderbird Private Equity PartnersLPsUSALPs ASIALPs LATAMEDCBALegalAcctGP=Cabrera Mgt LLCRegulatoryCUSTOMERSSUPPLIERSEMPLOYEESLENDERS
7、EXITIPO TRADE SALEAuditAdvisorLPs EuropeENTREPRENEURSFundraising ProcessFive Step ProcessTotal Time 12-24 Months DD/ClosingRoad-showsMarketingPre-Marketing Strategy Formulation LPs with decision-making process move forward.vDue Diligence documents sent to LPsvLPs visit managers officevLPs agree to c
8、ommitmentsvCommunicate closings to remaining LPsContact potential LPs and distribute Fund marketing materialvSend overview / teaser to initial targeted partiesvSend PPM to requesting partiesvSet up conference calls or face-to-face meetings for road-show periodvComplete LP QuestionnairesvInvite LPs t
9、o visit HQUnderstand and articulate market opportunityvInitial formulation of fund strategy and tacticsvInternal and external review and evaluation: resources, competition, market opportunity, teamvGeneral agreement on fund strategy, terms, team, process and documentationPreparation of documents/DD
10、materialvSelect key advisorsvWork with advisors to create suite of documents.vMap universe of LPs, decide on who to approach and when and by whomvFinalize LPA, PPM, PPT, overview, diligence package, subscription agreements.vDevelop communications strategyvForm new fund entity On-site presentations a
11、nd meetings with interested LPsvVarious formats possible depending on size of team and geography: Individual visits to LPs combined into a tourorLP group invited to luncheon or other event hosted by GPDecision to ProceedIdentify and interview advisorsRetain Advisors, Form TeamCompleted Marketing Doc
12、sPrepare to go to marketMarketing strategy agreedRoad-show set up with LPsManage process and monitor feedbackIncorporate feedback from marketBegin to get signed subscription agreementsMonitor objections, make refinement in processFace-to-face meetings with LPsFirst, interim and final closingsProceed
13、 with final closing processBegin investment processDocuments Marketing PackageOverviewFlip chart presentationPrivate Placement MemorandumDue Dilligence PackagevSubscription agreementvSummary of all contractsvActual contracts (only if requested)vNames of advisors to the fundvSample reports to investo
14、rsvEstimated timelinesvAsset allocationsvCurricula vitaevAttribution analysisvInvestment transactionsvManagement referencesvPipeline of dealsvArticles of incorporationvRisk mitigationPrivate Placement Memorandum Executive Summary Investment Thesis and Rationale Investment Strategy, USPs and Value Ad
15、d Sector and Geographic Focus Investment Process, Diligence Process, Use of Debt, Exits Team Members and Advisory Board Track Record with Attribution Analysis Deal Sourcing and Pipeline Key Terms of the Fund Risk Factors and Conflicts of Interest Legal and Regulatory Matters AppendicesStandard Limit
16、ed Partnership TermsObjective = Alignment of InterestsFund name:Thunderbird Private Equity Partners LPLegal structureDelaware Limited PartnershipManager:Cabrera Capital Management LLCFund size: $500 MillionMinimum: $5 MillionTerm:10 years + Two ExtensionsManagement fee: 2% during investment period t
17、hen decliningCarried interest:20% with 8% Hurdle RateGP contribution:2% of Committed CapitalCo-investments:Yes for Large CommitmentsVision, Strategies and TacticsTo raise the right size fundWith the right teamWith the right strategyOn the right termsWith the right mix of LPs At reasonable time and c
18、ostWhat is the Fundraising Vision?Strategic QuestionsBlanket The Market Or Be Selective?Geographic Target: Local, Regional, National, Global? Types of Target: Corporate Venture, Active Passive, Govt?Which Staff Should Undertake The Task?Documents Who, What, When, Where, How?Selecting Advisors: Legal
19、, Accounting, Communications How Much Time and Money Will It Take?Use Placement Agents Or Go It Alone?What General Partners NeedHIGH QUALITY, VALUE-ADD INVESTORS Good Relationships with LPs Strong LPs with Patience, Understanding, Insights and Trust LPs with Sophisticated Approach to the Asset Class
20、 Low Turnover of LP Investment Managers Global Diversification of Investor Base Value Added LP Base Advisory Board Members, Co-Investors No Interference in Running the Fund Little Friction Help with Exits, M&A Opportunities, Company Building Help with Secondary Market for LPs Who Need to SellWhat Li
21、mited Partners Want?DIVERSIFICATION, HIGH RETURNS, LOW RISK Attractive Market Opportunity Over Long Time Horizon Broad and Deep Pipeline of Deals Systematic Approach High Quality Team with Cohesion, Credibility, Balance, Stability Prefer to Back Strong Teams No One-Man-Band Portfolio Diversification
22、 Across Sectors, Stages, Geography Special Terms: Co-Investments, Technology Window, M&A or IPO Rights Stable Investment Environment: Regulatory, Economic, Fiscal Controlled and Manageable Risk Parameters Clear Value Creation Strategy of the Team Serial Relationship with GPs Clear Exit Routes via M&
23、A, IPO, Strategic Sales Lower Fees Equitable Risk SharingTarget Investors LP Decision Process Insurance Companies = Institutional Model Commercial Banks=Institutional Model Investment Banks= Strategic / M&A / IPO Pension Funds= Institutional Model Corporate Investors= Strategic Drivers Foundations=
24、Opportunistic / Strategic Endowments= Opportunistic / Strategic Fund of Funds= Institutional Model Governments=Strategic / Social Objectives Private Investors=Opportunistic / PersonalSovereign Wealth Funds: $2.5 Trillion ProblemAbu Dhabi Investment Authority$875 billion Government Pension Fund of No
25、rway$350 billion Government of Singapore GIC$330 billion Saudi Arabia$300 billion Kuwait Investment Authority$250 billion China Investment Corporation$200 billion Singapore Temasek$159 billion Stabilization Fund of Russia$158 billion Canada Pension Plan$119 billion Australian Government Future Fund$
26、 61 billion Qatar Investment Authority$ 50 billion Alaska Permanent Fund$ 40 billion Libyan Investment Authority$ 40 billion Brunei Investment Authority$ 30 billion Korea Investment Corporation$ 20 billion Malaysia Kazahana National$ 18 billionWrong Attitude This is a Piece of Cake My Fund Was Made
27、In Heaven Every LP Will Want My Fund Raise as Much Capital as Possible This Will Take No Time At All LPs Are Real Dummies Target All LPs Of All Types In All Categories Everywhere No Need For Personal Visits No Need For Professional AdvisorsRight Attitude My Fund Must Have Its “Issues”And Problems On
28、ly A Few LPs Will Be Interested In My Fund Better To Pace Myself, Do This In Stages Work My Network Personally This Will Take 5 Times Longer Than I Planned This Will Cost 5 Times More Than I Planned LPs Are Pretty Experienced Folks Target Specific LPs Of Specific Types Be Prepared For Travel Good Ad
29、visers Add ValueFundraising TrendsBig Picture Explosion of Private Equity Globally Greater Acceptance of Asset Class by Stakeholders Larger Fund Sizes, Larger Institutional Allocations Top Firms Produce Best Returns - Persistence Growth of Secondary Market but at a price Greater Sophistication at GP
30、 and LP Levels More Transparency, Better Investor Relations Standardization of Terms & Conditions Greater Value Added Role of GP Better Governance and Regulatory Environment Better Risk Measurement and Control However - Much More Criticism of the IndustryCurrent Environment Buyout boom of 2003-2007
31、has come to an end (or paused) Buyout firms paid too much for deals at the 2006-2007 peak Debt market closed for larger deals, more equity to complete deals Recession is fully underway may be long recovery Dollar at all time low and dropping Mortgage market in turmoil with subprime mess Stock market
32、s increasing volatility Financial sector Bear Stearns, UBS, Merrill Lynch, Northern Rock Sovereign Wealth Funds coming on stream big time Fed and White House taking emergency steps to provide stability AND YET - private equity allocations are increasing!Popular Sectors / Trends Traditional: TMT, Lif
33、e Sciences, Healthcare Mid-Market Buyouts / Expansion / Growth Specialized: q Clean Tech Sectorq Energy: the hydrocarbon problem q Infrastructure: electric grid, telecoms, ports, transportation Emerging Markets: BRICS + N11q First Tier: India, China, Central & Eastern Europeq Second Tier: Latin Amer
34、ica, CIS, Middle East, Africa Increasing Interest in Venture & Growth versus Buyouts Globalization / Regionalization Opportunities Predictions for 2008 Slow Down in Mega Buyouts (credit crunch/recession/falling markets) Pick Up in Late Stage Venture & Other Sectors (less leverage) Non-US Markets to
35、Stay Strong (less mature, still growing) Secondaries & Distressed =Strong Growth, Tighter Pricing Sovereign Wealth Funds & Petro Dollars Make Bigger Splash Think Contrarian - Take Advantage of the Carnage Biggest Challenge: Build the Case for Value Add Greater Convergence of Asset ClassesSource: Dow
36、 Jones Private Equity Analyst “Review & Outlook”Survey of Institutional Investors : 2008Source: Dow Jones Private Equity Analyst “Review & Outlook”Plans to Increase / Decrease Allocations: 78% plan to maintain or increase allocations to private equity 22% plan to reduce or terminate allocations to p
37、rivate equityAreas of Increasing Interest: Distressed debt, mezzanine, secondaries, co-investments, venture capital, growth equity, small and mid-market buyouts, cleantech, China, India, Russia, Western and Eastern Europe, Latin AmericaBiggest Areas of Concern: Credit crunch, economy, recession, exi
38、t markets, massive fund sizes, manager selection, tax law changesWhere Does The Money Flow? Source PEI: 1600 active LPs worldwideInstitutiontype and geographicalsplit of investors in privateequity fundsSector Allocations: Who Gets Most? Source PEI: 1600 active LPs worldwideTop 50US pension fundscurr
39、ent averageallocation breakdownby fund type.Regional Allocations: PE Stays Close to Home Source PEI: 1600 active LPs worldwideGlobal plusNorth America,Europe, Asia/Pacificbased LPs averagegeographical split ofInvestmentsSource: Probitas PartnersSource: Probitas PartnersSource: Probitas PartnersEMPEA
40、s 2007 fundraising statistics show that private equity funds investing in emerging markets raised US$59 billion in fresh capital in 2007, a 78% increase over the US$33 billion raised in 2006. Fund sizes broke records, with 19 funds raising US$1 billion or more. The average size of closed funds grew
41、dramatically, from US$272 million in 2006 to US$426 million in 2007.Source: Emerging Markets Private Equity AssociationSource: Emerging Markets Private Equity AssociationSource: Emerging Markets Private Equity Association2007 REVIEW & 2008 OUTLOOK USAChanges in Capital Commitments2007ACTUAL2008PROJE
42、CTEDALL USA PRIVATE EQUITY$300 B100%$180 B$320 B100%BUYOUTS$230 B75%$125 B$250 B65-70%VENTURE$32 B10%$23 B$37 B12-15%OTHER$45 B15%$30 B$50 B15-28%Source: Dow Jones Private Equity Analyst Lessons Learned:Tips & TricksThe Marketing Push New LP Relationships are the Hardest to Cement Start Pre-Marketin
43、g Two Years Ahead of Fundraising Be Prepared for the Long Journey! Assemble All Documents Before Fundraising Document Everything, Especially Track Record Get Local Anchor Investors in First Think of Every Question Ahead of Time Designate One Senior Partner As Point Person Brief Your References, Keep
44、 Them Informed Use Professional Advisors Use Technology Video OK But Face to Face BetterThe Marketing Push Determine Priorities: Close To Home LPs First Leverage Your Secret Sauce: Why Are You Unique? Spoon Feed LPs What They Need No Big Push Use of Virtual Data Room Learn From Each Presentation: Ad
45、opt and Adapt Do Not Push LPs for Early Decisions (Court a Negative) Deal Attribution Critically Important Track Record Is 90% of the Game Present it Well! Answer Each LP Question Carefully Must Involve Most Senior Team Members Must Have “Market Terms” (For Your Fund-Type)The Marketing Push Keep in
46、Front of LPs Send Stuff Regularly Must be a Good “Fit” with LP Strategy and Timing Talk About the Mistakes and Lessons Learned Show Succession Plan is in Place Think Long Term - Ten Year Marriage Be Anecdotal, Personal Relationships Matter Two Way Conversation Learn to Listen and Question Lighten th
47、e Atmosphere Be Relaxed Send Thank You Notes for Meeting and Advice Get used to it - Fundraising is a Life Style!Conclusion: What it Takes? Takes Time 12-18 months to raise new funds Takes Skill It is an art, not a science Takes Luck External events impact success Takes Money $1 million per launch Takes a Team Cohesive, hungry, smart, dedicated Takes a Story who, what, how, when, where, why Takes Persistence Must turn over many rocks!Happy Ending:Thunderbird Private Equity Partners Closes Fund at $600 million20% Over-Subscribed!Thank You!
