Yes, it’s hyperbolic to call the methodology revolutionary. It is used extensively by a large percentage of ultra-wealthy entrepreneurs to build great companies. The methodology enables multi-family offices, wealth managers, lawyers, and accountants to dramatically grow their practices. So, it is not inherently revolutionary. However, while outstandingly effective, the methodology is rarely used by hedge funds and PE funds as they seek to raise capital from the ultra-wealthy including single-family offices.
Generally, hedge funds and PE funds put together a pitch book to use in their capital-raising efforts. While the pitch book does indeed have a role, based on a series of empirical studies with the ultra-wealthy and single-family offices, it plays a major role. Commonly, the pitch book and the related PowerPoint presentations are the agenda and narrative used by the fund professionals. The way the pitch book is used often guides the conversation and—it is fair to say—the whole approach is somewhat narcissistic.
Even without the pitch book, the capital raising professionals are quick to discuss the merits and “brilliance” of their investment strategy and philosophy. To be clear, based on the research, this approach of “pitching” the hedge fund or PE fund to ultra-wealthy investors does work. However, the approach ends up leaving a lot of money on the table.
If “pitching” hedge funds and PE funds is not all that efficacious, why is it so pervasive? Again, it does work. Moreover, the approach is the “industry standard.” For the most part, it is what capital raining professionals do. It is how they were trained; it is how they think. Furthermore, the people responsible for raising capital—especially for smaller funds—are many times enamored with what they’re offering which in practice, can be seen as a version of narcissism.
So, if the answer is not “pitching,” what is the answer? Quite simply…to raise significant monies and create advocates among the ultra-wealthy who will help find other ultra-wealthy investors, capital-raising professionals are well served to align their interests with each ultra-wealthy investor. And, when we say interests, we are often talking about more than solely making money.
The methodology we are recommending is to make the conversation all about the ultra-wealthy investor. Before that is possible, capital raising professionals have to connect with ultra-wealthy investors. The optimal way to do this is by being introduced where the person making the referral has explained how the capital raising professional can help them determine if their hedge fund or PE fund makes sense for them. Ultimate Rainmaker is the methodology that can turn all types of professionals into advocates for the fund.
Having gotten a meeting with an ultra-wealthy investor, instead of “pitching,” a very powerful practice is to learn about the ultra-wealthy investor. The Everyone Wins Process is instrumental in learning the thinking and perspectives of the ultra-wealthy investor. A common mistake some capital-raising professionals make is not understanding the experience ultra-wealthy investors have had with hedge turns and PE funds. By lacking this information and going into their pitch, they may only be setting off alarm bells in the minds of the ultra-wealthy.
Similarly, not being able to smartly explain how the hedge fund or PE fund fits in the portfolio of the ultra-wealthy and—critically—how the fund will contribute to them achieving their objectives will often lead to them not investing or making a smaller commitment than they otherwise would.
These complications and many other related complications are easily avoided when using the Everyone Wins Process. In developing a deeper understating of each ultra-wealthy investor, capital-raising professionals can customize the narrative to ensure alignment. This is not merely adjusting the pitch, it is much more. By customizing the narrative, the capital-raising professionals are showing how the hedge fund or PE fund is a meaningful source of value to a particular ultra-wealthy investor.
Another major advantage of this methodology compared to “pitching” is that it can lead to ultra-wealthy investors becoming advocates. As such they will be looking for peers to introduce to the capital-raising professionals. And, very importantly, they will be able to effectively lay the groundwork so that when the referrals meet with the capital-raising professionals they are already mentally engaged and increasingly likely to invest.
This revolutionary methodology—while so much more powerful than what is usually practiced today—is likely to stay revolutionary and rarely used. A significantly different mindset is required than what permeates so much of the hedge fund and PE fund industry today where everybody pretty much portends to be an investment savant. Those capital-raising professionals that employ Ultimate Rainmaker and the Everyone Wins Process, provided that the funds they represent are not imploding or racing to the bottom, are likely to excel.
One final consideration…the private wealth industry is in the process of resetting with the balance of power shifting to the ultra-wealthy instead of the professionals. In effect, the ultra-wealthy are—with the assistance of various industry experts—becoming much better financial consumers. As this reset intensifies and expands, those capital-raining professionals “pitching” are going to increasingly find themselves flailing.
RUSS ALAN PRINCE is the Executive Director of Private Wealth magazine (pw-mag.com) and Chief Content Officer for High-Net-Worth Genius (hnwgenius.com). He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals.