“We cannot run that play again. Not ever! It was too much.”
In preparation for our webinar on the operations of capital formation on June 2, we’ve sourced material from recurring conversations across the PMF network: the COOs, IR leaders, placement agents and platform builders shaping the operating layer of private markets.
Capital Formation Is Seeing Three Defining Themes:
01. IR Infrastructure
One IR head in the network, after their last close: “We cannot run that play again. Not ever! It was too much.”
The LP relationship. The deal history. The call notes from four years ago... Most of it still lives in inboxes, decks and people's heads. That works at fund one. By fund three, it is friction. By fund five, it is a ceiling.
The mid-market IR back office still runs on copy and paste. Data lifted out of spreadsheets. Requests triaged by hand. Investor reports that take months to ship.
The question is not what tool… It’s do we hire ahead of the next raise, or rebuild the stack underneath it? Most teams have done one. The firms starting to compound are doing both.
02. Consolidation
Two pressures are landing on the mid-market at the same time:
1) The largest GPs are building public-style distribution into private products. Evergreens. Interval funds. BDCs through the wirehouses and the RIAs.
2) LPs are concentrating commitments into fewer managers. Operational diligence at the front of the relationship is harder than it was eighteen months ago.
Both pressures show up at funds three to five in the same place. The operating model has to do more, with the same team, while looking institutional from day one.
03. AI Readiness
Two AI conversations are happening in mid-market IR right now. They sound similar but hey lead to different places.
The first is productivity. Write the deck faster. Summarize the call faster.
The second is institutional memory. Every LP interaction, every diligence question, every deal context becoming a system the firm owns across cycles.
ODD teams are asking which one a GP has actually built. The answer separates the firms whose next raise will be easier from the ones whose next raise will be the same fight.
Questions Worth Asking This Week:
If you're talking to GPs:
How does your next IR hire come up to speed? Through someone's memory, or through a system?
What did the last close cost in operations hours that were not deal related?
When an LP layers three questions in one ask, how long does it take to assemble the answer?
If you're talking to LPs:
What has actually changed in your operational diligence in the last eighteen months?
Where do GPs tend to lose the thread between fund three and fund five?
When you decline a re-up, how often is it about the deal track record… versus how the manager actually runs?
We'll be back on June 2.
Join us on June 2 for a live online conversation on what this looks like from inside a firm. How the operating model behind capital formation is being rebuilt. From inside GPs. From the placement seat. From the diligence view across hundreds of firms each year.
With Scott Voss (HarbourVest), Justin Woodley (StepStone), Ray Grant (Altvia) and Scott MacDonald (Investment Management Operations Podcast). Convened by Marc Andrew.
