In short, it’s a long-term process. Really long-term.
When you’re looking to raise somewhere between $100 million and $150 million like River Cities Capital Funds is, you don’t just pick up the phone and start calling around. Or shoot off a couple of emails.
Image via WikipediaDan Fleming, a River Cities managing partner, said these things are done over long time periods and typically start with a personal referral.“We typically invest time in multiple meetings over the course of months or even years to attract new investors,” he said. “There is an extreme level of trust required to make an investment in a private equity firm.”
That’s because the investors rely on the fund manager to select companies in which they’ll ultimately invest.
Doug Roberts, a partner at downtown law firm Thompson Hine who works on venture capital issues, likened venture fund-raising to a political campaign or college sports recruiting. It’s a constant process that involves years of building relationships for a payoff down the road.
Now is when River Cities is expecting that payoff. Of course, it helps that its past and present investors have gotten healthy payoffs on their investments.
Fleming must feel confident his firm can raise money somewhere in the range he mentioned. The fact he was willing to mention sizable numbers for the next fund’s target size likely means River Cities has gotten a good response from its prior investors about signing up for the next fund, Roberts said.
“That speaks well to what River Cities is seeing,” he said. “Otherwise they would say they’re playing it safe in this market.”
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