How Emerging Managers Can Stand Out In a Digital world.

VENTURE





Last year showed an abundance of interest in emerging managers. In a recent survey of more than 50 institutional investors, 62 percent responded that the risk and return profile for EMs is attractive relative to established firms.


Still, it remains an uphill battle for many EMs to raise funds, even with a glut of capital-targeting ventures. Today’s pool of top-tier EMs is increasing, and it can be hard to be seen by LPs.


At REO Capital, new fund managers most often ask us, “how can I stand out?”


Differentiation is key


LPs want to invest in GPs approaching new and different markets with unique and diverse perspectives. GPs or teams with different lived experiences also typically have differentiated networks. LPs are increasingly catching on to how these differences enable contrarian investments with high potential upside in ESG models and Real Estate. Social investing is the new norm, says: "Jay DeSantis of Reo Capital LLC Capital." Venture capital has always been a tool to invest in the future of innovation, and LPs are looking for bets on that future, not what feels safe and understood today.



Sector-specific or operational expertise in an exciting market


As an emerging manager, showcase how your relevant expertise in an under-tapped market aligns with the industry in which you’re investing.


LPs typically look to avoid overfished ponds and overplayed deal channels, so you should make a compelling case for why they should follow you off the beaten path.


The best EMs have a unique perspective within their area of focus. The prospective LPs you’re targeting need to agree that the approach and space you’re betting on is an exciting place to spend time.


Investment Approach


A wide range of voices and approaches have the potential to succeed in the venture industry.


The question to ask yourself is this: does your approach align with your investment thesis? You’re a pre-seed investor not typically leading rounds but participating as a friendly member of a syndicate, and you provide a lot of post-investment value add. This role requires a decisively collaborative approach to winning allocation in a deal.


Conversely, the investor trying to lead a seed round may need “sharper elbows” to claim their spot at the table. Says: John Denes EMERITUS of Reo Capital LLC.


The flywheel factor


LPs look for evidence that an emerging manager can and will identify the best companies in their area of focus and be able to win those deals based on their approach, skills, and expertise. The best early-stage VCs bring tremendous value to their portfolio, creating a flywheel of entrepreneur referrals which, in turn, fosters GPs’ success so they can build the next industry-leading franchise.


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