A capital process needs a precise definition of what is being financed, why the capital is required, and which investors are positioned to consider it. Our starting point is the mandate. That definition governs the research, the materials, and the conversations that follow.
Define the capital requirement.
A fund commitment, a corporate equity investment, and financing for a development project ask different questions of an investor. Treating them as a single capital-raising exercise obscures the underwriting work each requires.
For a fund, the mandate needs to explain the investment strategy, proposed vehicle, deployment plan, and manager’s basis for executing that strategy. For a company, it needs to connect the use of proceeds to the operating plan. For a project, it needs to establish the development stage, outstanding milestones, and allocation of delivery risk.
Before approaching the market, the mandate should record the capital amount, proposed structure, use of proceeds, timing, and dependencies. Unresolved terms should be identified explicitly so that assumptions do not become commitments during early conversations.
Establish investor fit before outreach.
An investor’s broad sector interest is a starting point for research. We assess a more specific set of conditions before prioritizing a counterparty:
- Mandate
- Does the opportunity fit the strategy, asset class, geography, and stage the investor can consider?
- Structure and size
- Is the proposed fund commitment, direct investment, or financing instrument compatible with its requirements and likely commitment range?
- Timing
- Is there a current allocation or deployment window, and can the investor’s review process accommodate the proposed timetable?
- Decision process
- Who sponsors the opportunity internally, what diligence is required, and which approvals remain?
Prepare the evidence behind the proposition.
Investment positioning should connect the opportunity to evidence that a counterparty can examine. The narrative, financial information, operating assumptions, and supporting materials need to describe the same proposition.
For fund managers, this means preparing for questions about strategy, investment process, team responsibilities, track record attribution, governance, and reporting. A concise initial presentation should have a consistent diligence package behind it. The level of detail can increase as the review progresses.
These diligence areas are also covered in ILPA’s 2018 questionnaire for private equity fund managers. ILPA Due Diligence Questionnaire (2018)
Use each conversation to refine the process.
Initial engagement should test the fit assumed during research. A useful record distinguishes strategic interest from an active allocation, identifies unresolved questions, and names the next decision required. An introduction alone does not establish investment intent.
We view capital origination as a continuing assessment of alignment. Information from the market should sharpen the investor universe and the opportunity’s positioning, while preserving a consistent account of the mandate. The objective is to develop a credible route into review with counterparties able to assess the requirement on its merits.