Chapter 8
Fundraising Process
Running Your Fundraising Process
Fundraising as Sales: CRM discipline, follow-up cadence, psychology
The Close: Anchor mechanics, side-letter playbook, deal closing logistics
You’re an emerging asset manager, not a supplicant. Your job in 2025–2026 is to run an account-based sales process where limited partners are the accounts, your data room is the product demo, and your operating system is the proof. This chapter gives you an end-to-end playbook: the CRM fields to track, the follow-up cadence that converts without pestering, how to craft a “why you / why now / why this strategy” pitch that lands live and async, what to do with “no,” the mechanics of anchoring, a practical side-letter playbook, and a week-by-week checklist for your first close. Where it matters, I cite current rules and frameworks (SEC Form D; 506(c) verification; ILPA templates; MFN hygiene; AML changes).
Treat It Like a Sales Process
A real CRM is non-negotiable
- Pick Pipedrive, HubSpot, or CapQ and treat it like your single source of truth. For every prospective LP, log:
- Decision lead (person who actually moves paper), AUM band, typical ticket, mandate (strategy/sector/geo), EM appetite (yes/no), co-invest preference, intro path (warm/cold/referral), rule path (506(b) vs. 506(c)), status, next step/date.
- Document links: versioned deck, ILPA-ordered Master DDQ, VDR invite, side-letter term sheet, co-invest process note.
- Compliance fields: first-sale date (to back-solve Form D’s 15-day clock), per-state notice requirements, and whether a purchaser will require accredited-investor verification under 506(c).
Why it matters: When LPs (and consultants) test for operational maturity, a clean audit trail of meetings, documents, and next steps shortens diligence and reduces re-asks.
Track every LP touchpoint
Create a standard interaction map and store it in CRM:
- First meeting date & agenda (always send the agenda beforehand).
- Deck version shared (log the filename, not just “sent pitch deck”).
- VDR opened (which folders viewed: 02-Strategy, 03-Track Record, 04-Policies, 05-Service Providers).
- Diligence kick-off: 20-minute calls with your administrator and auditor pre-scheduled.
- References (CEO and prior GP) requested and booked.
- Side-letter draft issued (note clauses under discussion).
- Subscription docs sent/signed.
- Capital call notice and wire confirmation.
Pair this with a public Q&A log in your data room so everyone sees answers once. It’s the fastest way to trim a week off diligence.
Follow-up sequences
Respect calendars while keeping momentum:
- Day 3: Meeting recap + VDR link + two caselets (dated interventions/outcomes).
- Day 10: Admin/auditor time slots + co-invest process one-pager.
- Day 21: Side-letter term sheet + first-close date reminder.
- End of month: Pipeline note (two new deals, one signed), and your ILPA-style reporting sample.
Sales research consistently shows that structured cadences outperform ad-hoc follow-ups; your messages should be short, specific, and value-adding.
Status tracking
Interested: first meeting booked and mandate fit confirmed.
Diligence: room opened and service-provider calls scheduled.
Soft circle: amount + target close date + blockers documented + references lined up.
Negotiating: side-letter under review; subs out.
Committed: docs signed or IC-approved with papering in flight.
Dashboards you’ll actually use: stage counts & conversions, time-in-stage, owner per account (no orphans), risk flags.
Compliance hygiene while you “sell”
If you’re raising under Rule 506(b), avoid general solicitation, keep outreach to pre-existing, substantive relationships and private channels. If you’re raising under Rule 506(c), you can market publicly, but you must take reasonable steps to verify every purchaser’s accredited status (e.g., income, assets, third-party attestations). Keep the verification workflow, and document retention, inside the CRM. And don’t miss Form D: file within 15 calendar days of the first sale; track state notice filings.
Mastering the Pitch
Story over slides
Open with a one-sentence thesis (“We back Medicaid-adjacent SaaS selling through payer channels; our advantage is a 300-operator council and payer economics we can underwrite in 5 days.”). Then follow a 3-act arc:
- Why you: your unfair access + repeatable playbook.
- Why now: macro and allocator demand that make this window attractive.
- Why this strategy: the machine (sourcing → underwriting → value-creation → DPI) and the fund math that makes it work.
Use slides as evidence objects (charts, tables, names, timelines). Keep the talk track human and specific; every claim should point to a dated artifact in your data room.
The “why you” narrative
- Access you actually own
- Communities by name: “Operator Guild (1,200 members), Payer Ops Council (48 leads).”
- Volume + conversion: “15-20 warm intros/month; 62% to first call; 38% to diligence.”
- Referrer map: top 10 referrers with monthly contribution; show the compounding (new founders refer new founders).
Underwriting asymmetry
Publish a Day-5 checklist (literally show it): “3 buyer calls (named), 2 ex-employee references, 1 claims-data sanity check.”
List fast-fail criteria (kill-switches) you apply in week one (e.g., payer pricing power mismatch; <35% gross margin after rebates; >6-month procurement without executive sponsor).
Show win-rate impact: “Day-5 checklist ↑ win rate from 19% → 31% on last 30 deals considered.”
Post-investment operating system
Cadence (put dates): customer council every 6 weeks; hiring bench refresh monthly; pricing office hours bi-weekly; procurement playbook distributed at T+14 days post-close.
Capacity: advisor hours budget/quarter; named partners accountable for sales, pricing, and hire pipelines.
Uplift ranges: “median +11 pts gross margin after pricing sprint; 60-day time-to-pilot with council introductions.”
The “why now” market validation
Allocator & macro alignment
One slide with three boxes:
- Demand: founder inbound (graph 6 months), buyer pull (named payer/enterprise quotes), sector catalysts (e.g., regulatory or infrastructure shifts).
- Supply: manager fragmentation in your niche (who else truly focuses here; why generalists miss it).
- Capital channel: how private-wealth platforms, FoFs, or specific family offices are allocating to your theme in 2025–2026 (summarize who is buying and why).
Friction reduction for diligence
State plainly: “We report in ILPA-aligned format; here is a populated quarterly sample and capital account.” This calms consultants/ODD teams because it’s their language. Mention the Master DDQ index and where to find it in your room.
The “why this strategy” execution proof
Sourcing engine (inputs → outputs)
- Owned channels: councils, newsletters, founder Slack, show subscribers, open rates, meeting yield.
- Partner channels: accelerators, corporate BD, CTO guilds, show SLA (e.g., 10 intros/quarter) and conversion.
- Quality controls: kill-criteria (ICP mismatch, payback >18 months, regulatory red flags).
A single funnel chart (last 12 months) with intros → 1st calls → diligence → term sheets → wins beats paragraphs.
Underwriting model
3–5 quant checks you always do (unit economics template; cohort retention bands; payer reimbursement mapping; bill-of-materials for security/regulatory).
Speed: what is conclusively answered in the first 5-7 business days and by whom (name your partners/advisors).
Edge cases: when you walk, list two examples and why.
Portfolio math (prove it bottoms-up)
- Check sizes/ownership: initial check, reserve ratio, target % at seed/A.
- Pacing: calls per quarter; deployment bands (with slow/fast cases).
- Loss ratio & power law: realistic failure/flat/winner bands from comps; how your operating work shifts the curve (e.g., from 1-in-12 to 1-in-9 outliers).
- DPI path: timing to first realizations or structured liquidity (secondaries policy summary), so LPs see distribution mechanics, not just paper marks.
Handling “No”
Translate “no” precisely
Most “no’s” mean not now or not clear. Force precision with a 3-minute wrap-up:
- “What would make this a yes in 90–180 days—anchor, deal proof, or reporting sample?”
- “Which artifact is missing or weak: valuation cadence, expense allocation, co-invest policy, side-letter terms, or performance disclosure?”
- “Is our fund size or pacing off vs. your program design?”
- “Would two references (CEO + prior GP) de-risk your decision?”
Convert feedback into specs
Treat every “no” as a requirements document:
- If 3+ LPs flag expense allocation, publish a redline: add decision trees (legal vs. fund vs. portfolio), examples (DD fees, broken-deal costs, travel), and an approver line.
- If they want valuation clarity, add frequency, price-source hierarchy, Level 3 fair-value controls, and a sample investment memo (redacted).
- If they’re stuck on co-invest, post a one-pager with eligibility, allocation rules, timelines/SLAs, and information flows.
Build a “No → Nurture” lane
Create a two-track cadence:
Quarterly, ILPA-style update:
Header block (NAV called, % deployed, # companies).
Two dated interventions → outcomes (e.g., “2025-03 pricing sprint → +9 pts GM”).
Governance note (audit engagement signed, policy update v1.4).
Monthly sector memo:
One operator problem solved this month, the diagnostic, and the playbook you used.
One market lens (buyer map shift, pricing pressure, regulatory note).
One ask (intro type) and one give (template or checklist).
Keep the audience segmented: declines get value drops only; no asks until a trigger (see below). In your CRM, set Nurture status with next send date and auto-suppress if they open the VDR (indicating re-engagement).
Metrics that show your “No-to-Yes” engine is working
Track in your dashboard:
- % of “No/Not now” → Meeting re-opened within 60–120 days.
- Artifact-driven reactivations (how often a policy/report sample reopens a thread).
- Median time-to-feedback after a “no” (target ≤5 business days to publish the fix).
- Conversion of reactivated to soft circle (goal 25–40% with anchors in).
Building Momentum
Land anchors and use them correctly
Target 6-8 realistic anchor candidates in Week 1; aim to paper 2-3 by Month 3-4. Offer modest, time-bounded economics (e.g., early-bird fee step-down), documented co-invest priority, and clean side-letter terms. Once signed or IC-approved, request a short permissioned line you can share (category + sector, not names if they prefer anonymity). Pair the update with operational proof (admin/auditor calls on calendar, ILPA-style reporting sample, side-letter template).
Signal publicly but match your rule path
- 506(b): keep to pre-existing, substantive relationships; use invite-only dinners, private emails, or closed groups. Avoid any broad “offer” language.
- 506(c): panels, podcasts, and LinkedIn are fine, but verify accredited status for every purchaser and archive verification.
A simple comms calendar (T-28 to T+30)
T–28: announce first-close window; attach Momentum Factsheet + side-letter term sheet.
T–21: publish updated FAQ/Q&A and note any policy upgrades (valuation, expense allocation, co-invest).
T–14: share one operator caselet with dated interventions → outcomes.
T–7: confirm wiring logistics, equalization mechanics (if any), and your post-close deployment roadmap.
Close day: private note, “Closed $X; capital active; second-close path open.”
T+7 to T+30: send a stub ILPA-style report or reporting sample and log new soft circles for the 8)
Measure and protect momentum
Track: soft-circle→signed conversion, time-to-second-meeting after signaling, VDR opens within 48 hours, and reactivations triggered by anchors/reporting. Guardrails: keep deck/data room/press fully consistent; pre-clear MFN and side-letter terms; never disclose names without permission; log Form D timing and state notices; maintain a comms grid to avoid accidental solicitation under 506(b).
The Anchor LP Close Mechanics
Timeline that actually works
Target 2-3 anchors by Month 3-4. Pre-wire them in Weeks 1-2, run diligence in parallel (admin/auditor calls, references, side-letter draft), and aim to paper one every 2-3 weeks. Once the first anchor signs (or is IC-approved), your soft circle → signed conversion typically jumps because social proof + operational readiness de-risk the decision for everyone else. Use a visible countdown: first-close window, capital call date (T+7 – T+14), and two deals queued.
How the negotiation usually shapes up
Anchors don’t need exotic terms; they need clarity and speed. Offer a time- and size-bounded early-bird fee (e.g., 1.75% vs 2.0% for commitments signed before the first close or above a threshold). Provide co-invest priority governed by a one-pager: eligibility, allocation rules (pro-rata to existing LPs, then strategic fits), data-room timing, and decision SLAs (e.g., five business days). Add side-letter protections you can operationalize, reporting cadence, audit notifications, notice of GP commitments, without creating bespoke workstreams. For governance, offer an LPAC seat or observer and publish the LPAC calendar (quarterly cadence, agenda themes, conflict reviews).
Terms you can defend in diligence
Document the economic value of early anchors: how their capital accelerates deployment, compresses later diligence, and expands co-invest lanes. Tie early-bird benefits to objective gates (date/size) and make them MFN-eligible for LPs in the same class during that close. Keep fee step-downs modest and time-boxed; preserves economics while rewarding speed.
MFN (Most Favored Nation)
Assume professional LPs will request MFN. Maintain:
- an MFN schedule (all side-letter clauses, categorized),
- a class matrix (who can elect which terms, by size, vehicle, jurisdiction), and
- a clean election process (post-close package with election window and a help desk contact).
Be explicit about what’s in scope (fee step-downs, reporting detail, audit notice) and out of scope (bespoke regulatory accommodations, rights tied to regulatory status, facility-driven restrictions). Align with any fund-finance covenants to avoid conflicts.
Administration you’ll be judged on
Stand up a side-letter tracker (LP, clause, MFN-eligible Y/N, class limits, counsel sign-off) and store it next to a one-page MFN policy in the data room. Before each close, run an MFN sanity check with counsel and your administrator; after close, circulate the MFN election pack within a set SLA (e.g., five business days). Close the loop with a short “What changed this close” memo so every LP can brief their IC without back-and-forth.
Side-Letter Playbook
What side letters are
Side letters tailor specific terms, fee breaks, reporting cadence, co-invest priority, governance, to a particular LP. They bridge gaps without rewriting your LPA.
Principles that prevent chaos
Standard term sheet for common asks (fee step-downs, reporting, MFN).
Operational feasibility: never promise reporting or rights you can’t operationalize at scale.
Fund-finance compatibility: do not agree to information rights that conflict with a credit facility or sub-line covenants.
MFN spillover policy, if a term is elected by enough LPs (e.g., 3+ in a class), it “graduates” into the LPA at next fund or becomes an MFN election default (work with counsel).
Documentation that saves you later
Keep a side-letter tracker (LP, clause, category, MFN-eligible Y/N, class limits, financing counsel sign-off) and store it next to your MFN election pack. Consistency is how you survive ODD.
The First Close Execution (Last 4 Weeks)
Coordinate timing
Legal: PPM/LPA final, side-letter forms pre-cleared, equalization language visible.
Admin: SOW/SLAs signed; equalization calculator ready; investor portal configured.
Banking: test wires complete; signatories authorized.
Regulatory: Form D clocked (15 days after first sale); state notices queued; if you marketed into the EU/UK, confirm any NPPR/AIFMD notifications with counsel.
Capital call packages that don’t bounce
Send individualized notices with wire instructions, beneficiary forms, equalization entries (if any), and a plain-English “Commit → Sign → Wire” one-pager. Avoid calling capital on the same day as a closing; plan T+7.
Onboarding that feels professional
- AML/KYC: collect IDs and beneficial-owner attestations; make it portal-based when possible.
- Access: investor portal credentials; distribution list for reports and notices.
- Reporting: confirm LP will receive your ILPA-aligned quarterly pack and capital account statement.
Mistakes That Kill Momentum
Rushing the first close before the pipeline is real
Fix: have 3-5 IC-ready memos, with at least two closable inside 60-90 days. Put one-page snapshots in /02-Strategy so LPs can see what’s next.
Inconsistent messaging
Fix: freeze a Master DDQ mapped to ILPA headings and maintain a change log. If you update a policy (valuation cadence, conflicts, expense allocation), push the new PDF and link it in your follow-up.
Missing follow-ups
Fix: set SLAs in your CRM, 4-hour recap after meetings; two time slots for admin/auditor calls before the first meeting ends; 48-hour Q&A turnaround. Time kills deals; speed wins.
Over-promising on deployment or returns
Fix: publish pacing ranges, reserves policy, and your loss-ratio assumptions. If you show performance, follow the SEC marketing rule mindset: equal prominence for net alongside gross; gate hypothetical/extracted numbers; and retain the back-up.
How to Fundraise Your First Fund in 2025
Defining Your Investment Thesis
LP Targeting: Family Offices to Fund-of-Funds
Building Your Sourcing Edge
Running Your Fundraising Process
Fund Structure: 506(b), AIFMD & ELTIF
First Close: Funnel & Metrics
US Marketing Rules & SEC Compliance
The Final Close Checklist
EU Fundraising Routes
LP Reporting & Communication
Building Your LP Data Room & DDQ
Secondaries & Continuation Funds