I get asked really often about bonding and rapport, in terms of how to build them, when working with LPs, especially if you’re a general partner at an investment firm. Here are two solid examples of how to build rapport with LPs - how to do it nicely, and how to not really do it very well.
Good Bonding and Rapport: The Story of Jennifer and the Prospective LP
Jennifer, a general partner at a venture capital firm, was preparing for a big meeting with a potential limited partner interested in investing in the firm's new fund. Understanding the importance of building a strong relationship from the outset, Jennifer took a Sandler approach to her preparation.
Before the meeting, Jennifer researched the prospective LP's investment history, interests, and recent activities in the market. She discovered that the LP had a keen interest in sustainable technology startups, a sector her firm had successfully invested in.
During their meeting, Jennifer didn't start with a pitch about her firm's past successes or the potential returns of the new fund. Instead, she opened the conversation by discussing the LP's recent investment in a sustainable energy startup, expressing genuine interest and asking insightful questions about the LP's vision for sustainable technology.
This approach allowed Jennifer to bond with the LP over a shared interest, establishing a rapport based on mutual respect and common goals. As the conversation naturally progressed to Jennifer's firm and its new fund, the LP was more receptive and engaged, feeling a connection with Jennifer beyond a mere financial transaction.
Bad Bonding and Rapport: The Story of Michael and the Prospective LP
Michael, another general partner at a different PE firm, was also meeting with a prospective LP. Unlike Jennifer, Michael went straight into a presentation about his firm's investment strategy and past returns, barely allowing the LP to get a word in edgewise.
The LP, who had a strong interest in social impact investments, felt overlooked and undervalued. Michael's one-size-fits-all approach made the LP feel like just another potential check, rather than a valued partner with shared interests and goals.
Despite Michael's firm's impressive track record, the LP left the meeting feeling disconnected and unconvinced. The lack of genuine engagement and understanding from Michael made it difficult for the LP to envision a fruitful partnership.
These contrasting stories highlight the importance of good bonding and rapport in the context of VC and PE relationships with prospective LPs. Jennifer's approach, informed by the Sandler methodology, demonstrates the value of building connections based on shared interests and mutual respect, leading to more meaningful and successful partnerships.