Why Old Playbooks Don’t Work Anymore
The fundraising market looks very different than it did a few years ago. Capital is still available, but the balance of power has shifted toward LPs. More managers are chasing allocations, while investors have become more selective about where they commit.
Recent data shows private equity fundraising hitting multi-year lows, even as the number of funds in the market continues to climb. That means more competition for every dollar of LP capital.
For fund managers, this creates two immediate challenges: standing out and proving readiness. Strategy alone doesn’t seal commitments in today’s market anymore. If you can’t prove your discipline, clarity, and trustworthiness, LPs will move on to the next manager.
The Red Flags That Cost You Commitments
LPs rarely walk away because a strategy is weak. More often, it’s because the fund manager failed to meet expectations beyond the thesis. Here are the main reasons commitments slip through the cracks.
🚩 Unclear Differentiation: If your fund sounds like dozens of others, LPs have no reason to choose you.
🚩 Weak Operational Setup: Missing systems, no audited financials, or unclear reporting erode trust quickly.
🚩 Lack of Personal Commitment: If GP capital looks too low, LPs assume you’re not fully invested in your own strategy.
🚩 Poor Communication: Confusing decks, delayed follow-ups, or jargon-heavy pitches frustrate LPs and raise doubts.
🚩 No momentum: If no one else has committed, LPs hesitate to be first.
The reality is that LPs don’t just buy into a thesis. They buy into execution, discipline, and credibility. Fail on those fronts, and even the strongest strategy won’t close.
What LPs Really Look For Before Committing
Getting a meeting is one thing; securing a commitment is another. LPs are meeting with plenty of managers, but they’re saying yes to fewer funds.
So, what actually makes them commit? It usually comes down to a few clear signals that show them you’re worth backing. Keep these insights in mind in your next raise.
Insight #1: LPs Benchmark You Against Peers, Not Just Yourself
When LPs review your numbers, they don’t look at them in isolation. They compare you to managers in the same strategy, sector, and vintage year. You may think a 20% IRR is impressive, but if peers are showing 25%, you’re suddenly average.
What You Can Do
- Benchmark your performance against Preqin, PitchBook, or Cambridge Associates data.
- If you’re early in your track record, show peer comparisons for sourcing quality, pipeline size, or operating experience.
- Frame your edge as durable. For example: “Our sourcing network consistently gives us access to 40% of deals before they go to market, a rate above peer averages.”
Insight #2: First Meetings Are About Pattern Recognition
Most LPs take hundreds of meetings each year. They don’t have time to decode vague pitches. In the first 15 minutes, they’re looking for patterns: a clear thesis, a disciplined process, and a team that looks like others they’ve successfully backed. Clarity in those opening moments decides whether you get a second meeting.
What You Can Do
- Get to your thesis within the first five slides.
- Avoid spending half the meeting on a “state of the market” overview. LPs already know!
- Make your differentiation obvious: “Unlike most growth funds, we target companies with $1M–$3M ARR because…”
Insight #3: Operational Readiness is a Due Diligence Shortcut
LPs don’t just back ideas; they back systems. If your fund looks messy behind the scenes, they assume risk. The fastest way to lose credibility is with weak financial controls, inconsistent reporting, or DIY compliance.
What You Can Do
- Have audited financials ready.
- Use reputable fund administrators and legal counsel.
- Show that you’ve invested in automation or reporting tools.
Insight #4: LPs Want Evidence of Real Relationships
Many managers say, “We have strong LP networks.” LPs hear that constantly. What matters is proof: actual conversations, touchpoints, and engagement over time. Trust compounds when LPs see consistency before, during, and after the raise.
What You Can Do
- Keep a CRM of LP interactions (emails, updates, meetings).
- Share evidence: “We’ve engaged quarterly with 30 LPs over the past year, with 12 expressing interest in this fund.”
- Host small, curated investor events or webinars. It shows you’re building relationships, not just asking for checks.
Insight #5: The First Close Sets the Tone
Momentum matters. LPs are far more likely to commit once they know others already have. Nobody wants to be first in. Remember, early momentum shifts psychology. Focus on how to move LPs from “Why should I take the risk?” to “Am I going to miss this?”
What You Can Do
- Line up anchor investors or family offices before going wide.
- Structure an initial “friends and family” close if necessary, to establish traction.
- Communicate progress often. For example, “We’re at 40% of target with commitments from three institutions already.”
Insight #6: LPs Notice GP Capital as a Signal, Not Just a Number
GP commitment is about conviction, not matching institutional checks. LPs know personal wealth levels differ, but they still expect managers to invest a meaningful amount of their own capital, enough to show real conviction in the strategy.
What You Can Do
- Be transparent about your personal commitment.
- If it’s modest, explain why and reinforce with alignment in carry or fee deferrals.
- Show that your upside is tied directly to LP success.
Insight #7: Communication Style Can Make or Break Trust
LPs judge you on how you communicate long before they wire capital. Sloppy decks, jargon-heavy pitches, and slow responses raise concerns about how you’ll communicate once they’re invested.
What You Can Do
- Keep decks concise, about 15–20 slides max.
- Standardize investor updates and send them on schedule.
- Answer questions directly. Avoid “we’ll get back to you” unless absolutely necessary.
Insight #8: ESG and Value Creation Are No Longer Optional
For many institutional LPs, ESG and value creation are required filters. You won’t even get through screening if you can’t show a framework. Saying you “care” isn’t enough. This is about credibility. LPs want managers who align with their mandates, not just their returns.
What You Can Do
- Create an ESG checklist for deals and show how it’s applied.
- Track diversity metrics in your pipeline.
- Highlight examples where you’ve added value beyond capital (e.g., helping portfolio companies hire, expand, or secure follow-on funding).
Ready to Position Your Fund for Success?
The managers who succeed in today’s fundraising market are those who adapt. They know what LPs look for, and they deliver it consistently.
At OakTech Systems, we help fund managers put these principles into practice. From refining your investor story to strengthening your operational backbone and building real momentum, we equip you with the tools to raise faster with the right LPs.
If you’re ready to stop chasing capital and start closing it, schedule a call with our team today!
