May 27, 2008 |
For most start up managers, the most difficult part of starting a hedge fund is raising investment capital. I’m hoping you have read our previous posts about how to start the hedge fund. Without a sound foundation for your business, it won’t matter how much investment capital you raise if your business is plagued with problems.
1. Rarely does someone invest their hard earned money with a manager solely based on theoretical results. Therefore, you will have to put some “skin” in the game and invest your own money — and demonstrate results. If your strategy is working and you begin to talk to others about your success, you will begin to attract interest — and investment capital. Ask yourself, “how much of my own capital am I willing to invest? As my fund grows, what percentage of my own capital will I keep in the fund?” Tip: keep a substantial portion of your own money in the fund — it demonstrates your confidence in your strategy and abilities.
2. Make a detailed list of relatives, friends and business contacts who might be interested in making an investment. These people are “warm” contacts and are already comfortable with you. Contact them and tell them about your new venture and why you think you will be successful. Be sure your fund is equiped to accept investment capital immediately. This goes back to my preface to this post — do you have all the necessary pieces in place for your fund?
3. Develop your pitch. Keep it focused. Most likely you want to put together a Power Point presentation about your fund and strategy, so be sure to keep the number of slides to a maximum of 10. I like to refer people to Guy Kawasaki about how to keep a pitch focused. Kawasaki explains about how to put together a pitch for investors. He offers great advice that applies to both high net worth investors as well as institutional investors.
Stay tuned. We will be publishing more tips on this topic in the future.raising investment capital, start up hedge funds, starting a hedge fund