Welcome
Happy Thursday and welcome to another edition of Beyond TVPI.
Axcel recently announced that it had raised EUR 2.1 billion for Axcel VIII. The fund hit its hard cap in less than six months and was 60% larger than its predecessor.
My first thought was: I've seen this before.
I have no particular insight into the Axcel fundraise. The shape was simply familiar. A manager cultivates its LP base over several funds. LPs that want access do the same in reverse. When the fund opens, much of the relationship work has already been done.
For LPs, the useful question is how to position before that point. Which managers deserve your time? How often should you meet them? What should they know about your process before the timetable tightens?
This week, I use Axcel VIII and my experience with Alpine and others to set out a five-step plan for building access before a one-and-done fundraise opens.
Enjoy the read,
Steffen
THE MAIN STORY
How LPs position for a one-and-done fundraise
The anatomy of the raise
Axcel's closing announcement contains three details suggesting that demand substantially exceeded the available capacity:
A 60% increase in fund size. Axcel raised roughly EUR 800 million more than it had for the predecessor fund.
Less than six months to hard cap. It closed at EUR 2.1 billion, well above the EUR 1.65 billion target.
A dry close. Axcel VIII had no portfolio companies yet. LPs were underwriting Axcel's earlier funds, team and strategy without a live portfolio in the new fund for additional comfort.
This was not a secret fundraise. M&A Insights reported it as under way in February. That was useful market information. It was probably late as a starting point for a new relationship.
By then, Axcel knew its returning LPs. The LPs knew the manager. Any new investor with a realistic chance of joining likely had some prior connection to Axcel, the placement agent PJT Park Hill or both.
That is the anatomy of a one-and-done raise. The formal process is short because much of the relationship work happened before it.
I have seen this many times before
I have seen this pattern with BV Investment Partners, Alpine Investors, CORE Industrial and many others.
I have written about Alpine before, so here is the short version. We first met the manager during its 2018 fundraise and passed because too much of the track record remained unrealised.
When Alpine returned in 2021, a process expected to run from March to December closed in July. Because our relationship and underwriting had started in 2019, we could move quickly and invest.
Note: This is even more common in venture. Fund sizes often grow less between vintages, while existing LPs may take most or all of the available capacity. A new LP can be fully convinced and ready to commit, but still have nowhere to go unless an existing investor reduces its position.
What LPs can do before the fundraise
That does not mean chasing GPs or overselling your capital. It means treating access as a process that starts before the fundraise.
For reference, here is the rough timeline of my history with Alpine, from memory:
Late 2018: Met the team and turned down the opportunity.
Summer 2019: Met them again in San Francisco and realised we should have stayed close.
2020: Met virtually at least twice during Covid and attended the virtual AGM.
Spring 2021: Began detailed underwriting.
July 2021: Committed to the fund.
The point is that we did not start learning about Alpine when the fund opened in 2021. By then, we had been following the manager for almost two years.
Here is the high-level process we followed at my prior firms. It is also the process FundFrame's Pipeline Management is built around:
Identify the managers you want access to. Build a short list of the managers you would be genuinely disappointed to miss. Give each one a rating and write down what supports it.
Make a plan for outreach. Contact the manager well before its next fundraise. Visit the team at its premises where possible. You will learn more about the organisation and signal to the GP that you take the relationship seriously.
Schedule the follow-up. Do not end the meeting with a vague agreement to stay in touch. Add a date and an owner. If the next fundraise is two years away, make a note to check back in six to nine months for an update and to confirm the timing.
Be ready when the fundraise opens. Explain your investment process, expected timeline and likely commitment size. The GP and placement agent should understand what it will take for you to close and where delays could arise.
Continuously re-underwrite the manager. Every meeting should test your original rating. Record what changed, what still concerns you and what evidence would move your view. Familiarity should deepen the diligence. The bar stays where it was.
Each relationship has a rating, an owner, an expected fundraise date and a next action. The process itself is straightforward. It requires long-term discipline because most of the work happens while no fund is open.
One-and-done fundraises look fast when measured from launch to close. The relationships underneath them move much more slowly.
If Axcel is the type of manager an LP wants in its portfolio, it should decide now whether the relationship deserves time. If Fund VIII is any guide, the work for Axcel IX starts before Axcel IX exists.
FOUNDERS CORNER
A book recommendation and looking inwards
I am currently reading Amp It Up by Frank Slootman. I’m pretty amped about it.
The central argument is that most companies are capable of performing at a much higher level. They usually know what needs to be done, but lack the focus and urgency to do it quickly enough.
The book also argues against incremental thinking. Instead of asking how to improve the current plan by 10%, ask what a much better outcome would look like and what would need to change to reach it.
I recommend it without reservation to PE professionals as well. It is short, practical and difficult to read without recognising a few uncomfortable truths about your own company.
At FundFrame, the most obvious one is that we have too many priorities. This is not the first time I have said that. We are good at seeing opportunities and less good at saying no to them.
One change
One change we have made is moving development into four-day sprints. Monday to Thursday has one clear sprint goal. Friday is reserved for half-day projects and customer feedback that we can implement quickly.
It will not solve our priority problem by itself. But it removes the ability for projects to “spill into next week”. In turn, shorter cycles make delays and competing priorities much harder to hide.
ABOUT THE AUTHOR
This newsletter is written by Steffen Risager, the founder of FundFrame, a platform for LPs to manage their private markets investments.
Before that, Steffen was CIO at Advantage Investment Partners, a Danish Fund-of-Funds.
Steffen has a decade of experience as an LP, and has made commitments totalling approx. $6bn across fund- and co-investments.