Today's topic: increase the odds that your LPs will re-invest in your fund

Today’s article is designed for fund managers (or aspiring fund managers) who are thinking of raising their next fund.

I know I’m a broken record, but… competing for LP dollars right now is a struggle.

Between competition with other funds – and with other investment opportunities (like real estate and rocket ships) – raising a fund is not easy.

So. Maybe you’re eyeing Fund II, Fund III, or beyond.

In an ideal world, you’d get some of your existing LPs to re-up their investment. And check size (and investor limitations) notwithstanding, what’s the best way to renew those investors?

The basics always help

Of course, you need to pick the right companies and show progress — strong TVPI, or (even better) DPI.

But let's face it, that's only part of the equation.

What's the secret sauce? What nudges an LP to say “Heck yes, count me in!”?

Transparency, for one

Your LPs crave insights, not just the highlight reel.

After all, you are not running a non-profit. You are a steward of their money. So your investors? They’re gonna notice if you go dark when things get hard.

It’s normal to want to hide when things aren’t going particularly well. Maybe you made a big bet that isn’t panning out. Maybe you failed to win allocation into a deal that made headlines. Maybe you ran into a big snafu on the admin side of the fund.

The way you communicate these challenges could make or break your relationship with your LPs.

Go silent, and their trust in you will evaporate. Be proactive in sharing what’s going on (and what you’ve learned), and their trust in you will grow.

At a minimum, LPs want a rough understanding of how their investment is performing. If you keep them informed about how much their investment in you is worth today, you’ll be light years ahead of most other fund managers.

Also: consistency

Let's chat about consistency. Like startup founders, most fund managers do not deliver LP updates with any sense of regularity. Fewer than 5% send their updates monthly, and fewer than 25% send updates quarterly.

Do you know how annoying that is to an LP?

Super annoying.

It’s also a great way to weaken the bonds between you and your LP.

On the other hand, consistent updates don’t just keep LPs in the loop — those updates keep LPs engaged, increases the chance that they co-invest when they can, encourages them to introduce other LPs to you, and makes them want to remain part of your orbit.

The Human Connection

At the end of the day, transparency and consistency are about building relationships.

A quick story before we wrap up — a tale of an LP who was initially on the fence about investing in Hustle Fund.

Admittedly, we have kind of a weird model. And in the early days, not everyone immediately bought in. But this LP agreed to receive our LP newsletter, and so they received consistent transparency from our team.

Our newsletters gave this person a clear view into what it’s like to work with Hustle Fund – and this LP liked what they saw.

They liked that we followed through on our promise to send updates. They liked that we addressed obstacles and losses with transparency. They liked that we treated our LPs as if we were all in this journey together… because we are.

Anyway, that person finally invested.

So, what can you do?

Transparency and consistency aren't just nice-to-haves; they're the foundation of trust and ongoing relationships.

So, what can you do? Be open. Share your journey — the truth, the challenges, the wins. And do it regularly.

The goal: happy LPs who aren't just investors, but partners on this journey.

Off to write yet another LP newsletter,

Kera from Hustle Fund

My space heater is heating. My electric blanket is blanketing. But I’m still so cold.

Good thing there are some new sweatshirts on the Hustle Fund store. The latest drop is all about what makes a great investor (and another for founders).

Available as a hoodie, long sleeve, t-shirt, or tank, this design is guaranteed to deliver compliments from your colleagues (and questions on where they can get one of their own).