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Apex Group: Has the Pandemic Permanently Changed Fundraising Processes?

Employers are at a crossroads as COVID-19 restrictions are lifted, as they are left with the decision: return to working from the office, implement a hybrid work environment or a solely remote experience. The employer-employee relationship is not the only one seeing this sort of change. The relationships between investors and the companies they invest in are now also questioning whether a return to in-person meetings are essential.

Blair McPherson, Head of Capital Introductions at Apex Group. Delivering an extensive range of services to asset managers, capital markets, private clients and family offices, the Group has continually improved and evolved its capabilities to offer a single-source solution through establishing the broadest range of services in the industry; including fund services, digital onboarding and bank accounts, depositary, custody and super ManCo services, business services including HR and Payroll and a pioneering ESG Ratings and Advisory service for private companies.

Here, McPherson explains how the pandemic has irreversibly change the fundraising processes between investors and companies:

Blair McPherson, Head of Capital Introductions at Apex Group
Blair McPherson, Head of Capital Introductions at Apex Group

As the pandemic seemingly winds down, many employers and their employees are wondering if office life will ever go back to normal. Some hope not, believing a remote or hybrid model would best serve their companies.

Similar shifts in perspective are likely to also hold true for relationships between both general partners (GPs) and investors, and the portfolio companies they ultimately invest in. And it’s about time.

Before covid-19, investors and companies were already yearning for a different model of engagement that could go beyond investor roadshows, annual general meetings, and financial reporting. Now, having experienced the effectiveness of remote, digital engagement in their jobs and other parts of their lives, investors expect more company visibility and connectivity via engagement models underpinned by new technology.

Now it’s up to GPs to embrace this change.

Hybrid is the future

We’re in a transition period and a lot of questions linger. Restrictions on travel and in-person work are being quickly dismantled but the timing and terms of a return to the office are still up in the air.

Still, as the restrictions diminish, the number of in-person meetings is likely to rise, initially above pre-pandemic levels, as people try to make up for lost time. Even so, a sense of uncertainty remains around the future of business travel and the extent to which financial centres will remain the primary locus of work.

Before the pandemic, most private equity houses or venture capital investors favoured in-person meetings, particularly for fundraising and key management sessions. Now, a substantial portion of the professional services supporting the private equity industry appears to be adopting permanent hybrid arrangements.

This shift is a radical departure from traditional fundraising protocol, and the big question is: Will the fundraising process revert entirely once meeting and travel restrictions are lifted? The general consensus is that some technology-enabled changes, at least, are here to stay.

In fact, more than 90 per cent of LPs have said they are prepared to conduct initial meetings with GPs virtually in the wake of the pandemic, according to Private Equity International’s LP Perspectives 2021 Study. Meanwhile, two-thirds of investors will conduct fund due diligence on an entirely virtual basis, and just over half – 52 per cent – are receptive to investing in fund managers having never met face-to-face.

It is clear, that GPs and LPs alike are reluctant to return to the travel intensive schedules of pre-pandemic. Not only do virtual meetings free up time and create efficiencies, but as airmiles become a sign of an embarrassing carbon footprint, not a badge of honor. Investors see the dual benefits: digital engagement can help save both time, and the planet.

A yearlong conversation

Remote working and the use of digital technologies to stay visible and connected were suddenly and widely adopted in an effort to adapt to lockdowns, quarantines, and the new circumstances of staying home. As a result, we have a new normal in which technology plays a central role.

As market demand for secure and user-friendly digital engagement channels grows, sophisticated digital marketing platforms can provide one answer. By connecting Investors, Asset Managers and Companies instantly and providing a forum for exchange, these technological advances can help to build efficient, meaningful and productive virtual relationships.

Companies embrace change

The covid-19 lockdowns have demonstrated that digital technologies are effective and will continue to enhance engagement along with physical meetings and events. Communicating more frequently and more holistically through these new channels also helps break the old, familiar patterns of reporting as stipulated by regulation.

For example, ‘Thought Leadership’ is one crucial area where companies seeking investor cash can differentiate themselves – no matter their size. In an age in which videos can be viewed anywhere, consider making the most of the technological shift by having your senior management record their thoughts and industry insights for current and potential investors. Part of the underlying success of video is that we hunger for the face behind the story.

Video production, incidentally, is no longer the expensive and time-consuming process it once was. There is no reason not to take advantage of it. People are now used to remote work and Zoom chats. One doesn’t need an expensive studio to record a video. And if visual content still seems daunting, consider a podcast – this is a very effective way to generate content and get your message out.

What’s next?

Has the pandemic permanently changed fundraising processes? The short answer, we believe, is yes. The rate of change in the world has been turbocharged over the last year and whilst 100 per cent digital capital raising processes may not become the norm, hybrid fundraising is set to stay.

We should embrace new behaviours and technologies that have been net positives during the crisis. LPs seem to have moved more quickly up the comfort curve than we might have expected at the onset of COVID-19. But now they are there, and GPs need to meet them halfway.

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