Dear MCG… How different is different enough?
I’m setting up a new private equity fund and I understand that I need to differentiate my offering in order to garner attention, but how different is different enough, and what is “too different”?
Yes, you do need to stand out: like any industry, being different in private equity is vital. However, LPs must be able to understand which allocation bucket you fit into. Hybrid and overly exotic strategies can cause problems in terms of working out how you fit into an investor’s portfolio and allocation plans.
Furthermore, being too offbeat means more effort for LPs to understand what you’re trying to do, which is likely to lower your chances of success.
Ask yourself if you absolutely HAVE to be different in more than one way. A good exercise would be to review your strategy and work out how to conform where you can, even if you’re uncomfortable doing so.
It’s important to remember that being different is not enough – you have to be different for a useful reason. Rather than worrying about how different you can be, focus instead on your key strengths and making your business case as compelling as possible.
If possible, speak to a friendly investor or industry peer for some honest feedback on how “different” your pitch is. Ideally, you’ll find the balance between wacky and boring.