134. The Importance of Storytelling, VC EQ, and the LP-GP Dating Game, Part 2 (James R. ‘Trey’ Hart III)
Summary: <a href="http://apple.co/1RlJ4Qz" target="_blank" rel="noopener noreferrer"></a><a href="http://bit.ly/1SdFrwX" target="_blank" rel="noopener noreferrer"></a><br> Trey Hart of Northern Trust is back to cover Part 2 of the GP-LP relationship. In this segment we address:<br> <br> * <a style="color: #000000;" href="http://fullratchet.net/wp-content/uploads/2017/04/Trey-Hart.jpg"></a>Key mistakes that GPs make<br> * The key characteristics that successful GP’s share<br> * The importance of an ownership focus<br> * What winning really looks like for GPs, in terms of metrics (ie. DPI, TVPI, IRR, cash on cash, bulge bracket follow on, etc)<br> * Trey’s final thoughts on the GP-LP relationship and who he’d like us to have on the program<br> <br> <br> Guest Links:<br> <br> * <a style="color: #0000ff;" href="https://twitter.com/LP2LP2VC">Trey on Twitter</a><br> * <a style="color: #0000ff;" href="http://www.lp2lp2vc.com/">Trey’s Blog LP2LP2VC</a><br> * <a style="color: #0000ff;" href="https://www.50southcapital.com/private-equity-team">50 South Capital</a><br> * <a style="color: #0000ff;" href="http://fullratchet.net/133-the-importance-of-storytelling-vc-eq-and-the-lp-gp-dating-game-part-1-trey-hart/?utm_content=buffer4e337&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer">Part 1 of the interview with Trey</a><br> <br> <br> <br> Key Takeaways:<br> <br> <br> 1- The General Partner – Limited Partner Dance<br> We kicked off the conversation by discussing the importance of storytelling. This transcends the LP-GP relationship and even the venture business. One’s ability to synthesize their experience and craft a compelling narrative is essential in relationships and in sales. Ultimately, a VC pitching an LP is a sales process. Both capital and expertise are for sale. Trey emphasized the importance of timing, during this engagement. He said that one needs to know when a sale is going to happen. The people that stand out are those that understand the cadence of fundraising the best. They need to know when to push and when not to push. And the reality is that a lot of LPs don’t know what they’re looking for, which can put a lot of stress on the GP.<br> Trey suggested that the most important component is framing the conversation. He aims to have an open and transparent meeting where he, the LP, is clear about what he’s looking for so as not to string along the GP and waste everybody’s time. As he said, there are way too many people to meet with in this business. It would serve everyone to clarify intentions upfront and engage under the right pretense.<br> 2- GP’s that Stand Out<br> Trey thinks of GPs in two groups:<br><br> 1-Those that are easy to give money to but are hard to get into and<br><br> 2-Those that are hard to give money to but are easy to get into<br> In the LP community, this is what separates the bad from the good and the good from the great. Trey cited <a href="http://fullratchet.net/102-the-limited-partner-part-1-lindel-eakman/">Lindel Eakman</a> as someone who has routinely given money to the latter and enjoyed tremendous success doing so. The best in the LP business are those that make money by giving to managers that are yet unproven. I’d venture to guess that there is a similar parallel with GPs giving money to entrepreneurs. Proven founders often raise at very high valuations early on, limiting return upside. While first-time founders may be much harder to assess, the upside opportunity is higher for those GPs that take the risk. Hence the return profile for the earliest stages in venture capital is often the highest.<br> Trey said that the truly great GPs have mastery of stage, sector or geography… and in some cases all three.<br> A few unique characteristics that he’s looking for includes:<br><br> -An actual track record<br><br>
