How long should you be in market?

Several factors can guide your optimal timing.

When you launch a new fund, LPs are quick to ask, “How long will you be open?” or “When is your final close?” Many GPs want their response to create a sense of urgency: “Based on the interest we’re hearing, we think we’ll be done in X months” (insert number < 12). However, it’s a fine line between signaling scarcity and getting egg on your face, not to mention the narrow path between encouraging LP speed and discouraging LPs from engaging if they cannot meet your desired closing schedule.

We recommend answering this question with a blend of reality, optimism, and humility.

• Reality: Private markets funds generally take at least 12 months to raise. Expectations of shorter fundraises should be based on specific closing timing discussions with a majority of your existing LP base and their consultants. Timing and priorities will change, meaning that a green light in Q1 can turn to a red light in Q3 through no fault of yours, as LPs juggle re-ups, staff changes, and due diligence overload.
• Optimism: LPs want to hear your optimism, especially when paired with facts, for example, “Based on the timing of our 10 largest LPs, we are optimistic that the final closing could be as early as Q2…”
• Humility: No matter what you hope for in speed, acknowledge that the outcome may be different. “…However, we know how busy LPs’ calendars are this year, and it is possible that it may take somewhat longer.”

Finally, ask. “If you were to pursue due diligence, what is your timing for a potential commitment?” Besides checking on timing, the tone of the LP’s answer should give you a good gauge of their current interest in your fund.