When is your first close?

Usually, your first close is challenging to predict.

Yet a lot rides on your first close as a signal of positive momentum to investors. A strong first closing can drive the rest of the fundraising.

In sympathy with all the kids that have just finished their exams, we offer a short True/False quiz to test your First Closing knowledge:

1. TRUE/FALSE: Your need for capital is the most important consideration when scheduling a first close.

Answer: FALSE. For the strongest funds, LPs’ commitment timing seems to effortlessly support the GP’s desired pace of capital raising. For everyone else, LP timing is a stronger driver of your first close than are your capital requirements — unfortunately.

2. TRUE/FALSE: Investors will provide a clear indication of their timing for committing to your fund and keep you apprised of changes.

Answer: FALSE. It is up to you to ask your LPs what their timing would be for a commitment. And to ask again. An indication given more than 3 months ago is out of date. LPs do not have full control of their timing, which means that the wise GP has frequent, open conversations with key LPs.

3. TRUE/FALSE: Timing and scale of distributions from your prior funds can have a significant impact on the timing of your new fund’s first close.

Answer: TRUE. Existing LPs and new investors will look for evidence that you have recently returned meaningful capital. The current seller’s market has made this a higher priority, as many funds have demonstrated an attractive distribution pace. Timing your first close shortly after a meaningful distribution can be effective in supporting LP approval processes and maximizing the market’s perception of momentum.

4. TRUE/FALSE: A strong first close must be at least half of the target fund size.

Answer: FALSE. Generally speaking, a larger first close is better. How ever, a more modest first closing with referenceable LPs can also jump-start the fundraise, especially if that capital is deployed into a compelling first investment. Aim for a respectable first closing size
— approximately one-third of the fund target — to generate momentum, rather than waiting to line up a larger first closing.

5. TRUE/FALSE: The single most important word in planning a first closing is Pre-Marketing.

Answer: TRUE. How do some GPs have a huge first closing mere weeks after beginning formal marketing? They have been pre-marketing for as much as a year, assessing LP timing, coordinating legal review schedules, communicating tentative timing, and addressing concerns and questions.

Many more considerations come into play, including your competitors’ fundraising schedules, the time of year, and your deal pipeline. In short, a good first closing is like an excellent theater performance—it looks effortless, leaves the audience wanting more, and nobody sees the months of behind-the-scenes work that made it possible.