Guides · Private equity

How to Raise Capital for a Private Equity Deal

Most private equity managers chase pension funds, endowments and foundations. Those groups can write checks of 20, 30, 50 or 100 million at a time. Family offices are often treated as an afterthought, and they know it.

I run the Family Office Club, and I talk to family offices all the time. They tell me what they want from a manager and what annoys them. This guide turns those conversations into steps you can use. Many managers talk to a securities attorney about the legal side before they start raising.

How it works, in order

Step 1. Pick the right type of capital

Start by choosing the type of capital you want. Pension funds, endowments and foundations can write checks of 20, 30, 50 or 100 million at a time. In what I hear, many family offices allocate 3 million, 5 million or 10 million, and sometimes 1 million or less. Many private equity managers see family offices as small investors. That gap is your chance. Match your fund or deal size to the checks you can realistically get, and be honest about which group fits you. Do not pitch a 100 million raise to someone who will write a 3 million check without a plan for how those checks add up.

Step 2. Lead with capital preservation

Family offices care about capital preservation first and second. They know how to make money. Many are entrepreneurs or did well in the private sector. What they do not want is to lose principal. I tell managers they care more about that than taxes, high growth or some new exciting idea. So when you explain your strategy, start with how you protect the downside. Show what happens if the deal goes sideways. Put the risk controls before the return projections. If an investor thinks you might lose their money, the rest of your deck will not matter.

Step 3. Build a credible, known team

Family offices want managers who are consistent, reliable and professional. They also want the most credible and well-known team you can put together. It helps to add people with recognized names. That could be an executive from a large investment bank, someone from a well-known private equity shop, or a respected business figure who is now an investor. A name like that can help in getting meetings and being taken seriously. Investors reason that you must have real value if someone like that agreed to work with you. Building that team takes time.

Step 4. Find investors by their mandate

Do not send the same pitch to everyone. Learn what each investor actually buys. In one investor mandate interview, Jose described a multi-family office in Sioux Falls, South Dakota. Its clients are mostly business owners or families that sold a business. Its larger clients invest directly, and real estate currently matters more to them than private equity. That is the kind of detail that decides whether your deal fits. Ask for the mandate, read it and write to that. If you cannot find a match, skip that investor and move on to the next.

Step 5. Look for angles others ignore

Some of the best openings are in places other managers skip. Jose's team said opportunity zone legislation drew their interest for private equity as well as real estate. I told him only about two out of a hundred people talk to me about the private equity side of it. Most went hard on real estate. If your deal has an angle like this, explain it plainly. Many sponsors talk with their accounting firm and a securities attorney about how it might apply. I cannot give tax or legal advice, and a video is not a substitute for it.

Step 6. Get meetings and respond fast

In my experience, a common complaint from family offices is that nobody listens to them. They ask for materials and fund managers do not get back to them. Do not be that manager. When an investor asks for a deck, a track record or a data room link, send it quickly. Answer questions on the phone yourself. Keep a simple record of who asked for what and when you replied. A fast and complete answer sets you apart from managers who treat small checks as not worth the effort. It also shows what working with you will feel like after they invest.

Step 7. Serve investors after they commit

Raising the money is not the end of the job. Family offices tell me they get poor service once the money is invested. They do not get consistent reporting. They do not get a senior person assigned to their account. They do not get much follow up. Fix that and you gain an edge. Send regular reports on a schedule. Give each investor a named contact who can answer questions. Extra help and resources can lead to referrals to other families, and investors who stay longer and are more loyal to your fund.

From my talks

More from my talks

One thing I see private equity managers do over and over is describe themselves in labels. They say they are a lower middle market private equity fund with a best in class team and world class service. To an investor, that means almost nothing, because every other fund says the same thing. Before you send a deck, write down what is actually different about your deal, your track record or your access. Say that in plain words in the first paragraph, and drop the label.

Mistakes to avoid

• Leading with projected returns instead of how you protect investor principal.
• Sending one generic pitch to every investor without checking their mandate.
• Treating family offices as too small to bother with because their checks are smaller than a pension fund's.
• Taking weeks to reply when an investor asks for materials.
• Going quiet on reporting and access once the money is invested.

Facts and figures

• Pension funds, endowments and foundations can write 20, 30, 50 or 100 million dollar checks, while most family offices allocate 3 million, 5 million or 10 million.
• One panelist said their family office holds about 266 companies and that almost 95% of its activity is now private equity and venture capital investing.
• Jose's multi-family office in Sioux Falls, South Dakota runs a core public equity portfolio of 25 to 30 names, and its larger clients invest directly in private deals.

General education only. Not legal, tax or investment advice.

Talk to a securities attorney to explore options around offering documents, fund structure options and opportunity zone treatment. Do not use AI to write your own legal agreements.

Questions about this guide

Related questions

• How do I close a funding round?I close a funding round by focusing on investors who fit the opportunity and moving each interested prospect through clear, consistent follow-up.
• What documents do investors request during due diligence?Prepare a clear, organized package covering your operations, investments, compensation, team, and track record.
• How do I raise capital for my business?I raise capital by building a repeatable system for attracting the right investors, establishing credibility, and developing relationships before asking for money.
• How do I raise money with no track record?I would raise money without a track record by focusing on credibility, relationships, and evidence of my ability to execute.

Use the ready to raise checklist alongside this guide.