Kevin Albert is a private-equity fundraising pro of the highest order, although he hasn’t had to raise a new fund for nearly three years now. He handles investor relations for Elevation Partners, a media and entertainment-focused shop. I caught up with him a while back for a Buyouts mag-related interview.
How did you get into private equity fundraising?
Merrill Lynch was the first firm that set up a group to help firms raise money, and I worked in the group from the very early days. We started doing it on a fee basis for people like Tom Lee and Leonard Green when they raised their first funds in the 1970s. We had little competition from other Wall Street firms until about 1992 when a group of our colleagues split off and went over to DLJ and set up a competing group, and after that a whole bunch of people set up groups.
For 24 years I was at Merrill Lynch, and for about 17 years I was in the private placement group, and for most of that period I ran the group. So for that entire period of time I ran one of the two groups on Wall Street that raised funds for private equity firms. And I did a lot of them. Three years ago, when I retired from Merrill Lynch, I went to work for Elevation Partners, which was a client. I managed their fundraising internally here. We used Merrill Lynch to help raise the fund, but sort of on a modified basis. Since we closed that first fund at $1.9 billion in 2006, we haven’t had to raise another fund. I’m always looking to meet new people and cultivate relationships with them and make our existing investors happy.
Are the skills you use in fundraising technical skills that can be learned?
It’s more about having strong marketing and people skills than technical skills. There isn’t very much analytical work to do. You need to be able to analyze track records, but you don’t need to know calculus to do that. It’s pretty much arithmetic and judgment. It’s really about your ability to read markets and figure out what investors are going to want to invest in so that you pick the right assignments. People who are the most successful are the ones who get the funds that are going to be doable and that are going to be easy to do. A lot of that is judgment about what clients to market to and what clients to take on. Because if you’ve got a fund that sells well and easily, it’ll go quicker, and clients are happier, then you can do more of them, and it’s a virtuous circle. If you end up taking on a lot of tough assignments, it’s tough to make a living, it’s hard to look good, and the clients aren’t happy. I’d say the key to success is product selection and fund selection.
Even given Merrill’s selectivity in choosing mandates, have there been funds you’ve raised that have been more difficult than others?
You can take any group of funds and put them on a bell curve, and there are a hundred different reasons why funds are challenging. Private equity is basically a money management business, so the track record is probably the most important thing. Now you can’t take that too far, because even if you have a good track record but the people you take on the road show are jerks, it’ll be tough to get investors to like them and to invest with them. But it would be easier to get them to do that fund than if you take a nice cuddly group of people around who just haven’t done a good job and don’t have a good track record.
Is it harder than ever for first-time funds nowadays?
[Private equity] is a very mature business. It’s no different than the cell handset business. It was easier to go into that business 10 years ago than it is now, because now you’ve got Nokia and several other big Japanese firms to compete against. So why should a consumer try something that’s untested? The same thing is true in private equity. There are hundreds of managers with track records who’ve worked together and have shown that they can do the job, so why pick a new firm?
Well, why pick a new firm?
You’ve got to be different. You’ve got to offer them something that the current firms don’t offer them. What Elevation Partners offered them, for example — and we were a very successful first-time firm — was an investment strategy that no one else was really targeting. That strategy was to make investments in media and communication businesses that were being adversely affected by technology. Venture capitalists do technology, but not private equity firms, for the most part. We had a guy named Roger McNamee who was very good with technology. So we married him with some private equity people and said, ‘We can attack this area, because we’ve got people who are very competent and proven in both sectors.’ And people found that compelling. It wasn’t a leveraged buyout model.
What’s the most interesting story to come out of your time on the road?
It’s very repetitive, after you’ve done it for, say 15 years. At Elevation we played it pretty straight. At the beginning I’d say a minus was that we had [U2 head singer] Bono involved in the road show. I think people initially thought that was a gimmick, and that he wasn’t really involved in the firm. Also, people were pretty suspicious, particularly state funds, who didn’t want to look like they invested in this thing because they wanted to meet Bono. Ultimately he went out and he met something like 80 people, and he helped convinced them to invest. Once he got in front of them, they were able to ask him questions. ‘Why are you doing this?’ ‘How did you meet these guys?’ ‘What’s in it for you?’ and all that. He’s really such a level-headed guy, he’s not your typical rock star. Basically he won the day.
Edited for clarity