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The Haves and the Have-Nots: How Are Some Firms Beating The Fundraising Odds, While Others Fail Miserably?

Talk to any firm that’s been painfully plodding along the fundraising trail, and they’ll blame it all on the environment. “It’s tough out there with cash-strapped LPs and fears about the future of private equity,” they’ll say.

These “Have-Not” firms are basically stuck in fundraising purgatory, and they sing a very, very different tune than that of the “Haves.” And there are plenty of “Haves” out there, despite the odds. For example, Odyssey Capital last week topped the target on its fourth fund by half.

But I want to know, what is the difference here? Are the “Have-Nots” just mediocre firms that got swept up by a rising tide? Are they the “tourist” PE firms like the ones the FT called out today? Or is it a symptom of the type of LPs they have? Or is it their investment strategy? What about the performance of existing prior portfolios? Or, maybe the “Haves” simply got lucky?

There’s no single answer to those questions, but rather a combination. Firms that successfully raced through their fundraising process have at least one of the following coveted qualities: (1) A highly, highly differentiated strategy, (2) GPs with a long, strong track record or (3) Good timing, meaning the majority of their commitments came before the September market crash. Furthermore, look at your LPs. According to a Buyouts cover story published today, small endowments are the place to look, now that their larger peers are on the sidelines.

A Select Group of The Haves (Or, Funds That Seem to Defy The Dismal Fundraising Environment)

  • Intervale Capital: Closed its debut buyout fund, Intervale Capital Fund, L.P. with capital commitments in excess of $280 million, busting through its target of $200 million.
  • Odyssey Capital: Raised $1.5 billion for fund four, topping its $1 billion target.
  • WestView Capital Partners: Raised $250 million for second fund, expects to close on $300 million soon.
  • Stone Arch Capital: Raised $170 million toward second fund, seeks final close on $200 million.
  • Siguler Guff: More than halfway on a $750 million Russian fund, crossed the target for its distressed fund-of-funds, and nearing its target on its BRIC fund-of-funds.
  • Thoma Bravo: Closed oversubscribed ninth fund with $822.5 milion in commitments; target was $800 million (although, the firm initially lowered its target from $1.5 billion).

A Selection of Have-Nots (Or, Firms in Fundraising Purgatory)

  • Ripplewood placed fundraising for its third fund, a vehicle seeking $2.5 billion, on hold. The firm had been marketing for a year before holding a first close.
  • Providence Equity Partners scrapped plans to raise a $1 billion small and middle market fund.
  • CapitalSouth Partners has extended the closing date of its third fund, targeting $330 million, by a full year.
  • Castle Harlan-slightly less than halfway toward its $1.5 billion goal after 14 months.

That’s without even mentioning the likes of Blackstone Group, Madison Dearborn, Carlyle Global Financial Services Partners, Carlyle Partners, KKR, Hellman & Friedman, and Riverwood Capital, who’ve all lowered their fund size targets.

Previously: Increasing Number of Firms Stuck in “Fundraising Purgatory”