Using Impact Stories to Raise Capital
Let’s say an investment boutique launches. They’ve got a fund! The fund has seed capital and the firm starts working their network. They get their first 5 investors; each investor gives them $3 mm. They are measuring success by dollars raised, AUM, so they’re kinda disappointed.
Can you relate? Drop the sad face and pop the champagne. Here’s why:
The typical fund investor doesn't want to be more than 20% of your AUM. If they have $15 mm in seed capital, 20% is a $3 mm allocation per investor. So those 5 investors give $15 mm. Your AUM is now $30 mm.
$15 mm seed capital x 20% = $3 mm
$3mm x 5 investors = $15 mm
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$15 mm seed capital + $15 mm investments = $30 mm
You doubled your AUM.
What’s the next step?
Call all of your prospects. Tell them the stories of how you helped your first 5 investors; these are called impact stories. And I’ll teach you to write ‘em in just a sec. But hold tight, let’s finish our math homework.
From the impact stories, you get 5 more investors. But now a 20% allocation is $6 mm per investor, so you just added another $30 mm. You’ve got 10 investors; you’re at $60 mm AUM. Another double.
$30 mm in fund x 20% = $6 mm
$6 mm x 5 more investors = $30 mm
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$30 mm in fund + $30 mm more = $60 mm
But wait!
Now you can call the original investors to tell them about the new 5. The OGs can now top up too. 20% on $60 mm is $12 mm so those original 5 who were at $3 mm go up to $12 mm each. Another $9 mm each which adds up to $45 mm.
$60 mm in fund x 20% = $12 mm
($12 mm - original $3 mm) x 5 more investors = $45 mm
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$60 mm in fund + $45 mm more = $105 mm
You’re at $105 mm now. A critical AUM milestone. From 10 investors. And those original 5 investors at $3 mm started this chain of events.
Stop obsessing over dollars and put the right number up on the scorecard — # of investors you help.
Now, the most important part.
The impact story.
The goal is to build credibility by showing how you helped a specific investor. As with all stories, it needs to be compelling and relatable.
How to write an impact story
Step 1: Describe the client
You can describe the type of client they are; you don’t have to name them. Sometimes when you don’t name them, it allows a prospect to better envision themselves in that space.
Example:
A $10B multi-family office in San Francisco, formed from Goldman Sachs breakaway advisors
Step 2: Define the challenge
What were they struggling with? Why did they need you?
Example:
They wanted to get into venture capital so they seeded their own VC fund. Although the fund has delivered decent returns, they weren’t seeing the deal flow they wanted and were concerned this wasn’t the best VC option for their investors.
Step 3: Outline the solution
What are a few concrete things you did to solve the problem they had?
Example:
Demonstrated how we tilted our fee schedules toward performance related fees rather than management fees
Began sending them our quarterly performance reports
Step 4: Illustrate the impact
What did your solution do for them? What difference did it make?
Example:
They have won $100 mm from new clients.
Now put the 4 steps together. This is your impact story that you’ll share with investors.
Let’s sum things up.
When you get your first investment, write an impact story.
Use the 4 steps above to put together your talking points.
Call your prospects and share the impact story.
They see your success. They become clients too.
Write new impact stories.
Call your prospects AND your original investors and share new impact stories.
Rinse and repeat (but in a people-y way).
Stay focused on the people, not the AUM.
Are you Too busy to write your own impact stories?
