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How the Private Equity Industry is Maturing and Innovating
- 1. Fairview Capital 2013 Symposium Guest Speaker: David Snow, CEO & Co-Founder, Privcap “Private Equity – It’s Just Like Other Industries!”
- 2. About Privcap Success in private-capital investing depends on two things: People and Ideas. Privcap connects you with both. Founded Sept 2011 Digital Thought-Leadership: • Video Programs – Interviews, Panel Discussions • Magazines/Special Reports • Transcripts • 4 to 8 New Programs Per Week Growing Audience: • 9,000 Visitors Per Month • GPs, LPs, Service Providers Media Promoted Via: • Email Newsletter • LinkedIn/Twitter • YouTube • Search Results
- 3. US Magazine Feature: Stars – They’re Just Like Us! Readers can’t believe that stars do regular things and are subject to banal human frailties!
- 4. My Comments: Private Equity – It’s Just Like Other Industries! Market veterans can’t believe the exceptional, singular private equity industry is evolving just like other maturing industries. It is Being Disrupted by Innovation! The Largest Players Are Becoming Ever More Dominant! Its Participants Are Using the Internet More and More!Expensive, Luxury Items Are Becoming More Affordable!
- 5. Largest 50 PE Firms 5-Year Fundraising Totals 2007 Top 13: $278bn Next 37: $273bn Top 13 raised $5bn more than next 37 2013 Top 13: $305bn Next 37: $278bn Top 13 raised $27bn more than next 37 Source: PEI The Biggest Get Bigger:
- 6. 1982 Motorola DynaTAC 8000X $3995 Products Once Affordable Only by the Rich Drop in Price 2013 Samsung Galaxy S III $49.99 Private Equity Then Private Equity Today $10 million minimum commitment KKR Income Opps Fund: $18 per share 2 and 20 1.25 and 20 Deal Fees 100% to GP Deal Fees 100% to LP
- 7. More and More Business Functions Take Place Over The Internet Private Equity Stone Age Private Equity Today Reporting done via snail-mail Online reporting Portfolio Company Data Stored on Your Floppy Drive Portfolio Data Stored in Cloud, Accessed by LPs Physical Data Rooms Virtual Data Rooms Fundraisers Fly Around World Having Meetings Fundraisers Fly Around World Having Meetings. . .
- 8. Behold the Least Efficient Market in the World: Private Equity Fundraising • Meetings, flights, meetings, flights, meet ings, flights. . . • Cumbersome due diligence process • Myriad data formats • Competing performance benchmarks • Blizzard of different LP requests • Two years to raise a fund, if ever • Getting to “no” takes months Can the internet help?
- 9. “No One is Going to Use the Internet For Fundraising Because. . .” • These are long-term, illiquid partnerships, not impulse-purchases • This process is driven by personal relationships and face-to-face interaction • Transactions of this magnitude won’t take place online • Prestige-minded participants would be embarrassed to scout for deals online • No one is going to list their private information on a website
- 10. Sounds like: “No One is Going to Use the Internet For Marriage Because. . .” • These are long-term relationships not impulse purchases • This process is driving by personal relationships and face-to-face interaction • Marriages won’t take place online • Prestige-minded daters won’t be caught scouting for mates online • No one is going to list their private information on a website
- 11. What Can the LP-GP Market Learn From the Online Dating Market? Online information doesn’t replace personal interaction – it improves early decision-making More and better information up front leads to better dates Don’t get on a plane or book a meeting unless you have spent time with quality information about your potential capital partner
- 12. Disruptive Innovations in PE Driven By: Transparency, Standards, Data Tools Will Vastly Change Market “Portable Track Records” Means Talent Can Be Better Verified and Backed New Forms of Capital Formation • Public Markets • Defined Benefit Market • Crowdsourcing • Co-Investment • Separate Accounts New Liquidity Tools
- 13. Number-One Driver of Innovation in Private Equity: Popularity Because of its performance and promise, more and more capital, more and more people, will want access to private investments. New technologies, regulations and business practices will facilitate that participation.