The Differentiation for GPs Nobody Talks About

How To Truly Set Yourself Apart

Many Limited Partners have great exposure and access to Emerging Managers. This leaves GPs with the challenge of truly differentiating themselves from the crowd.

In this volume I share a pathway to differentiation nobody else seems to be talking about: the language you form around your fund.

If you’re an LP who is actively investing or interested in investing in Emerging Managers and are looking to exchange insights, resources, reports, LP references, etc. with others - Embracing Emergence hosts a simple group chat for LPs. Ping me below if you would like to join!

Volume #10 TL;DR:

  • Many Emerging Managers do not have enough visibility of the market and crowd they are in themselves, which results in a lack of clarity of why they are different.

  • A slide with logos of co-investors, a slide about the market and why now is the right time, and a slide about why you are the right investor to execute the strategy is most likely not unique to your pitch.

  • The language an Emerging Manager forms around their fund is the one tool every Manager has in common. And yet, few utilize language to its fullest potential.

  • Linguistic consistency sparks the imagination of the LP and often sets you more apart than 12 slides in a pitch deck.

Table of Contents

Personal Updates

My apologies, I have been taking a quick break from publishing Embracing Emergence volumes during May. There have been plenty of exciting changes over the past weeks:

  • We have found a new rhythm as a family of four and with each child my sense of responsibility, meaning, and presence grows!

  • I celebrated my 26th birthday and enjoyed that my parents, who flew in from Germany, were able to celebrate with us. At the age of 18, I lived in Peru, and since I’m 21 I have been living in the US - so most of my birthdays have been spent apart from my family.

  • The family office world called and I am incredibly excited to be back with the Sutton Family Office, who I had the privilege of working with over the past years - this time with a different focus. More updates on this later.

The Differentiation for GPs Nobody Talks About

One thing I have noticed over the past years while speaking with 100s of Emerging Managers: many don’t have true visibility of the market and crowd they are in themselves. As an active Limited Partner, who is exposed to the various Emerging Managers that are raising and forming their funds, you get a good picture of the Emerging Manager market at scale. And as you speak with numerous Emerging Managers, many start to become more similar. Which is not a phenomenon that is unique to LPs sourcing Emerging Managers.

However, if you are a GP with a specific industry focus, it is very likely that the LP you are speaking with has met at least 15 if not 20-50 other Emerging Managers who share a similar investment focus and strategy with your fund. Many of them will have a slide with logos of their co-investors, a slide about the market and why now is the right time, and a slide about why they are the right investors to execute the strategy. This is most likely not unique to your pitch.

I am not trying to be unnecessarily provocative, I am nonetheless trying to raise awareness of the fact that many Limited Partners have great exposure to Emerging Managers with very similar strategies. This creates a true challenge for Emerging Managers to communicate their differentiation.

Now, there are two pathways for differentiation that open themselves up to Emerging Managers:

  1. Find a strategy that nobody else is doing.

  2. Find something that everybody else is doing poorly, and do it better.

In an environment, where Managers are ideating new strategies consistently, the probability for the first pathway to be the most powerful one is low. Plus, new is hard to pitch.

The second pathway, however, finding something that everybody else is doing poorly, seems to have indications of being incredibly compelling. If the people you are pitching are exposed to a crowd, the best and most sustainable way of standing out is by finding something everybody else the LPs come across is also doing. This means that the LP is familiar with it and familiarity will exponentially increase your differentiation. You don’t have to convince anybody of your differentiation, it reveals itself to your target audience.

So, what is the one thing ‘the crowd’ of Emerging Managers has in common, that many are doing poorly? Language.

There is one common element every Emerging Manager and Limited Partner utilizes in the process of pitching: Language.

The language an Emerging Manager forms around their fund is the one tool every Manager has in common. And yet, few utilize language to its fullest potential. Human beings are everywhere and anywhere interpreters: we are hermeneutic beings.

Charles Taylor, a highly insightful modern philosopher, wrote a book called ‘The Language Animal’, in which he makes the point that language is the main element through which individuals and society form their way of being and meaning.

Language does not only serve to depict ourselves and the world, it also helps constitute our lives. Certain ways of being, of feeling, of relating to each other are only possible given certain linguistic resources.

Charles Taylor

So, how should you utilize language as an Emerging Manager?

Mastering The Differentiation

When reading J.R.R. Tolkien’s “The Lord of the Rings” or “The Hobbit” you meet the master of linguistic consistency. Tolkien himself was obsessed with language. He mastered Greek and Latin as a young teenager and made up his own languages for fun during his teenage years. His works are marked by this fascination with language. The names for his characters, places, the language he created for the Elves - it all is drenched in a language of its own. This linguistic consistency helps the reader to truly dive into the world of the hobbits, you can almost breathe the air of the Shire and hear Gandalf’s voice. The linguistic consistency sparks the imagination, exactly what Emerging Managers can use to their advantage.

There are a few Emerging Managers I have come across, who I would describe as highly differentiated and they all have such linguistic consistency in common.

These Emerging Managers have formed a language around their fund and thesis that functions as a thread throughout their entire operations and strategy. The way they talk about their investment focus, their personal stories, how they perceive the market, their portfolio construction, the traits they look for in founders, etc. is all marked by this language they have formed.

To make this more practical, below is a list of a few Emerging Managers I put in this category of differentiation (not ranked):

There is one thing all of these Emerging Managers have in common, they write in long format. Their writing is the manifestation of the linguistic consistency they are constantly refining around their fund. Erica, she writes about why she is looking for Elephant founders, not Unicorns. She goes into detail about the traits of Elephants, how these are reflected in the people she invests in, and why they increase the likelihood of a successful venture startup. If I, as an LP, talk about this with her during her first pitch for 15 minutes, it tells me so much more about her and her strategy, than 12 pitch slides can.

Why? Because linguistic consistency sparks the imagination. I now know what in principle she is looking for in founders. It helps me imagine the calls she has with founders, what her due diligence process could be structured around, what makes her excited about an investment, what would make her pass, what she personally values, etc. - all things LPs want to know and get an idea of. As an LP I still have to do my due diligence, but a 15-minute conversation has made me more intrigued than slides on a pitch deck most emerging funds share in common.

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