How I Invest with David Weisburd
E158: How to Find the Right LPs for Your Next Fund w/Meghan Reynolds
Fri, 25 Apr 2025
Meghan Reynolds, Partner and Head of Capital Formation & Talent at Altimeter, has spent over 20 years at the intersection of GPs and LPs, helping some of the largest firms in the world raise capital, navigate investor relationships, and scale their strategies. In this episode, she breaks down what it takes to be a best-in-class capital raiser—how to expand into new strategies, find the right investors (not just any capital), and build enduring partnerships in a hypercompetitive environment. We also talk about what’s changed in the last 20 years, how the best GPs handle crisis communication, and why building a brand as an investor matters more than ever.
Chapter 1: Is there a first mover advantage in asset management?
As a general rule, is there a huge first movers advantage in alternatives and asset management as a whole?
That's a great question. I would imagine there is definitely a first mover advantage, but track record really will rule the day. There is a trail of tears. that exists in asset management with firms that were there very early that don't exist today, that they don't withstand the test of time because the track record's there.
If you can look back in history, there were very large buyout firms that were some of the mega buyout firms that existed in 2005, 2006, 2007 that literally disbanded and don't exist today.
When we last chatted, you mentioned this concept of a strategic investor. I always thought that that meant the investor with the most money in their bank account. What makes an investor strategic?
Capital can be flexible. It can be consistent. It can be flexible. scalable. Like that is very strategic. Or a capital that says, yes, you've been a $10 million investor to me and now I'm raising in a $100 million fund and I'm going to raise a billion dollar fund. That's super strategic.
What is the difference between capital formation and investor relations?
So in the simplest terms... Investor relations is everything to do with investors that are already on your platform. So working with your investors from an administrative standpoint, getting them everything they need to know from you once they are already invested in your products and your platform. Capital formation is primarily concerned with attracting and securing new commitments.
So that would be a sales process. That would be identifying new prospects and bringing in capital to ensure the funds that you're managing have what's necessary to pursue the investment strategies that you're trying to pursue.
So tell me about how these investor strategies change over time.
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Chapter 2: What defines a strategic investor beyond capital size?
You've had a very interesting vantage point educating people about private equity in the early 2000s and then about private credit in the early 2010s. And it seems like not coincidentally, the people that were there educating were the winners and the big winners and incumbents in the space.
Is asset management a space where you have to be there from the very beginning to really become one of these big players? And as a general rule, is there a huge first movers advantage in alternatives and asset management as a whole?
Hmm. That's a great question. I would imagine there is definitely a first mover advantage, but track record really will rule the day. There is a trail of tears that exists in asset management with firms that were there very early that don't exist today, that they don't withstand the test of time because the track record's there.
If you can look back in history, there were very large buyout firms there. That were some of the mega buyout firms that existed in 2005, 2006, 2007 that literally disbanded and don't exist today. There's plenty of venture firms that went out of business that were very or just wound down that were very successful in the 80s and 90s and even 2000s.
So I think, yes, there is a first mover advantage, but ultimately it's people like who's able, who is able to deliver returns and scale in a super sustainable way that matters a lot. I think about certain people that are raising massive firms today. I mean, Look at the capital being raised by an Andreessen Horowitz and Venture and Growth or a General Catalyst.
Those firms didn't exist 20 years ago. Venture and Growth have been around for a long time, so there's definitely room for innovation. And the success that those firms have had should be studied for sure in terms of how do you raise capital and how do you scale.
When we last chatted, you mentioned this concept of a strategic investor. I always thought that that meant the investor with the most money in their bank account. What makes an investor strategic?
There's capital that can be passive and big, capital that can be passive and called, like just putting money into a bank account. Like I think of that as passive capital and that's wonderful. But I think more importantly, there is this idea of the capital can be strategic to you.
And capital that is strategic is capital that allows you to take advantage of opportunities that you would otherwise not be able to take advantage of. What does that mean? Capital can be flexible. It can be consistent. It can be scalable. And there are ways that it plays out. But that's how I think of capital that is truly strategic to you.
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Chapter 3: What is the difference between capital formation and investor relations?
That's so good, transparency, because it creates this risk. LPs are looking at their funds to fit a specific box. They need it to be diversified. They need to make sure that there are certain factors in place to make sure that they're not over-levered and taking too much risk.
Mm-hmm.
Double click on what does it mean for an LP to have transparency? Does that mean that they understand every asset in the portfolio or how can GPs be more transparent?
It's not necessarily understanding every asset in the portfolio. It's not understanding all the ins and outs of a fund. It's not looking underneath the hood and saying, I know everything. the revenue and EBITDA of every portfolio company, it really comes down to having a very clear understanding of what the drivers of performance have been and are expected to be going forward.
It sounds basic, but it's actually missed a lot, right? People aren't necessarily, don't often give the framework, particularly in a private company, portfolio context of what are the things that are really going to move the needle? What are the companies that we expect to really drive value going forward? Another is being very clear around problem areas.
What are the problem children in my portfolio? Where are where is there real risk of capital loss? If you just nail what's expected to be the big value driver or what has been and what's expected to be in the future and where are the problem children in my portfolio, you're good.
If you just nail those basics, everything else is, yes, there's other things that are helpful and that certain investors need to check the boxes for the job that they're doing. But that is really the most important thing. Another thing there would be no surprises.
Like if you see something coming good or bad and can give some sort of heads up on that, even if it's two hours before that hits the press, that is helpful because no one likes surprises in an investment context. They like to know what's coming. They like to get ahead of it.
You're generally dealing with professional investors who have bosses that they need to explain what's going on in the portfolio. And being able to stay ahead of that is extremely helpful to the investors that are ultimately responsible for managing the portfolio in which your fund exists.
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Chapter 4: How do investor strategies evolve over time and affect fundraising?
Today, in general, our institutional investors are more unbounded than they were in the past. I think people, particularly as it relates to direct opportunities, that's happening. Actually, it's happening very, very quickly into institutions. the high net worth and retail market. We didn't see that before that group. They're kind of skipping right from funds to direct deals.
If you look at what's going on in banks and RIA platforms and what they're offering out to their clients. So yes, I'd say investors today are much less bounded to funds than they were in the past. But in general, I would say it's the largest pools of capital, sovereign wealth funds, pension plans, very, very large family offices that tend to be the most potentially strategic.
That being said, they often have governance structures. Those are very bit large organizations that can be very hard to move. So you can have smaller family offices that are just like, hey, I'm super flex. I can do whatever I want. I can do I can do a new product. I can do a direct deal. I can be super, super flexible for you.
Which is why when I think about building an LP base for a fund, I think it's important to have a range of types of investors, range of size of investors, range of type of investors, because you never know what you're going to need and who might be able to provide something strategic to you, to use the word that we were talking about before.
Sometimes these strategic investors come by category. So you mentioned the pension funds in 2012 to 2015. Sometimes there's some regulatory or returns-based reason why a specific type of asset class may become strategic, which is why you want to diversify across asset class for many other reasons as well.
Mm-hmm. Yeah. Yeah. I think that it makes sense. You don't want to overgeneralize. No LP is the same, but you generally do have sweeping generalizations that you can make about specific types of investors. And I was really lucky. I started my career at Goldman Sachs and
Because it was a big asset management division, but we had the small private equity group sitting within it, we had access to these sales teams that were organized by investor type. And so I was very lucky in that I learned the differences between different types of investors and how they might act differently, how they behave, how they're governed, regulatory environment.
what a sales process looks like for one versus the other pretty early in my career. And I think that's more well understood today. But understanding that even if you're just a small emerging GP, I think is very important because it will affect your go-to-market. It will affect how you think about marketing and fundraising over time.
You mentioned diversification and sovereign wealth funds. One way to diversify is around geography. If let's say you're not TBG, you're a smaller fund, do you really have to double down and pick a specific geography in order that the managers could travel to that geography every year?
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