EP268: Inside LP Psychology: How Great GPs Raise Capital in 2025
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode, David speaks with Alexander Russ, Senior Managing Director at Evercore and Head of North America for the firm's Private Funds Group, about what truly drives fundraising success in today's crowded private equity market. (00:48) Alex breaks down why the most successful GPs create oversubscribed funds by focusing on three critical elements: having a compelling narrative that clearly articulates their differentiation, building early momentum through strategic first closes, and leveraging existing LP relationships as the foundation for new capital raises. The conversation reveals that in today's market with a 3-to-1 oversupply of GPs versus available LP capital, fundraising has become a momentum machine where nailing the first close at 60-70% of target determines the entire trajectory of success or failure.
- Core themes: The psychology of LP decision-making, the critical importance of momentum in fundraising, and how trust and credibility built over years can determine fundraising outcomes in an oversupplied market
Speakers
Alexander Russ
Alexander Russ is Senior Managing Director at Evercore and Head of North America for the firm's Private Funds Group. In his role, he advises general partners on competitive positioning and go-to-market strategy while executing capital raises through Evercore's global sales team. With sixteen years of experience in the business, Alex has built credibility in the market by working on numerous oversubscribed fundraising processes and developing deep relationships with both GPs and LPs across the private equity ecosystem.
David Weisburd (Host)
David Weisburd is an active investor and podcast host who conducts in-depth conversations about investment strategies and market dynamics. He brings analytical insight and thoughtful questioning to explore the nuances of private markets fundraising and LP decision-making processes.
Key Takeaways
Master Your Narrative Before You Hit the Market
The most successful GPs don't just tell a good story—they nail their narrative by conducting a comprehensive 360-degree assessment before fundraising begins. (03:51) This means getting unvarnished feedback from existing investors about what they think you do well, what concerns them, and what shifts they want to see. Alex emphasizes that existing LPs can often articulate a manager's differentiation better than the manager themselves because they're meeting numerous GPs and can provide comparative perspective. This preparation allows GPs to hook LPs within the first five minutes of their sixty-minute pitch, clearly articulating what their fund XYZ deal looks like and how they're differentiated in a crowded market.
Engineer Your First Close for 60-70% of Target
Fundraising success hinges entirely on achieving a strong first close, which Alex defines as hitting 60-70% of your target fund size. (02:18) This requires working backwards from your first close goal rather than setting an arbitrary target. The strategy involves bear-hugging existing LPs to form the foundation, then attracting new capital by credibly communicating that the raise will move quickly. Alex notes that lack of momentum is "the killer in fundraising"—if you don't hit this threshold, you get caught in the doldrums where LPs adopt a wait-and-see approach, extending your time in market and weakening your position.
Focus on Excitement Over Fear in LP Psychology
Contrary to common belief, LPs don't invest out of fear of missing out—they invest because they're excited about return potential. (07:01) Alex clarifies that while timing pressure can drive urgency, the foundation must be genuine excitement about what the GP brings to their portfolio that they don't already have. In today's oversupplied market with three times more GPs than available LP capital, success comes from articulating how you solve a specific problem or upgrade existing exposure in an LP's portfolio. The fear element only works sequentially after excitement is established—helping LPs prioritize which funds deserve their limited time and mental energy.
Leverage Existing LP Relationships as Your Foundation
The biggest mistake GPs make is taking their existing LP relationships for granted, even with close partners. (04:30) Alex's rule is simple: "Don't assume, ask." This means clearly validating that existing investors will participate, communicating your fundraising plan, and ensuring you have that bedrock built up before approaching new LPs. Existing LPs should form the foundation of every first close because they provide credibility and momentum that attracts new capital. GPs who fail to secure strong existing LP commitment often struggle to convince new investors of their fund's quality and urgency.
Build Credibility Through Consistency and Market Intelligence
Long-term fundraising success depends on building credibility through consistent delivery and deep market intelligence. (05:41) This means understanding each LP's specific portfolio needs, allocation priorities, and investment criteria before approaching them. Alex emphasizes that sending irrelevant opportunities destroys credibility—if an LP says they need middle-market US buyout exposure and you send them a European infrastructure fund, you've immediately lost trust. Successful agents and GPs invest time in understanding what problems each LP needs to solve, then only present solutions that directly address those needs, respecting everyone's most precious commodity: time.
Statistics & Facts
- There is currently a 3-to-1 oversupply of general partners versus available LP capital in the private equity market, creating intense competition for fundraising. (07:53)
- The average private equity fundraise now takes 17 months to complete, significantly longer than in previous market cycles. (11:52)
- LPs are meeting approximately a dozen managers per week, with some meeting half a dozen per day, highlighting the massive volume of pitches they evaluate. (13:35)
