Many first-time fund managers pursue deal-by-deal fundraising as a stepping stone toward launching a debut fund. This approach, often implemented through Special Purpose Vehicles (SPVs), is gaining mainstream traction. A recent Real Deals article describes the model as “here to stay,” citing growing institutional interest and stronger economic incentives for both managers and investors.
Its appeal lies in flexibility: investors commit to individual deals, not blind pools, and sponsors can tailor terms, fees, and timelines. This structure also allows emerging managers to build a track record one deal at a time. When executed professionally, deal-by-deal fundraising becomes a powerful credibility-building tool that paves the way for future fundraising.
Below, we outline best practices to ensure each SPV reinforces your reputation and common mistakes that can undermine it.
Best Practices for Deal-by-Deal Fundraising
Fund investors (LPs) will assess an emerging manager’s professionalism based on how they handle SPVs. Each transaction is a microcosm of a full fund and should reflect the same level of operational excellence.
Establish Institutional-Grade Infrastructure
Treat the SPV like a mini fund. Build strong legal and compliance frameworks, use independent fund administrators, and implement reliable governance and reporting processes. Most seasoned firms use third-party administrators to ensure institutional-quality operations and signal transparency to investors.
Streamline Investor Onboarding
Investor onboarding is often your first test. Use digital tools and standardised workflows to handle KYC/AML, subscription docs, and accreditation checks. Avoid manual, paper-heavy processes that frustrate investors and slow momentum. Concise welcome packets, user-friendly portals, and prompt responses show you’re “fund-ready” from day one.
Provide Clear, Consistent Reporting
Investors expect transparency, even in single-asset vehicles. Set a regular update cadence, quarterly or milestone-based, and stick to it. Include key developments, performance metrics, and financials. Use secure portals or bulletins for communication, and consider a “mini case study” post-exit to reinforce your track record.
Maintain Professional Standards Across the Board
From your pitch deck to your closing documents, ensure everything looks and feels polished. Branding, materials, fee structures, and legal terms should meet industry norms. Institutional LPs notice the details and judge whether you’re ready for larger-scale capital.
Pitfalls to Avoid
A “quick and dirty” SPV undermines trust, even if the deal performs well. These common mistakes can sabotage investor confidence and your ability to raise future capital.
Disorganised Operations
Makeshift controls, delayed documentation, and inconsistent processes send red flags. Without committed capital, delays can kill deals. Speed and credibility go hand in hand; a streamlined, reliable setup is essential to compete.
Poor Onboarding Experience
Confusing instructions, repeated document requests, or insecure methods for collecting sensitive data (like email or wet-ink signatures) can alienate investors. If the process feels substandard, LPs may walk away. First impressions matter; a clunky start can permanently sour relationships.
Inadequate Communication
Once investors are in, they expect clarity and professionalism. Vague or irregular updates raise doubts and make you look careless. Reporting isn’t just a formality; it reassures investors you’re managing their capital responsibly and builds trust for future deals.
Neglecting the Investor Relationship
Fundraising is more than deal execution; it’s investor service. Being unresponsive or appearing dismissive erodes trust. Investors talk. One bad experience can quietly spread and hurt your reputation. Treat LPs as long-term partners, not one-time check writers.
Why the Investor Experience Matters
Running SPVs professionally isn’t just about compliance; it’s a direct investment in future fundraising success.
Trust Builds Loyalty and Reinvestment
Various academic research shows that trust reduces perceived risk. When investors have a positive experience, smooth onboarding, clear communication, and timely updates, they’re more likely to reinvest, even through tougher market cycles. Breaking that trust, on the other hand, is difficult to recover from.
Satisfied Investors = Easier Fundraising
Your early backers can become your first fund’s anchors or your most vocal critics. Retaining them is cheaper and more effective than finding new LPs. A great SPV experience builds the confidence needed to secure larger, longer-term commitments.
Reputation Compounds
Social proof matters. Any category of LP will gather input from peers about their experience with a manager. One glowing endorsement (“it ran like a top-tier fund”) can open doors. A single negative review can quietly steer others away. In private markets, your reputation is cumulative; every SPV is an audition for what comes next.
Conclusion
Deal-by-deal fundraising is more than an interim strategy; it’s a proving ground. By running each SPV with professionalism, transparency, and operational discipline, you not only build investor trust but also lay the foundation for a successful fund. Avoid shortcuts, deliver excellence, and treat every interaction as part of your long game. The LPs you impress today are the ones who will back you tomorrow.
