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    69. Capital Intro 101 with Ron Biscardi

    en-usMay 18, 2024

    Podcast Summary

    • Empowering educators through access to professional development opportunitiesThe CEO of Iconnections, Ron Viscardi, emphasizes the importance of building authentic relationships through service and giving incremental value without expecting anything in return in the financial industry.

      The CEO of Iconnections, Ron Viscardi, not only brings valuable insights into the world of finance and raising seed capital, but he also embodies the importance of building relationships through service and giving incremental value without expecting anything in return. IConnections, the largest capital introduction conference in the world, is dedicated to empowering educators by providing access to professional development opportunities through funds for teachers. Ron's personal involvement in this initiative, as well as his efforts to help The Wall Street Skinny hosts, exemplifies the power of approaching relationships with a spirit of service. This episode not only offers insights into the financial industry but also serves as a reminder of the importance of authentic relationship building.

    • Adapting to Crisis: Innovating in the Alternative Investment IndustryDuring crises, innovate and adapt to create value, as shown by the launch of Iconnections, a virtual platform for the alternative investment industry, which attracted fund managers by leveraging prestigious allocator names and donated proceeds to food banks.

      During times of crisis and uncertainty, innovation and adaptability are key. The speaker shared his background as an entrepreneur who pivoted his business during the financial crisis in 2008 and later during the COVID-19 pandemic. He discussed how the alternative investment industry, which heavily relies on face-to-face meetings, was particularly impacted by the pandemic. To address this challenge, the speaker launched Iconnections, a virtual platform for connecting the alternative investment industry during COVID-19. The platform's success came from its unique approach, using the names of prestigious allocators to attract fund managers and donating the proceeds to food banks. This not only provided a valuable service but also created a win-win situation for all parties involved. The story demonstrates the importance of being agile and finding creative solutions to overcome obstacles.

    • Building relationships and having a track record are crucial for securing seed capitalPersonal connections and a proven track record increase the likelihood of securing seed capital in the alternative investment industry

      Building relationships and having a track record are crucial in securing seed capital in the alternative investment industry. The speaker shared his experience of growing Iconnections, a platform for virtual and physical events connecting allocators and investment managers, and how it transformed from a regional event to a global one. He emphasized that seed capital is not easily obtained, especially for new entrants, and that having a track record is essential to even get noticed. Successful funds are those where the portfolio manager has personally taken the time to build relationships with Limited Partners (LPs) and other industry players. This personal connection and proven track record increase the likelihood of securing seed capital. The speaker also mentioned that the biggest seeds often go to those already in the business, having spent years building a track record and network within larger firms.

    • Building strong LP relationships and demonstrating consistencySuccessfully raising capital for an investment fund necessitates forming robust LP relationships and delivering consistent performance and team dynamics.

      Starting and growing a successful investment fund is a long-term commitment that requires building strong relationships with Limited Partners (LPs) and demonstrating consistency in performance and team dynamics. LPs consider various factors before allocating capital, including existing portfolio needs and business risks related to the fund manager's team. The fundraising process is challenging for most managers, as the majority of capital flows to the largest funds. Despite the challenges, diversification is essential, and there is focus on smaller funds. However, the business is inherently difficult, and only those who are committed for the long haul should consider starting a fund. As one expert noted, if the idea of facing initial resistance deters you from starting, then perhaps it's best not to begin.

    • Building relationships leads to opportunitiesPersistently sending high-quality resumes led to a business relationship with Cisco. Focusing on relationships over transactions can lead to success and discovering valuable partners.

      Building and maintaining relationships is crucial in both engineering-based businesses and the financial services industry. Persistence and the willingness to go the extra mile can lead to valuable opportunities. A powerful example of this is how the speaker landed Cisco as a client by sending them high-quality resumes without expecting payment, which impressed them and led to a business relationship. This approach of "paying it forward" has been a consistent strategy for the speaker throughout their career, leading to both small and large favors and opportunities. It's important to remember that this method doesn't always work, but the potential rewards make it worth the effort. By focusing on building relationships rather than solely on transactions, the speaker has found success and also discovered who they want to work with.

    • Exploring new opportunities in crisesNavigating crises can lead to new opportunities in events, software, and alternative investments. Traditional seeding business models may no longer work, but alternative channels and investments can provide success.

      Navigating crises in the capital raising industry can present opportunities for growth, despite the challenges. This was evident in the speaker's experience during the financial crisis and the COVID-19 pandemic. In the financial crisis, the traditional seeding business model no longer worked, leading the speaker to explore new opportunities in the events and software industries. During COVID-19, the speaker was able to identify market gaps and provide solutions, resulting in success. Capital introduction (cap intro) refers to the process of connecting investors with potential investment opportunities. This can be done through various channels, including introductions from trusted sources, industry events, and software platforms. Alternative investments are assets that fall outside of traditional stocks and bonds, and are typically only accessible to accredited investors or qualified purchasers. These investments can include private equity, real estate, hedge funds, and infrastructure projects. While the alternative investment industry is largely made up of institutional investors and high net worth individuals, there are vehicles that allow access for those with smaller balances.

    • Connecting fund managers and investors through cap intro eventsCap intro events bring investors and fund managers together, seeding offers early capital and enhanced economics, and cap intro firms earn fees as a percentage of capital raised.

      Cap introduction (cap intro) is a process that connects fund managers with investors. Cap intro events aim to bring these two parties together, as one side needs their money managed, and the other side excels at managing and investing it. Seeding, a part of this process, refers to providing early capital to new funds in exchange for enhanced economics, such as reduced fees or a percentage of GP ownership. Those who provide the seed money can benefit significantly as they get a share of the fees generated from the funds' future capital raises. Cap intro firms or third-party marketers, who facilitate these introductions, earn their fees as a percentage of the capital raised. For instance, they might receive 1-2% of the capital raised for private equity funds or up to 20% of the fees generated for hedge funds. Cap intro events, like a dating app for capital investment, serve as a platform for investors and fund managers to meet and potentially form successful partnerships. However, our specific event organizer is not a third-party marketer but rather a software product that facilitates these connections.

    • Prime Brokerage and Cap Intro: Connecting Funds and Capital SourcesPrime brokerage firms act as intermediaries, connecting hedge funds with potential investors, and providing trading services and leverage. The cap intro function within prime brokerage facilitates introductions between institutional investors and fund clients, benefiting both parties.

      LinkedIn and other platforms serve as marketplaces where investors and capital seekers can connect, filter, search, and confirm meetings. This is similar to how events and third-party marketers facilitate introductions. Prime brokerage firms, like Goldman Sachs or Morgan Stanley, play a crucial role by introducing hedge funds to potential capital sources. In return, these introductions lead to more trading revenue for the prime brokerage firms. Essentially, prime brokerage acts as a full-service stock broker for funds, offering trading services for various securities and providing leverage. The cap intro function is a subset of prime brokerage, where teams maintain relationships with institutional investors and introduce them to fund clients. This benefits both parties as the fund client grows, potentially leading to more trading for the prime brokerage firm.

    • Alternative investment industry adopts technology to streamline businessThe alternative investment industry is adopting technology to automate subscription processes and portfolio reporting, with iConnections introducing a roadshow module to help fund managers plan and execute roadshows more efficiently.

      The alternative investment industry, although relationship-driven, is slowly embracing technology to enhance and streamline various aspects of the business. The industry, which has traditionally relied on face-to-face interactions, is now adopting digital solutions to automate subscription processes and portfolio reporting. However, there is no dominant player in this area, leaving room for companies like iConnections to fill the void. iConnections, which already has a significant footprint in the alternative investment space, aims to extend its reach deeper into the investment process by introducing a roadshow module. This module will help fund managers plan and execute roadshows more efficiently by handling logistics and providing a concierge team. The ultimate goal is to help fund managers focus on building relationships and making investments, while the technology takes care of the rest.

    • The Power of Influencers in the Private Investment SpaceInfluencers are disrupting traditional marketing and branding in private investment with their direct relationships with consumers and impressive sales numbers.

      The influence economy is disrupting traditional marketing and branding in the private investment space. Speakers like Kim Kardashian, who are known for their reality TV careers but also run successful businesses and have large followings, can create a direct relationship with consumers that corporations may find hard to compete with. This was evident at a conference where such speakers were invited not just for entertainment, but because of their entrepreneurial ventures and influence. The future of consumer products lies in the hands of influencers, with companies like Mr. Beast and Kim Kardashian generating impressive sales numbers. While the traditional economy still dominates the conference agenda, the inclusion of influencers brings a fresh perspective and adds value to the event. The intersection of the public sphere and the private investment space is becoming increasingly blurred, and the power of influencers in driving consumer demand is a trend that is here to stay.

    • Success in one domain doesn't limit potential in othersInfluencers and celebs bring intellect, determination, networks, and personal brands to finance, challenging traditional institutions and creating new opportunities for growth

      The success achieved in one domain does not limit an individual's potential in other areas, such as business and finance. Influencers and celebrities, despite their initial claim to fame, possess impressive intellect and determination, making them formidable competitors in the financial world. Their vast networks and strong personal brands provide unique opportunities for growth and investment. This trend is expected to continue as more wealth is generated in the influencer and celebrity economies. Traditional financial institutions may face a reckoning as they grapple with increased competition from these new entrants. Ultimately, success in any field is rooted in grit, relationships, and a willingness to learn.

    • Relationships are key to success in capital introduction businessIntentional and consistent networking leads to valuable connections and opportunities in capital introduction business

      While technical knowledge is important in the capital introduction business, relationships are the key to success. Harvard MBAs and influencers, despite their different backgrounds, have demonstrated the ability to succeed in business and deliver value to customers. These individuals have demonstrated networks and deal flow that traditional private equity firms envy. However, to be successful in this industry, it's essential to focus on building relationships from day one. Networking intentionally and consistently can lead to valuable connections and opportunities in the future. While technical knowledge is necessary to enter the game, it's the relationships that drive success in the capital introduction business.

    • Building relationships early on in your careerEarly relationship building can lead to valuable opportunities and experiences. Seek help from mentors and professionals, make a strong work ethic clear, and invest time in networking and skill development.

      Building relationships and asking for help from mentors and professionals early on in your academic and professional journey can lead to valuable opportunities and experiences. This was emphasized by the discussion about Steve Jobs' experience reaching out to Bill Hewlett for help, which led to an internship at Hewlett Packard. The speaker also advised students to start relationship building early and to make it clear to potential employers that they have a strong work ethic. Additionally, the speaker noted that young professionals today may be seeking more guidance and specificity in networking and professional development than previous generations, likely due to the unique challenges of the COVID era and the changing job market. Ultimately, investing time and effort in building relationships and developing skills early in your career can pay off in the form of future opportunities and a strong professional reputation.

    • Investing in yourself and relationshipsFocus on long-term benefits and relationships for career success, not just current compensation

      Focusing only on the present compensation in your career can limit your long-term success. Investment banking, for example, is a demanding but valuable experience that provides skills, relationships, and reputation, setting you up for future opportunities. This mindset of investing in yourself and building relationships is crucial for career advancement and sets apart the next generation of leaders from followers. People often view their jobs as something they would do for free due to the long-term benefits they receive. Therefore, it's essential to look beyond the current compensation and consider the intangible benefits that come with the role. Ron's insight emphasizes the importance of relationships and thinking long-term for a successful career in the industry.

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