Ahead of the Private Equity Wire European Emerging Managers Summit, Joe Briggs, Founder & Managing Partner at Briggs Capital Formation, provides insight for new and emerging managers on the topic of differentiation. Joe will be moderating a panel and roundtable on this topic at the Summit on 14 November.
What is differentiation? In biology, it’s the process by which cells, tissue and organs acquire specialised features, in particular during embryonic development. In mathematics, it’s the process of determining the derivative of a function at any point, a central part of calculus. In private market alternative investment funds, it’s got to be one of the most talked about but also one of the more elusive concepts out there in the industry today.
It comes up regularly and it comes up everywhere: our “key differentiators”, “unique selling points”, “competitive advantages”, “distinguishing features”, “secret sauce”, “definable edge”, “reason to exist”, “right to win”. Building a fund involves drawing together so many different aspects, so many moving parts, each presenting a potential opportunity to demonstrate how you stand out and do things differently. These parts can be combined in a multitude of different ways and shaped to produce distinct and discrete offerings for investors.
Investors have short attention spans and (they at least like to think) they’ve heard it all before. To be memorable, funds ultimately need to go all-in on the handful of clear defining characteristics that set them apart from the crowd. These characteristics need to be both sufficiently familiar and inherently distinct, a real balancing act. They also need to be eminently repeatable – repeatable by funds in a way that is simple, compelling and authentic, and repeatable by investors in a way that shows you’ve given them something interesting and exciting to talk about with other people.
Three short lists set out below outline some of the ways funds think about their key differentiators – inspiration perhaps for how some funds do it, but also for how new funds might want to do it differently.
- Study the art of framing a unique proposition
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- “We do more than just X”
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- “We have access to X and we know what it takes to get to Y”
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- “We understand X and we’ve seen how X has evolved over time”
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- “We combine A and B, which enables us to do C”
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- “A typical deal for us looks like X and features ABC characteristics”
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- “The way we do X is complemented by the fact we have Y”
- Spend time at some of the typical investor STOMP-ing grounds
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- Strategy: proven, consistent, established, focused, specialist, hands-on?
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- Team: senior, sophisticated, entrepreneurial, experienced, dedicated, seasoned?
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- Operations: robust, optimised, systematic, professional?
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- Market: attractive, large, growing, underserved, inefficient?
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- Process: disciplined, proactive, repeatable, rigorous?
- Get investors to take the BAIT
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- What’s your Behavioural edge (e.g. managing around certain biases)?
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- What’s your Analytical edge (e.g. processing the same information but better)?
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- What’s your Informational edge (e.g. possessing better information)?
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- What’s your Technical edge (e.g. leveraging real know-how and expertise)?
Whichever way they approach it, funds should always take the time to unpack what they do, how they do it and why they believe it’s something that merits serious investor attention. It’s an iterative process that requires healthy doses of creativity, honesty, self-awareness and self-belief in the face of uncertainty and competition for capital.
In the words of one investor when asked to define differentiation – “Well, I like to think I know it when I see it”.
Want to learn more? Join us at the Private Equity Wire European Emerging Managers Summit on Thursday, 14 November, at etc.venues County Hall, London. Apply for your pass here.
