- Short Description:
- A way for a GP to build brand for sourcing and LP fundraising is to have investments in companies that are successful and well known. The logos of these well-known and respected companies can be used in the GPs marketing materials hence the term “buying logos”. Buying logos is distinct from investing early in successful companies in that it waits until the company has been identified and therefore the stock purchased is likely at a higher price and/or not in large amounts. At times emerging managers will follow this strategy to at first to prove relevance to LPs and founders, there are some who continue this strategy past that early stage of a fund’s life.
- Benefits:
- For a fund that is still relatively unknown, having some investments that are known to LPs and founders can building legitimacy and relevance.
- If you are lucky enough to invest in truly successful companies early-on, then you may have the returns to match the . Wonderful! If this is the case, then really you are investing wisely and not buying logos.
- Trade-offs:
- Chasing the logos of already respected companies, can result in buying small amounts of stock and/or investing at a higher price. That means absolute amounts of capital returned to LPs and the percentage increase may be smaller.
- Does not do as much to develop or maintain independent judgement
