Growing an association

As the Private Equity Council gears up to add more members, officials from two leading private equity trade associations share their perspective how to build association membership while staying true to the core mission.

Earlier this month, Washington DC-based Private Equity Council (PEC), a lobbying group launched in 2007 with 11 mega-firm backers, decided to bolster its membership.

The head of the most established private equity trade association in the US, the National Venture Capital Association, says the PEC’s transformation into a much larger organisation will not be easy. “There will be challenges, especially between larger firms and smaller firms,” said Heesen. “There also could be issues between firms that look at private equity from an international perspective and those that look at it from a US perspective.”

In addition, “You’re always going to have tension over who should be steering the boat,” said Heesen.
While growing a trade association can be challenging, a group with attractive offerings and the right mission can grow quickly and successfully. One such group is the Emerging Markets Private Equity Association (EMPEA).

Since its founding in 2004, EMPEA has grown to nearly 300 members made up of 60 percent GPs, 30 percent LPs, and 10 percent service providers, according to Sarah Alexander, president of EMPEA.

Unlike the PEC, EMPEA started out quite broad in its membership base. The group is open to private equity firms, LPs, professional service providers, corporate venture capital funds, non-profit institutions, and academic institutions.

“Unlike many of our counterparts, we were not founded as a lobbying organisation. Most of the national associations have as a mandate a lobbying role. That’s not what we do. We focus on research and education. That’s where a lot of our energy goes,” said Alexander.

The NVCA, however, was created nearly 30 years ago to lobby the importance of venture capital to the US economy. “We’ve grown slowly,” said Heesen, adding that the group now represents more than 425 venture capital firms, which is 90 percent of the total US venture dollars under management.

The founding of the PEC was largely in response to the growing momentum in Washington toward raising the tax rate on carried interest and other regulatory initiatives viewed as harmful to the growth of the private equity business.

Doug Lowenstein, president of the PEC, said in an interview that the association members had put off the decision to expand membership in part because of the need to focus resources on lobbying against key congressional initiatives. While Lowenstein says the private equity industry is not “in the clear” on the regulatory front, he argues that a lull in legislative momentum spells “the best opportunity to be visible” on Capitol Hill.

Whether the PEC grows slowly or rapidly may depend on how anxious hundreds of middle-market GPs are about regulatory developments in Washington, and on whether they feel that in joining the new association they will have any impact on these developments.