I’m am working on ways to scale up my platform and one opportunity I have in front of me is to take on some funding for the GP portion of my JVs. I’ve never done a structure like this with investors being part of the GP. On the very outside chance anyone on here has done one of these structures (or knows about them), what are the typical (market) economics - % in and % out? I would be providing all of the deal sourcing and operational capability/decision making and they would be, for the most part, sourcing the LP equity, along with providing the majority of the GP coinvest. Anyone?
no input from the AF BOMs. shocking.
Lost me on the acronyms, so I’m probably not much help here.
I don’t really understand why you would do this if you’re still responsible for sourcing equity, deals, and operations - do you just want to give away a portion of your business?
In the circumstances I’ve seen these pitched, managers give away a portion of their GP ownership in exchange for support of the investor. This usually means a vote of confidence, access to funding, and is traditionally for startup funds with little or no funding.
If the intent is to raise capital for co-investment why not structure it outside of the GP?
It sounds like turd would be the ops/finance guy and the partner (which it sounds like the person sharing in the GP would be) is raising capital. I’m actually an LP in a similar structure with some old friends and I’ve reviewed tons of them in a prior life. Need more info:
what is the value of your contribution versus theirs? What are the underlying LPA terms? I’ve seen different structures depending on a lot of things. I’ve seen structures where the GP only takes a cut after 20% IRR and the GP investors get paid through another owners tranche. You dream it, you can do it as long as they’ll sign. So, the answer is it is a negotiation. There aren’t any rules except for what you think your contribution is worth versus theirs. Did they describe what they’d be looking for?
Why don’t you give them a special tranche with better terms and keep the GP with a hurdle? I guess how are your deals structured now? That will determine what’s attractive to you.
Giving away GP stake, so hacksaw.
Turd, whos the KP kid?
Looks like you’re right, my mistake, I read that as he was still doing the capital raising.
So I actually did this once on a small scale and I agree. In college I ran a small landscaping operation (not weeding, heavier 1 off work like redesigning beds, tree removal, mulching etc) with my college roommate. We had several trucks going at once, some guys working for us, a decent amount of equipment and made out pretty well. I brought a decent amount of equipment and most of the expertise with me and my Dad was pretty adamant that I should have been seeking more than 50% of the returns. I ended up going 50% because I didn’t want to poison the well with contentious negotiations from the start and my roommate was a hard working entrepreneur type so I figured I’d get it back by having someone equally committed rather than an employee. By doing this, he was WAY more engaged than he would have been, acting like a co-owner and it made the four years we did it an entirely better (and more profitable experience). It was actually the best decision I made with that operation.
That being said, there’s a huge difference between sharing profits with the right person who will be committed and take equal reigns in a small company and selling out an equity stake for early capital. In most cases you’re selling out too cheaply in favor of a quick pump of growth and opening the door to a bad operating dynamic. In one famously comical example, the facebook founders offered David Choe (obscure street artist at the time) either $60k or a slice of equivalent shares in the company for painting a mural in their office. Choe, a gambler took the stock since he felt he had enough money. Ten years later that stock was worth $200M at the IPO.
Have you disclosed to your funding provider that only 50% of your time will be spent on this venture as the other 50% of your time will be spent watching every Alex Jones video published, researching every conspiracy theory propagated by the alt-right, and watching 45 minute episodes of Maury on YouTube?
lol lol lol 