Investment Structure Strategies 101 - LLC Share Classes, Co-GP Deals, Gross Revenue Royalties | EP 8 | Summary and Q&A

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December 15, 2022
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Investment Structure Strategies 101 - LLC Share Classes, Co-GP Deals, Gross Revenue Royalties | EP 8

TL;DR

Learn about various investment structure strategies that can maximize profits and protect your interests in deals, often making structure more important than strategy itself.

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Questions & Answers

Q: Why is investment structure often more important than strategy?

Investment structure can significantly impact the distribution of profits and risk, allowing one party to gain more advantages. By structuring a deal favorably, even a mediocre strategy can become highly profitable.

Q: What are some examples of investment structure strategies?

Some examples include gross revenue royalties, different share classes based on involvement in the business, de-risking payout order, and equity gap fees. Each structure offers unique advantages in maximizing returns and minimizing risk.

Q: How can investing schedules impact deals?

Investing schedules, such as vesting equity over time, incentivize key employees, strategic investors, or advisory board members to provide consistent value. This structure allows for increased flexibility and alignment of interests.

Q: How can investment structure strategies enhance a family office's impact?

By focusing on strategies that align with their expertise and passion, family offices can leverage their unique advantages. Becoming known as the first and most strategically valuable investor can lead to exclusive deal flow and better valuations.

Summary & Key Takeaways

  • Investment structure strategies are essential for aligning different parties and protecting interests in deals.

  • Proper structuring can make a mediocre deal profitable and ruin an excellent deal if not done correctly.

  • Different structures, such as gross revenue royalties, equity gap fees, and investing schedules, offer unique ways to optimize returns and minimize risk.

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