Investment Structure Strategies | Ep 8 | Summary and Q&A

TL;DR

Investment structure strategies play a crucial role in the success or failure of a deal. Custom structuring can turn a bad deal into a decent or excellent one, while a bad structure can ruin a great deal.

Key Insights

• 🤝 Investment structure is a critical aspect of a deal and can make or break its success.
• 🛃 Custom structuring options provide flexibility and tailored arrangements for investors.
• ⚾ Various structures, such as convertible notes and venture debt, offer different benefits based on the stage and needs of the company.
• 🫥 Gross revenue royalties can be an attractive option for passive investors, providing cash flow based on top-line revenue.
• 👻 LLC partnerships allow for different share classes and more tailored agreements, enhancing investor control and returns.
• 🔒 Collateral and transparency requirements can provide added security and confidence for investors.
• 💨 Preferred income models and cogp structures offer alternatives for guaranteed income and faster capital raising, respectively.

Transcript

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Questions & Answers

Q: How does investment structure impact the success of a deal?

Investment structure is crucial because it can significantly affect the outcome of a deal. A bad structure can turn a great deal into a failure, while a well-structured deal can enhance its potential for success.

Q: What are some examples of custom structuring?

Custom structuring can include boosting returns, negotiating income attachments, and creating different share classes within an LLC partnership. These approaches allow for more flexibility and tailored arrangements based on the specific needs and preferences of the investors.

Q: What are some common investment structure options?

Convertible notes, venture debt, and gross revenue royalties are commonly used structures in investments. Each option offers different benefits and considerations, such as discounts, coupon rates, equity kickers, and various types of returns.

Q: How can preferred income models and cogp structures be advantageous?

Preferred income models provide a guaranteed return before profit-sharing, ensuring investors receive a certain level of income. Cogp structures involve partnering with a third party who contributes capital, enabling faster capital raising and potential access to a larger network of investors.

Summary & Key Takeaways

• Investment structure is critical for savvy single-family offices, as it can make or break a deal.

• Custom structuring examples include boosting returns, negotiating income attachments, and creating custom share classes within an LLC partnership.

• Various structures, such as convertible notes, venture debt, and gross revenue royalties, offer different benefits and considerations.

• Preferred income models, cogp structures, and performance fee-only structures are additional options to explore.

• Collateral and transparency requirements, as well as multiple equity caps and negative controls, can provide added protection and flexibility.