WHY to RAISE A FUND or How to Get people to Give you $$$?

I've raised for big players (Goldman, SSgA, First Trust, EEC) to the tune of literally tens of billions...

(Hand slaps face for not getting more equity)...

A thread:
At @GoldmanSachs (should I name drop again 🙄) we were shown a study on generational wealth...

Almost 100% of the wealth was made 1 of 5 ways:

Lucky Sperm Club (ok it said Inheritance)

Owner of a Business

Marry Rich

Public Co C Suite Exec

Asset Management
The last one is intriguing...

Building a fund and then a fund family (a group of funds)
Fund managers (PE, VC) make $ when the Cos they invest in make $.

2 revenue streams:
1. Carry: share profits realized by investors
2. Management fee: usually a 2% fee to run the fund
3. Fundraising/admin costs: aka jets, offices in Connecticut etc
Carry - 20% is standard

For example:
If a fund makes $10 million in profits (or returns)

The partners take a $2 million to $3 million cut before distributing the rest among their investors.
Management Fee - That fee is paid as a percentage of total fund size over the life of the fund (5-10 years)

Example in the spreadsheet for $50M fund

- $1M will be paid in each of the first five years

-next 5 years $500 paid out (½ management fee)
Look at how the money stacks up.

Not too shabby

Now imagine you raise multiple of these funds over the course of a few years… the payouts ain’t bad.
But before you start putting together fund formation docs and asking your grandma if she’s an accredited investor...

GOLDEN RULE: you have to deliver.
It’s a hits-driven business.

You have one judge, jury, and executioner… your MOIC (Multiple on Invested Capital).

A fancy way of saying I give you $100, do you give me back $300 to $500.

If not, pick a new job.
Want to learn more follow these buds of mine who raised funds the unconventional way & who share:
@ShaanVP - $3.5M rolling fund
@moseskagan - MF fund In RE
@keith_wasserman - $1.5B+ fund in RE
@fortworthchris - $500M assets in RE
This isn't an easy game.
Because you are playing a reputation game w/ OPM
You need:

Financial saavy
Investment thesis
Unfair advantage (unique skill stack)

Outcomes are often outside of your control
BUT these days you don’t need to have gone to Harvard or be a billionaire to start a fund (although many have and are)

Plenty have killed it within unconventional areas, regions, and backgrounds like @BrentBeshore
Weigh the risks then, hey who knows, maybe you too can be a fund manager.

If you're any good... let me know, so I can invest :)

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More from @Codie_Sanchez

16 May
Oh hey there... so you wanna buy a laundromat?

I heard ya. SO - some of the tools we use to buy 'em.

Also remember - he who keeps it stupid simple wins. A thread on deal docs:
How do I know this isn't a lemon?
Oh that's a good q. You need a deal calculator.

Here's how we measure it. Super simplified but it lets you not waste time on sh*t. Image
It's not an IOU, it's an LOI (letter of intent):
Fancy way of saying, Hey Homie, I'd kinda like to buy your business.

BUT I'm not proposing, we're not exclusive, we're just dating. Cool? Image
Read 9 tweets
14 May
This dude looks at 3000+ businesses a year.

And narrows down which to buy often in 30 seconds...

A 🧵 featuring my new homie @SievaKozinsky DD process:
How to go from 3,000 -> 1,000 deals
Narrowed down by looking quickly at these 4 things..
Know your parameters = save your time.
- Type of business
- Cashflow amount
- location
- profit

Only 1-3 hits those amounts rest.. (30sec review)
1,000 --> 500
- Financials (learn how to spot a healthy biz is largely in the #'s)

Oh, they're a mess & you're actually not profitable.

Bye (less than 30min to review)
Read 9 tweets
13 May
I want to own a passive cashflow business!

Ok - then you need an operator my friend.

How we've hired 100+ operators (some amazing some spectacularly bad).

A 🧵
How to find this elusive human who will do all work while we cashflow?

Stop, no free lunches, expect skin in z game.

I started as an operator. Like a RE property manager.
They took $ risk, I took time risk.

Done right. You are giving only path to REAL wealth... ownership.

Always is one of two things:

- Potential talent - someone you know and trust or someone
- Proven talent - who has done the job before
Read 14 tweets
12 May
I wanna buy a business, but where do I start???

Good Q since: 91% of ppl with a net worth of $5M+ own their own biz

BUT - Sometimes it's better to start with what not to do.

Here are the most common MISTAKES in M&A & how to avoid them:
1) Don't listen to your Mom, not all Debt is bad

Leverage. I like to try to shoot for a similar to a mortgage.
10-20% cash down in cash, rest “seller-financed"

For example, a biz makes $100k profit, and they're usually valued at 2-3x profits
So you buy for $200k let us say bc you my friend r a killer negotiator.

- $20k down (20%)
- $80k paid end of year 1
- $100k end of year 2
If you fancy, u use profits from biz to pay for the purchase.

Rule #1, Don’t Buy with Cash. Rule #2, Don’t Forget Rule #1.
Read 11 tweets
11 May
How to get free $Money?

Stop. No such thing.

Well, except I think the SBA loan programs are pretty d*mn close.

A thread on OPM from the good ole' US government:
SBA loans... a quickie 😜
- Can get loans up to 90% of your qualifying biz purchase price
- Govt backs a portion of your loan
- Max usually $5M
- Loots of new benefits during Covid to read up on
They're basically copies of what big PE firms do with their partner lending firms.

Assets + Cashflow Potential+ Leverage = PE
Assets + Cashfow Potential + Leverage = SMB buy w/ SBA loans
Read 8 tweets
10 May
3 Rules for Deal Making that'll Teach you More than ANY PE MBA

Speak finance and earn finance like $ w/o the IBanking like hours.

I did the Goldman thing... believe me, you don't need to. A 🧵
📏 Rule #1: Cash Isn’t King, Cashflow Is

I optimize for making $’s on my deals day 1.

When I close a deal personally (not through our VC funds), I want that deal to pay me that same day.

Greedy, maybe? Possible, unequivocally.
📏 Rule #2 @ycombinator Term Sheets are for Amateurs

- Most sign term sheets straight from Y-Combinator.

- Have to when deals are super hot (theoretically).

But if I’m optimizing for cash flow, not potential 100x’s, no thanks. Instead...
Read 7 tweets

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