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What’s up, everyone? Today, I want to tell you how to structure your investment committee, board, and team!
This is one of the most frequent questions that Lincoln Archibald and I get asked from our students at Fund Launch.
How do I compensate my team? What does equity look like?
There are many financial decisions like these that will make or break your business and/or relationships.
3 Roles
We’ve recently gone over the 3 components to the team…
- Expert Investor
- Fund Manager
- Money Raiser
Of course, these roles can (and sometimes should) be filled by more than one person.
Just to be clear, you won’t see any of the roles above on a LinkedIn profile.
However, you will see titles like the Chief Investment Officer (CIO), Chief Compliance Officer (CCO), and the Chief Financial Officer (CFO).
CIO
Just because your fund has a CIO, doesn’t mean they need a team of 20 analysts with commercial office space.
Start small and hire who you need.
CCO
Maybe your CCO doesn’t actually know all the compliance regulations.
There are companies like Foreside that you can hire. As long as your team has an appointed CCO, Foreside will tell them what they need to do.
Compensation
If you have deep pockets, just use cash.
If you don’t, then you can use equity as leverage.
Deciding between the two?
I said in my YouTube video that…
“It just depends on your situation. From my fund experience in the early stages of the company, you will lean more towards equity. But, once you’re up and running, you’ll want to use cash as fast as possible.”
How Are Money Raisers Compensated?
Depending on how much value a money raiser brings, I would say they could be compensated anywhere from 0.5% to 50%.
However, a good rule of thumb is to make it a 1/3 split between the expert investor, fund manager, and capital raiser.
Equity
The great thing about launching funds is that if you and you’re partners don’t love the equity split the first time around, you can always modify it to better suite your next fund.
I’m saying that if you keep launching closed-ended funds, then your equity is not set in stone from one fund to another!
In my video, Lincoln said something very insightful…
“Most people that aren’t successful at starting a fund typically fail because they try to do it all on their own. Don’t be selfish. Find partners to help you out. It’s worth the shared equity.”
Conclusion
There’s more to my video, so go check it out here!
Hopefully, you have been enlightened on how to structure your investment committee, board, and team for your fund.
It’s a heavy and important task, so follow these principles and visit Fund Launch for help!
That’s it for today!
Thanks,
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.
