What do capital partners expect from an operating partner?
Short answer
I would say capital partners expect three things from an operating partner. First, a real skill in running the deal or the business, such as development, acquisitions or financing. Second, capital or effort at risk, since many capital partners like to see the operator share in the risk. Third, visible momentum. Terms vary by deal, so check the structure with securities counsel.
Start with what you are actually good at. When I explain joint ventures and co-GP deals, I always begin with skills. A capital partner usually brings money or investor access. What they often lack is the ability to find, run or fix the deal. So they look for an operator who is strong at one clear thing.
In the webinar I list the kinds of strengths I mean. You might be great at development. You might be great at securing or negotiating operating businesses for acquisition. You might be great at aligning financing, or at running a company after it has been acquired. Pick your lane and be honest about it.
"When you set up a joint venture, it's really trying to find parties that are complementary to your core skill sets."
In this webinar I explain why a joint venture works best when each partner focuses on what they do best.
Summary and key takeaways from this video
Why capital partners want you to carry risk
In many traditional structures, the general partner often finds the deal, shapes it and runs it, while limited partners are typically more passive. How risk is shared varies from deal to deal. That is why capital partners generally expect an operating partner to have something on the line. It might be cash, time or reputation, and the mix depends on the deal.
"The general partner has more risk. They're putting some of their capital on the line at risk."
A co-GP deal applies the same idea at the management level. You bring in one or two other parties to joint venture on the project. It can be in a very limited way or a very broad and open way.
This clip walks through how a co-GP deal splits roles and risk at the management level.
Terms that match what each side contributes
Sometimes the split is 50/50 right down the middle. Many times it has to be customized to what each party contributes and what the deal needs to be successful. So expect the capital partner to ask what you bring and to price your share around it. Come ready to explain your role in plain terms.
Put the roles and economics in writing and have securities counsel review them. I am not giving legal advice here, and every deal is different.
Momentum is part of the job
Capital partners also watch progress. I tell people that if outsiders, your own team and your business partners feel you are not getting anywhere, you will lose their trust as a leader. Momentum matters as much as the plan.
This is also where a good partner pays off. Speed can mean reaching 100 million in assets sooner. It can mean building credibility, or acting while timing is right on a distressed investment. A partner who brings the deal flow, investors or access you are missing may help remove the bottleneck.
Here I cover speed, focus and momentum as reasons to bring in a joint venture or co-GP partner.
Summary and key takeaways from this video
If you want a capital partner to take you seriously, show a clear skill, show that you share the risk, and show steady forward motion.
More from my talks
One point I would add is that the operator does not have to do everything. If you are great at development, or at securing and negotiating operating businesses for acquisition, or at aligning financing, or at running a company after it has been acquired, you may not want to deal with the capital raising and the structuring. In that case you can joint venture as a co-GP with a few others and get more deals done by focusing on what you are best at. A capital partner may value that focus.
"You might find that you're really great at development, or at securing or negotiating operating businesses for acquisition, or at aligning financing, or at running a company after it's been acquired. You don't want to deal with the capital raising or the structuring. Well, you could joint venture as a co-GP with a few others to get more deals done by focusing on what you're best at."
Facts and figures
- In many traditional GP and LP structures, limited partners tend to be more passive, while the general partner often puts some capital at risk.
- A co-GP deal brings in one or two other parties at the management level of the project.
- Richard names speed as a first reason for joint ventures, including speed to reach 100 million in assets.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club, Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club, Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club, Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around co-GP role splits, joint venture agreements and general partner structure. Do not use AI to write your own legal agreements.
What to do next
- Write down the one or two things you do better than most, such as development, acquisitions or financing.
- Decide what you can put at risk, whether capital, time or both.
- List the gaps a capital partner would fill, such as investor access or deal flow.
- Draft a simple role and split proposal based on what each side contributes.
- Consider talking with a securities attorney about the structure before you sign anything.
People also ask
What is a co-GP deal?
It means that at the management level of a deal, you bring in one or two other parties to joint venture on the project. The involvement can be limited or very broad.
Is a joint venture always a 50/50 split?
No. Sometimes it is 50/50, but many times it is customized to what each party contributes and what the deal needs to succeed.
Why would an operator bring in a capital partner?
Focus and speed are the main reasons. If you do not want to deal with the capital raising or the structuring, a partner can cover that so you can stay on what you do best.
Related questions
- How do I structure a JV between a sponsor and capital partner?Start with who does what.
- How should I split ownership with a money partner?Start with a preferred return for the money partner, then split the back end profit.
- How do I find a joint venture equity partner?Start by naming your bottleneck, whether that is deal flow, investor access or deal setup.
- What is a co-GP in real estate?A co-GP in real estate is a second party who shares the management of a deal with the main general partner.
Work through it with the investor meeting follow-up checklist. See all co-gp and joint venture deals resources.