Creative Investment Structures: Co-GP, Sidecar Funds, SPVs and Priced Rounds
Creative investment structures: Co-GP, Seed, Anchor investor, JV & Other Innovative Approaches to...
Fund managers, sponsors and startup founders who want to see how angels, venture investors and family office real estate teams think about deal structure.
Quotes from the session
"I like to put in an additional layer of control which is a third party property manager that has the checkbook."
"We haven't done a SAFE. We hope to never do a SAFE."
"So you've got to make it easy for the partner to sell that idea internally to their investment team."
What this talk covers
Carlos, who runs real estate for a family office, likes to control the whole capital stack. He uses a third party property manager that holds the checkbook. He likes preferred equity because he wants his capital positioned first, and he takes a co-GP role when he brings the full stack. His priorities are capital preservation first, then yield, then upside.
Yaniv and Juan cover startup structures. Yaniv's life science angel group runs a sidecar fund that co-invests on the same terms, using published rules and a 20% cap on any one company. Juan's venture firm offers SPVs to its LPs with lower fees and carry. Both dislike the SAFE and prefer priced rounds. The panel also shares pitch tips and how to apply.
Key facts
- Yaniv's sidecar fund limits itself to 20% of its capital in any one company under its published rules.
- Juan's MIT network has about 800 alums who invest and has invested in about 80 MIT affiliated startups.
- Carlos would not look at a 1970s apartment in Atlanta priced at more than $100,000 a door.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Creative investment structures: Co-GP, Seed, Anchor investor, JV & Other Innovative Approaches to.... 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 preferred equity terms, sidecar fund rules and SPV structuring. Do not use AI to write your own legal agreements.
What to take from this talk
- Control the whole capital stack. Carlos calls other co-investors even when he is a limited partner. He tries to fill the full capital stack so he has more control over the deal.
- Add a control layer in real estate. Carlos avoids vertically integrated sponsors on multifamily deals. He wants a third party property manager who holds the checkbook and has signed to listen to him. He also uses a lock box and makes sponsors justify requests for more money.
- Sidecar funds can run on rules. Yaniv's sidecar fund has no investment committee. Rules are published ahead of time, the fund aims to get the same terms as the members, and its published rules limit it to about 20% of its capital in one company. Each deal is an automatic yes or no.
- SPVs reward existing LPs. Juan's firm offers SPV opportunities in its existing companies once the fund is fully deployed. LPs can join the best deals at lower fees and lower carry. Co-investment rights may also be offered to the right investors.
- Priced rounds beat SAFEs. Yaniv explains that in his view a convertible note postpones the question of value, so early value can be missed. His group has not done a SAFE and hopes never to. Juan also personally prefers priced rounds over the SAFE, and notes that valuations in smaller markets can be more reasonable than in SF, New York or Boston.
Related questions
- How does revenue-based financing work for growing companies?Revenue-based financing gives a company capital in exchange for a share of its sales until the investor is repaid.
- What is the difference between a convertible note and a SAFE?A convertible note is commonly described as a loan that later converts into equity, often with interest and a maturity date.
- How do I structure an earnout in an acquisition?Tie part of the purchase price to how the business performs after closing.
Questions about this video
What is a sidecar fund in this panel?
Yaniv describes a fund for non-members that co-invests alongside his angel group after the group has done its own diligence. It aims to get the same terms as the members. Published rules decide whether each deal is an automatic yes or no.
Why does Carlos take preferred equity or become a co-GP?
Carlos says that if there is an argument on valuation, he likes preferred equity because it puts his capital first in his view. When he brings the whole capital stack, he becomes a co-GP so he can see exactly what the sponsor is doing.
How should founders pitch to venture investors?
Juan advises describing the future of the market first and why it is inevitable. Then explain why your team or technology can deliver it. Keep it short, because a partner may have only 30 to 60 seconds to sell the idea to the firm.
Put this into practice with the pitch deck grader. See all deal structuring resources.
