Flexible Deal Structures and How to Engage Investors
Mastering Deals & Engaging Investors: Insights from Richard C. Wilson at a Family Office Club event
Founders, fund managers and deal sponsors who are raising capital and want to know how structure, return claims and persistence affect investor decisions.
What this talk covers
A $400,000 investment in Better Bath Better Body closed last week through a structure based on a share of gross revenue. Richard C. Wilson uses it to show why founders should stay open on structure. The investor came back for a second investment and asked for changes. The CEO found a middle ground and the deal got done. He warns that, in his experience, one fixed offering can mean most of the people you talk to do not want it.
Investors want moderate to very good returns and they watch the downside. Most are not chasing home runs, and they allocate to people they trust and who explain how value is added. Promising a 30% IRR can signal hidden risk or a first-time raiser. Richard also gives attendees tips: add value first, use a one-liner, listen to investor mandates on stage, and use the member portal between events.
What to take from this talk
- Stay open on deal structure. The Better Bath Better Body deal closed because the CEO stayed open to a revenue-based structure and then adjusted it for a second investment. Richard says it would not have happened without an open and creative mindset.
- One investor can fund years. Richard has seen one investor contact fill all of a company's capital needs for the next 2 to 4 years. Rigid rules such as LP only, no direct investments or no JVs can turn that investor away.
- Structure can beat strategy. A good strategy with a horrible structure makes a horrible deal. An average deal can look much stronger to investors when the structure is designed thoughtfully, and many sponsors talk to a securities attorney about how to do that.
- Do not over-promise returns. Most investors look for doubles and sometimes a triple. A return that sounds too high can suggest big risk, unacknowledged risk or inexperience. Over-delivering needs room to do so.
- Be politely persistent. Some investors say no to nearly everyone and then watch who comes back. Those who politely persist and explain why the investor should do the deal can win the ones that matter.
In their words
"Most investors I talk to are not trying to get home runs on every deal."
"You can show me a pretty good strategy, but if there's a horrible structure around it, it makes the deal horrible."
"One investor contact can sometimes fill all your capital needs for the next 2 to 4 years."
Facts and figures
- Better Bath Better Body closed a $400,000 investment from a club investor through a structure based on a share of gross revenue.
- One investor contact can sometimes fill all of a company's capital needs for the next 2 to 4 years.
- The member portal holds over 1,000 investor recordings, and 18 more investor mandate recordings were uploaded the week before.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Mastering Deals & Engaging Investors: Insights from Richard C. Wilson at a Family Office Club event. 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 deal structure options, return and revenue-share terms and investor communications. Do not use AI to write your own legal agreements.
Related questions
- 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 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.
- How does a distribution waterfall work?A distribution waterfall is the order in which a deal pays out cash.
Questions about this video
Why does deal structure matter when raising capital?
Richard says structure can often beat strategy. A pretty good strategy with a horrible structure makes a horrible deal, while an average deal can become excellent with the right structure.
Should you promise a high IRR to attract investors?
Richard advises against it. He says many investors prefer people they trust and who explain how value is added. A very high promised return can suggest big risk, unacknowledged risk or a first-time raiser.
How can you find out what investors want to invest in?
The Family Office Club asks every investor on stage about their focus. Its member portal also holds over 1,000 recordings of investors describing what they invest in, with 18 more added last week.
Put this into practice with the data room checklist. See all deal structuring resources.
