Why Deal Structure Matters When Raising Capital: Richard C. Wilson
Mastering Deals & Engaging Investors: Insights from Richard C. Wilson at a Family Office Club even
Founders, fund managers and deal sponsors who want to understand why flexible structures and realistic return claims help them win investor capital.
Quotes from the session
"You can show me a pretty good strategy, but if there's a horrible structure around it, it makes the deal horrible."
"Most investors I talk to are not trying to get home runs on every deal. They're not looking around the whole room seeing who's promising the highest IRR."
"we have over 1,000 recordings of investors in our portal from live events and one-on-one interviews saying exactly what they want to invest in."
The short version
A $400,000 investment in Better Bath Better Body closed through a structure the company described as a gross revenue royalty, and Richard C. Wilson uses it to make a point about flexibility. The investor came back for a second deal and asked for a change the CEO had not handled before. The CEO found common ground and the deal closed. Richard says one investor contact can sometimes fill all of a company's capital needs for two to four years.
The talk is an opening address at a Family Office Club event. Richard says structure can matter more than strategy, and that investors tend to back people they trust over those promising the highest IRR. He also tells attendees to listen to panelist mandates, use a one-liner, and be politely persistent. He points to the member portal, which holds over 1,000 investor recordings.
From the source
- Better Bath Better Body closed a $400,000 investment using what was described as a gross revenue royalty structure.
- Richard says one investor contact can sometimes fill all of a company's capital needs for the next two to four years.
- The member portal holds over 1,000 investor recordings, with 18 more mandate recordings uploaded the previous week.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Mastering Deals & Engaging Investors: Insights from Richard C. Wilson at a Family Office Club even. 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, royalty agreements and offering documents. Do not use AI to write your own legal agreements.
What to take from this talk
- Stay open on deal structure. Richard warns that saying "this is our offering and that's the only offering" can turn away 90% of the people you talk to. Investors may have different preferences across debt, equity, preferred return, gross revenue royalty or direct investments, and many sponsors talk to a securities attorney about which approaches fit their situation.
- Structure can beat strategy. Richard argues that a good strategy with a poor structure makes a poor deal. In his view, an average deal can become much stronger when it is structured well, and many sponsors talk to a securities attorney about the options.
- Do not promise the moon. Richard says most of the investors he talks to are not chasing home runs on every deal. A very high promised return, such as 30% IRR, can signal unacknowledged risk or a first-time sponsor, and it leaves no room to overdeliver.
- Be politely persistent after a no. Many people hear no before a deal gets done. Richard notes some investors say no to nearly everyone and only do the deals where the person politely comes back and explains why.
- Use events and mandates well. Attendees are told to add value to others first, use a one-liner, and watch for investor mandates stated on stage. Skipping the stage to network outside can mean missing the right investor.
Related questions
- How does a distribution waterfall work?A distribution waterfall is the order in which a deal pays out cash.
- 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 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 deal did Better Bath Better Body close?
The company closed a $400,000 investment from a club member using what was described as a gross revenue royalty structure. The investor later returned for a second investment and asked for a tweak, and the CEO's open mind helped close it.
Why can promising a high return hurt a raise?
Richard says investors may think you are taking big risk, not acknowledging unknown risks, or that it is your first time. He says it is better to overdeliver, which requires not overpromising.
Where can members hear what investors want to invest in?
The member portal holds over 1,000 recordings of investors describing their interests. The club uploaded 18 more investor mandate recordings the week before this talk.
Put this into practice with the how much to raise calculator. See all deal structuring resources.
