Syndication

The craft of the raise

The securities law sets the walls a raise runs inside. The craft is everything that happens within them: where investors actually come from, how trust gets built, how a deal gets explained without being oversold, and what to do when the money is short.

The securities law tells you what you are allowed to do in a raise. It does not tell you how to actually get anyone to wire money, and those are different skills that fail in different ways. A sponsor can run a flawless 506(b) offering that raises nothing because no one trusts him, and a sponsor can raise millions on charm and land in front of the SEC because the charm outran the truth. The craft is the work between those two failures.

The law sets the walls. The craft decides whether anything gets built inside them, and whether it stays standing.

What makes this section different from the generic advice about raising money is that the craft and the law are not separable here. Where your investors come from is decided by which exemption you chose. The conversation that raises the money is the same conversation that can create fraud liability. The deck that sells the deal is the document most likely to contradict your own PPM. Every craft decision on this page has a legal shadow, and the sponsors who treat the two as separate departments are the ones who get the raise legally clean and commercially dead, or commercially hot and legally radioactive.

The articles below run the practice side of the arc: where investors actually come from, how trust is built and why it is built in the sponsor and not the building, how to run a capital-raising conversation that is both persuasive and safe, what belongs in the investor deck and what must stay out, and what to do when the deal does not raise enough, which is a more dangerous moment than failing outright.

Start with the question that every first-time sponsor gets wrong: where the money actually comes from.

Inside this hub

Where the money actually comes from

Your first fund is raised from people who already trust you, because the law will not let you solicit anyone else. Your capital-raising strategy and your securities exemption are the same decision, made once.

People invest in you, not the building

Passive investors are buying the sponsor, not a property they will never see, and the diligence sophisticated LPs run is on the person. The trust that raises money is built from the things that survive a bad deal.

The conversation that raises money without creating fraud

The conversation that raises the money and the conversation that creates securities fraud are the same conversation, held well or badly. The move that both raises capital and protects the sponsor is the same move: lead with the risk.

The investor deck: the most dangerous document in the raise

The deck is the document written to be believed and the one least likely to be lawyered, which is exactly why it is where liability hides. What belongs in it, what must stay out, and why it has to match your PPM.

When the deal doesn't raise enough

The most dangerous moment in a raise is not failing outright. It is raising almost enough, because that is when sponsors quietly bend the deal to close it and create the problems that surface later. A shortfall is a disclosure event, not just a sales problem.

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Keep reading

Syndication 18 Distributions: when paying cash is smart and when holding it is smarter Investors want distributions, and a sponsor who pays them to look successful can starve the deal of the reserves it needs. The tension between the cash investors want now and the cash the property may need later, and who should decide.

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