Standard Commission Structure/Terms for Sourcing Equity?
I am currently in the process of lining up a high net-worth family friend with a previous employer of mine (smallish REPE shop - $500m AUM ). The family is preferring a smaller ticket size (sub $500k) to test the waters, but if successful my friends indicated more money/contacts would follow in their lead.
Knowing the size of the potential fish here, what are standard for commission and protecting my future interests on equity funding?
I had brief discussions with one of their MDs and he suggested they would likely roll the family into one of their current indirect investment vehicles and base my fee on a % of their management fee. Thoughts?
Should I inform the family of my intentions to profit from this connection? How involved should I be with the conversations? When should I have everything in writing?
bump
Oh for sure. I worked for this firm so can speak first hand to the value of this type of experience. That said, there is definitely value to bringing equity into a deal and it would be silly not to capitalize upon it.The fee would be paid out of the firm's share (management fee) not direct from my friends. I am pretty set on trying to structure in a contract for myself.
Get my foot in the door?
Bumppp
Bump
This is highly negotiable and what you hear from one person is going to differ from what you hear someone else say (including myself). If you want a benchmark look at how much the guys who raise equity full time make, which is 2%-3% of the equity raised and back into how much of the management fee you'd need to get to get that much over time.
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