Tilden Moschetti: It is not uncommon for me to meet a client
for the first time and them to explain that they have four
different projects that are all very different from each other.
And want to know should they put this under one umbrella or how
to organize everything. It's my name is Tilden Moschetti, I am a
syndication attorney with the Moschetti syndication Law Group,
I'm gonna go through how I would if I were them organize those
projects
so a lot of times private equity funds will look at a series of
projects and try and make a decision on whether or not to
put them all in one under one umbrella, or to separate them
out. So I'm going to talk to you about the pros and cons about
putting them all under one or the how to how you do it, or
separating them out and why you'd make that decision for
your own. Now, it doesn't have to be a private equity fund or a
syndication or whatever it is, put those terms beside. So let's
say you've got five, four different projects that you're
all trying to raise money for, and you're trying to figure out
the best way to do it. So that's the most pragmatic way to think
about it, just put the terms aside. So let's open up a
whiteboard. Because that will make it a little bit easier to
explain. So let's make up for projects. Let's say you have a a
business that you want to raise money for it's in the services
sector. And I'm making this up as we go. Number two, let's say
you have a, a crypto mining that you want to do. So you have a
business that wants to do it, it's professional services, or
some sort of services. Number two, you have a crypto mine that
you want to raise money for number three, you have a an
apartment building.
And just for fun, we're going to make one also in real estate
just so that we can talk about that a little bit more
extensively. So then let's say we've got a triple net, which is
you can think of like fast food restaurant or something like
that. So we're gonna pay is all of the operating expenses of
everything. So you've got these four different business lines
that you all want to raise money for. But you need different
things, let's say each one needs just first, let's say each one
needs one a million dollars, just because each one needs a
million. So you can either do what $4 million arrays, which
might seem like the easiest thing to do, right? So you would
have your entity your investment entity here. And it would have
all four projects that you are raising that $4 million for.
Now, you could do that. But I want you to think of also or
actually let's talk about the the other alternative. Or you
could have four different entities that people invest in
to
write each for a million. And just because we can, let's say
you also have this one where you have the option of an entity,
just a real estate, one that also invest in both of them.
That's also a reasonable way to shape it. So those are sort of
the three different structures that you can think of. Now the
very first thing I like to think of when I'm putting together any
kind of deal is my founders investment theory. Again, if you
need to watch it, I've got videos on here that describe
founders investment theory, but essentially what it is, is you
can think of it as that story that makes you why somebody
should invest in you, right. So why somebody should give this
money. And so if you put yourself in the thought process
of what an investor would be hearing is that that would be
the way I would think about it. So if I was trying to pitch this
first deal, right if I was trying to pitch this $4 million
he'll, then I would have to go to my investors and say, look,
I've got a conglomerate, I've got four different things that I
that we're going to invest into, and you're gonna get
distributions in these four different ways for these four
different business lines, you can do that, but it's going to
be kind of confusing to an investor. Why four different
things? I mean, you've got things all over the map here,
don't you specialize in anything, you know, what's
special thing are you bringing to the table here, it's gonna be
a really real big challenge to raise money, raise $4 million
for four totally different things, or at least three very
different things. And two of those things are fair, two, new
two things are somewhat similar. Or you could go to them and say,
look, I've got, I've got three investment vestments that I'm
looking to raise money for. One of them is a business is a
services business, and you're going to get a piece of the
equity. But we're going to do that on you'll have an option to
convert it into the prefer into the that into it, because we're
going to pay you a fixed percentage of 10% a year. And
then after two years, when we've shown we're successful, you can
convert it into real equity into the business. It's a great
business, here's what it does. The second thing that I'm
raising money for is a crypto mine, and here's how it makes
money. And you're going to immediately own equity in that
business and just be getting the profits off of what what we've
invested. And we'll have, we're also raising money for an
investments. Now we diversification is important. So
we're going to do something that's kind of unusual, we're
going to invest in an apartment building, and we're going to
invest in this fast food triple net. And the reason that we're
doing that is because should something happen in the economy
in these uncertain times, we want to be able to balance and
make sure that you know, you're always making money. And so if
fast food suddenly stops making money at a at a reasonable rate,
if the appreciation and just isn't happening, you know that
that apartment buildings still gonna go up. Or if you know
that, because of some new laws about rent control, or whatever
it is apartment buildings start to stagnate, we've now got this
fast food business that's going to carry that load and make sure
that you have a good investment. So at the end of the day, you
have a nice balance between two different types of real estate
that are just ultimately going to make your portfolio more
valuable. That would be how I'd pitch it. In that scenario, in
the fourth version, over here, it separate them out into
individual things, you just talk about apartment buildings and
triple nets in a different way. Now, obviously, the number two
and number three way is the easiest way to pitch a pitch.
And it's probably the way that you're going to be most
successful. So I would probably recommend that almost always
you're going to separate them into distinct different units.
Now, sometimes you will have distinct units within one
individual investment. So you could in your business services,
say look, we have two different mechanisms here. So in this
business, let's move this off here. In this business, that's a
certificate, we've got two different ways of paying you and
one is a Class A preferred. And one is a class. A common and
what that means to you investor is that the class a preferred,
they're going to get paid first no matter what. So they're
always getting paid. But they're only getting paid 10%. Right. So
even if this company starts making a trillion dollars per
unit per, per share, you're only going to get 10% of the money
that you invested on top of it. So you're going to be making
that return. Why if you think this is a great business, maybe
you want to come in along this class a common now we're not
going to pay out a preferred return at all, we're not going
to pay 10% There's no no guaranteed income, it's probably
not going to pay anything out over the next two or three
years. But you know, we're planning on doing or planning on
going public in in three years. And you've seen boy IPOs go and
you'll probably all that equity is going to be equity you're
going to be carrying in to the IPO before it even happens. So
that means you're going to get this huge amount of appreciation
in the value of the company and then you can sell the stock at
that point. So those are the kinds of pitches that you would
do. Now here you've got two different classes of shares. So
sometimes the point is, is that you'll have something that is
two very distinct kinds of investment. But that's under
what that still goes under one umbrella. So we'd still net
probably put this under one offer, as we call it.
Insecurities language. So I hope that helps describe, well, why I
would separate these into multiple classes like this into
I mean, into multiple investments, multiple offers
different things entirely, is the reason again, is just that
you want to make the story as clear as possible to investors.
Now, here's an asterix. Just a disclaimer, yes, I'm a real, I
am a syndication attorney, I put these offers together, and I do
get paid more by splitting them out into four parts. But at the
end of the day, your investors are probably the ones paying my
fees. They're the ones that you get reimbursed for it. But also,
it's gonna be that much easier for you to raise funds for. I
always leave the actual decision making completely up to my
clients, if they want to do it like this, with this $4 million
raise. Absolutely, I'd be happy to write it. We can make it as
good as possible and give you every opportunity to be able to
raise that $4 million. My advice if you want an easier time
raising money would be to split it up into four units or three
units. So I hope that helps describe what you do in those
situations where you've got four different things you want to
raise money for and they're all very different. My name is
Tilden Moschetti. I am a syndication attorney with the
Moschetti syndication Law Group.