If I bring Equity to a deal, what’s my cut?

[Alfredo Sanchez]

I was recently approached by a developer who needs equity to get the ball rolling on a development deal. He asked me to help him raise the capital in exchange for a % of equity in the deal

At a high level he needs:

$1MM for acquisition then a additional $3MM to secure financing and start up costs.

Depending on how much I raise, what should my % equity of the deal be? Any other suggestions on how I should structure?

Located in South Florida.

[Greg Dickerson]

@Alfredo Sanchez the first thing to be aware of are SEC regulations. You can not be compensated for raising capital for someone else’s deal. You must be a part of the sponsorship and have an active role. There’s lot of info on this topic if you google it or go to crowdfunding lawyers website. 

If it’s all your money then you are fine and you would want to get a preferred return of at least 6-8% and a portion alone share of the equity in relation to the amount you are investing. (Pari-Passu) Ex. If the $1 million represents 25% of the total equity requirement you should look for 25% of the equity in the deal. 

If the $1 million represents all the equity requirement you could look for a pref with a 50/50 split or straight pref or straight equity.

Lots of ways to structure the deal.