Have a great deal but no sponsor

[Sandra Brothers]

I have been networking and there are no clubs or meetups anywhere near me, and I keep getting great deals but cant find a sponsor. Ive had some act like they want to, I do work for them, then they ghost me after using me. Right now I have a large but great deal and as usual no sponsor so I cant ever close. Not sure what to do anymore.

[Ian Stuart]

Quote from @Sandra Brothers:

Thanks! Yeah, I actually just did that on a very large deal that I had that I couldn’t take on, but I was screwed over and they ended up stealing the deal away from me and taking everything even though they said they were going to pay me for doing everything for them and finding it for them and all that. It seems to be a common theme. Am I supposed to get people to sign a contract before I even send them deals?

Hi Sandra - In my experience most GP's adhere to the following trajectory. 

1. Establish Track Record (Small Deals & Personal Equity): Most GP's start by acquiring/developing smaller properties where they alone can fund the equity side of the capital stack (IE - no raise). Maybe they raise some equity direct from immediate family (IE - mom/dad/sister/brother/grandparents/uncles/aunts/cousins), but the majority of the skin in the game is the GP's own. The goal here is to establish track record and operating credibility, because frankly no LP with half a brain is going to roll the dice on an inexperienced sponsor without operating experience. 

2. First Raise (Midsize Deals & Small-Moderate Family/Friends Raise): After the new GP put points on the board and establishes operating track record, they begin raising small-moderate equity commitments from family & friends who will co-invest as either LP's or JV equity partners. Once the equity commitment(s) / fund is raised, the GP finds deals and deploys the raised capital. Assuming the GP is any good, their deals will go well and they'll make their investors (and themselves) money. This further solidifies their operating & returns track record, which paves the way to market your firm to professional investors & LP's outside your direct bubble of family & friends. Once you have a marketable track record, you can start the "ramp up" phase.

3. Ramp Up (Bigger Deals & Moderate-Big LP Raise): Once the GP establishes track record and operating prowess, they start marketing equity raises to professional investors & LP's outside their immediate circle of family & close friends. Depending on how good the GP's prior returns have been & marketing strategy, they can raise 70-95% of the total equity required to take down their next deal. Because the GP has track record, it's easier to raise capital from LP's. Reason being? The LP's aren't worried that you'll blow their deal up. 

Based on what you're saying, sounds like "your" LP investors aren't really you LP investors. These LP's are blowing you off. I guarantee that these same LP investors are telling 20+ other GP's the same thing... "bring me a deal and ill bring you the equity". IE - they're stringing you along to get exposure to deal flow, and they're not making any tangible or material commitments to being your financial partner, unless it's an absolutely incredible deal that they cannot afford to miss out on. Frankly - this space has become extremely saturated over the last 10 years - so the odds that you find this one "diamond in the rough" deal is relatively low all things considered. 

I recommend taking down smaller deals with your own / immediate family equity first to establish track record. If you need additional capital outside what a traditional bank or credit union would give you on the debt side, maybe start exploring higher leverage private credit / hard money options. Granted - these hard money guys don't play around with their rates and fees - but they'll get you more leverage and help you keep the equity requirements lower so that you can build up a strong track record and start taking down deals with your own / immediate family equity. 

Once you've got the track record, then LP's will be more inclined to forward commit and tie up their equity in a dedicated fund that your firm controls. This way, you have your cap stack sorted up front and you can fully focus on identifying and taking down deals. 

IDK if any of this helps but this what I have observed / experienced among the clients we work with.