Exploring syndicate fund

Ideas


Ideas

Structure

From cashflow

Investors invest in EAH and we allocate a certain percentage of that investment to upcoming deals.

If we could get them to invest directly into EAH then we wouldn't have to worry about the regulatory framework at all and we wouldn't need to use OD in at all because we could be investing from our spreadsheet balance sheet

What are the monetisation options are there? Because if we want to raise for ourselves then we need to have a very clear way of proving to investors that monetisation is going to happen

Full idea no. 1


Odin will be charging 3% per deal, plus a £1,500 per year subscription fee (fee is capped at £7K, so that’s at raises above £240K).

How about this:

Basic/core offering
We charge 5% per deal, all legal fees included.
20% carry on top of that too.
No membership fees - only pay when you do a deal.
Requirement: upfront signed pledge documentation to attest to how much you’re going to invest that year

Idea 1 - Invest in us offering
20% discount on fees charged (so it’s 4% per deal instead of 5% per deal)
50% of the carry that we hold in the next 10 deals.

Idea 2 - invest in us and profit share from each deal syndicated
50% of fees generated for first 2 years of deal syndications


Don’t forget SEIS benefits and also need to identify the buyer personas - maybe the better way to do this is to ‘inventory’ the different ‘products’ we can offer, then we can ascertain during our calls with investors as to what sort of products are interesting to them and can tailor the packages accordingly.
For instance, some investors are doing this because they want the ‘thrill’/satisfaction of vetting businesses and being involved in the deal - essentially akin to gambling. Whereas, some of them will be interested in it based on it as a passive investment vehicle - they want to allocate their capital in an efficient manner with as high a return on investment as possible.


So, what are the products we can offer?
Bespoke pitch decks
Share in the carry
Share in the fees we get
Either or:
Excitement of vetting a startup
Hands off deal flow/unique investment product

Need to think about what we are trying to get from the calls with the accountants. Basically it boils down to: what are they trying to achieve?
Are they doing this because they want to have a hobby/develop an interest in investing? Is it an ego thing? Or are they looking for a hands off investment vehicle? Those are likely the two spectrums.
Specifically, let’s try and identify what sort of questions we can ask so we can ascertain how to pitch this to them:

What’s your main motivation that prompts your interest in investing?
What level of hands on vs hands off do you want from this?
What’s most important to you/what do you value the most?
Reducing risk
Generating reliable cashflow
Looking for asymmetric returns - I understand that I could lose my whole investment, but I want exposure to the possible upside benefits


Revenue generation calculator
0
Avg Amount raised
Charged by Odin
Odin Fee
Odin annual fee
'Substantial interest' contribution
Amount we charge on top
Revenue per deal (ex Odin p/y fee)
No. of deals per year
Total yearly revenue
1
£200,000
2.95% or £7K
£5,900
£1,500
£1,000
2.5%
£4,000
5
£18,500
There are no rows in this table



What is the structure with Odin?
Few bullet points for the deck and few FAQ answers

Exit strategy - how do you get your money out in either scenario?

Odin structure:
Shares are issued into an SPV, investors then purchase their percentage of the SPV, thus gaining ownership of the funds.
Any decision making in regards to voting is handled by the syndicate lead (note - it may be that we can decide to include all investors in the decision making, I think this is up to us).
A Bare Trust Structure is used, this ensures that shareholders have the specific benefits and liabilities of their country (meaning UK investors are eligible for SEIS).
This structure minimises paperwork and ensures maximal tax efficiency whilst ensuring that individual shareholders maintain all beneficial rights to their investments - all the benefits, with the least amount of effort.
Furthermore, EAH is required to operate as the syndicate lead for each deal and thus, directly and equally benefits from the outcome of the SPV. This ensures that our interests are aligned with the shareholders and puts the onus on us to manage future dividends and/or exits events effectively and efficiently.

Exit:
In the event that the business that you invested in started paying dividends or was sold, the funds would be passed into the SPV, and then distributed to the shareholders, pro rata, just as if the investors investment had been directly into the LTD.

Definitions:
SPV: Special Purpose Vehicle, essentially a legal entity which holds the investment for multiple investors as if they were one individual.
Bare Trust Structure: The method of managing the assets held within the SPV. Think of these as the guiding principles of how the SPV should operate. Primary benefit is the transparency of the structure and that the investors maintain full rights to the capital and the income generated from the investments (as they are the ‘beneficial owners’).

Transparent Financials:
Odin charges 2.95% of the funding round, up to a maximum of £7,000
EAH charges 2.05% of the funding round (note - keeping this simple for now, it could be that we add a cap to this, like Odin does).
Example fundraise:
Amount raised: £200,000
Charged by Odin: £5,900
Charged by EAH: £4,100

Final note that’s not part of the write-up above - since the people you will be speaking with will be accountants, it’s plausible that they will know more about these structures than I do, so I’d be reluctant to put too much detail into the description in case we get it wrong. Hopefully the above gives us enough for them to get the idea, and then we can say something along the lines of our core business being the accelerator, so we can take any of their questions directly to Odin for clarification, to ensure we provide a most accurate answer. That seems like a reasonable position to take and is hopefully appreciated by them, rather than us trying to learn the whole legal/accounting framework and making a mistake.
Hope this helps, let me know if you’d like any further clarification, or further elaboration on any of this!






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