Hello BP Community,
We are getting very close to launching our private equity fund, and I wanted to get some feedback on minimum investment amounts that other fund managers may offer. I originally was thinking a $100K minimum per investor, but in trying to raise $14M, I am not sure if we want to have a ton of $100K investors. I now thinking that a $500K minimum makes the most sense, maybe even $1M per investor. Does anyone have any experience with this that can share some pros and cons?
You're not going to get 1M from 14 people to start out with. You need to earn investors' trust first and you'll be limiting yourself to a select few.
Consider a 50k minimum. That doesn't mean people won't start out with 150k.
Without knowing your track record, your investor base, and the details of your fund that question is impossible to answer. The larger and usually more sophisticated investors demand a known quantity in regard to the sponsor.
Less than 5% of new sponsors attempting their first capital raise are able to successfully raise enough money to launch. Since 2010 “blind pools” have had much more difficulty raising capital than those where a target property is identified. Many think that with a few years experience buying houses, and spending $15k on attorney fees to comply with a Reg D filing, all they have to do is put their offering on line and money will be pouring in. Nothing could be further from reality. Seminars, road shows, talks, panel discussions, social media can all help. But to raise significant money you either need a verifiable track record and great Rolodex, or a rich dad to introduce you around the yacht club.
I couldn't agree more with @Don Konipol
I don't know your track record, but if you're raising $14M, it's better not be your first one unless you have a full Rolodex of HNW's! Raising funds takes a consistent track record, time and dedication. I was just responding to another post on a similar topic: "Rome wasn't built overnight." So be prepared to spend considerable amount of time building up a list of investors unless you already have one. Keep in mind, most people won't throw large sums at you unless 1) they know well and 2) you show them a successful track record. SO patience is a virtue here.
I don't think $500K or $1M as a minimum will get you very far.
Best of luck!
I have Never done a syndication on either side of it. But I will say your pool of people at 50,000 buy-in will easily surpass your needs. Don’t pass up the nickels in the fountain looking for the quarters.
If you're just starting out I would look at even going as low as $25,000.00. You will need to disclose that minimum in your SEC filing as well. Doesn't mean you later have to accept that low of an amount but it would attract a lot more investors.
Thank you for the responses everyone, this feedback helps us tremendously!
Paul, What did you end up deciding on for a minimum investment? How has it been going?
$50,000.00 is a good starting point for a new fund minimum. You wont get 100, 250 or 500 without being well known.
Start small. Do a 2nd one later and then a 3rd.
Hi All, Thanks for all of the input. For our opportunity fund, we have set the minimum to $500K per investor, but left it open in the docs to accept less as we deem appropriate. So far we have gotten great traction, and most of the groups that have committed are $1M+. We do have a solid track record in this type of product (attached single family), and most have come through word of mouth from other investors and clients (other developers). We haven't started marketing it just yet to the public, but will start doing so in the next couple weeks.
It has been so well received, we actually started another smaller fund for a Class A stabilized mixed use building in Denver, and we feel that we will get this one fully committed before we release the opportunity fund to the public. We started the minimum investment for this one at $100K, but also left it open to accept a lower investment.
Although it totally makes sense to start at $50K as @Nate Marshall pointed out, the thought of having that many investors to report to made it sound unappealing. Fortunately we do have a solid name and track record in Denver, which allows us to bring the minimum up a bit.
Thanks again for everyone's input, it surely has been valuable!
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