Clarify your investment strategy and unique edge – Demonstrate your specific expertise and discuss the kind of strategy
you will invest in and the investment types you will use to implement your strategy.
Distressed and other situations
Develop a strategic business plan
Cash flow projections – fixed vs. variable costs
Evaluate which expenses should be paid by the management company and which can be absorbed by the fund
Timeline for execution
Prepare an executive summary and basic term sheet – Include a description of basic terms.
Fund life and investment period
Capital raise and closing period
Minimum capital commitment
Select external consultants – Consider their experience and reputation in the private equity industry and their ability
to grow with the business and adapt to change. Weigh that against costs, the level of service you expect and the importance of
your business to the provider.
Independent valuation consultant
Information Technology (IT) consultant and support
Third party marketers/fundraisers
Select names for the operating entities and the fund(s) – Obtain tax ID #s and incorporation for foreign entities.
Select members of the management team – Consider forming an advisory board and valuation committee, and outsourcing
the CFO and CCO positions.
Chief Executive Officer
Chief Operating Officer
Chief Investment Officer
Chief Financial Officer
Chief Compliance Officer
Banking relationships – consider obtaining line of credit arrangements for bridge loans
Research subscriptions and services (Capital IQ, Bloomberg)
Human resources – Consider outsourcing to a professional employer organization (PEO) that will handle
everything from payroll to benefits to retirement plans.
Network and computer systems
Disaster recovery plans
Purchase adequate insurance – Business, life and health, E&O, D&O, Cybersecurity
Select general ledger and accounting systems – Leverage fund administrator
Specify structure and type of investment entity based on type and number of investors
LP vs. LLC
3(c)-1 or 3(c)-7
Determine legal entity, structure, and appropriate jurisdiction
Consider investment types
Evaluate registration options and costs to assure compliance – Register as a Registered Investment Adviser (RIA);
develop compliance program and manual.
Blue sky laws
Potential regulatory changes
Determine the provisions to be included in your offering documents
Distributions, waterfall calculations
Allocation of profits and losses
Carried interest, preferred return and claw-back clauses
Management fee and offsets
Determine year-end tax reporting needs
Establish compliance, risk and valuation guidelines – Document the process, review by a valuation committee, and approve
on a regular basis. Valuation Policy must be in accordance with generally accepted accounting principles (GAAP).