Can You Raise Money From International Investors?

Alright, alright, welcome back to the show. Today we're gonna talk about, can I raise money from international investors? I was on one of our group coaching calls a few weeks ago and I had somebody ask me this question, Bridger, what are the rules, regulations, can I even raise money from international investors? I think it's a very valid question, something I wanna dive into today to talk about what you can do and just some shortfalls or things to be aware of before you go out and raise money From international investors. So first thing I'll say is, a lot of the content we produce is based in the US. I'm from Salt Lake City, Utah. I run a— by the way, if I can start a fund in Salt Lake City, Utah, you can start a fund wherever the freak you're at. If I was able to do it in Utah, you can do this, okay? But a lot of the content, when we get really into the weeds of regulations and stuff, we are talking about the SEC, okay, Securities and Exchange Commission. They are the governing body over anyone that buys and sells security in the United States, especially funds, right? That's what we're doing a lot of times is buying and selling securities. And they have a lot of rules and regulations and stuff they have to protect investors, to protect the markets, the economy, all that kind of stuff, 'cause they've seen a lot of crashes in the past. They were formed out of the Great Depression, out of the huge crash in 1929 to help protect the country from from another Great Depression and crash like we had then. So that's crucial to understand when raising money from an international investor, 'cause you might have family in Canada or Spain or England, or you might be based there and wanna raise money from the United States and vice versa, or invest, you're in the United States, you wanna invest in the UK and their markets or whatever you're gonna do there. This is what you need to understand. Number 1, yes, you can do it. Okay, the first, so answer to the question is yes, you can raise money internationally. Huge funds, funds do this all around the world. They're raising money from every country you can imagine and getting money together to do this, but if you're gonna do this, understand that you're gonna have a lot of expenses that go along with it. So number 2 is it might cost you a lot more money to do so. So for example, if I'm in the US, my mom is from Canada, I love Canada, it's a great spot, and I've got a lot of family up there, some doctors, some people in my family. Hey, I wanna raise money for my fund. Well, what I have to do now is not only Do I have to make sure I'm in compliance with the SEC, which is the US law, and typically fund documents for a fund are like $30,000 at minimum, okay? Now, and by the way, through our programs and stuff, if you guys use our documents and our lawyers, we typically can get it down to like 8, 7 grand, somewhere around there, but typically just street price, if you were to walk into a lawyer's office, it's $30,000, okay, to launch a fund in the US, US investors. If I was gonna raise money from Canada, Okay. I now have to find a lawyer that also understands Canadian law. Okay, they have to understand the SEC and also Canada law. Additionally, I need to find an accountant who understands U.S. tax law and Canadian tax law because I'm going to have to be paying taxes now to my Canadian investors. So, what just happened there is I just, instead of the SEC and tax with IRS, I just doubled the amount of compliance and regulation I need to do. I have to now comply with 2 countries' securities laws and IRS laws. See how the money can start stacking up? So this $30,000 will probably bump up and maybe even $40,000, $50,000 depending on what you're going to be doing and how you're going to be raising money. And that is true for any time you cross a border. So if you are in Canada and raising money from the United States, you crossed a border, you have to do this. If you're in the United States, have investors in the United States, but you want to invest in Canada, Okay, buy property in Canada or buy property in the UK or wherever you're gonna do, but you're a US-based fund, US investors, you're still gonna have to comply with the regulations and laws and taxes of that country. So again, back to number one, yes, you can do it, but just understand it's gonna probably cost you a little bit more money to do so. Some of these fund docs for very sophisticated funds that are raising money from a lot of countries around the world, they will charge almost a quarter million dollars, $250K, to just set up the fund because there are so many tax laws to comply with and so many different things you have to understand to help your investors internationally. So just be aware that's what's gonna happen. Now, the best thing about funds though is when you raise the money, let's say you're gonna raise a $100 million fund, this startup cost can be a write-off to the fund. It's a reimbursable expense Of the fund, which makes it a lot easier to go and spend some money on some good nice documents because you're raising the money, it's a reimbursable expense of the fund. But my suggestion would be if there's just one investor from Spain that wants to put some money in, maybe it's a smaller amount for your fund, I probably wouldn't be able to justify this to my investors, hey, we're going to spend an extra $30,000 on documents so we can get one investor in from Spain. That doesn't make a lot of sense unless that investor from Spain is a really big-time investor. Does that kind of make sense, right? So you kind of have to justify the cost. Now, number 3 I'll walk you through is we've had other videos on this too. We talk about different feeder-style funds that investors can come through to limit tax liability. So one example, this is not true, but this is just a metaphor of what could happen, okay? So for example, if you had a lot of investors from Hong Kong, Korea, Japan, stuff like that, let's call it Asia, East Asia, right? And they want to invest into your fund in the United States. If they invest directly into your fund, if they come in directly from Japan and Korea and Hong Kong, they have to every year fill out a US tax return. And a lot of investors don't want to do so. They have to hire a translator and somebody that knows US tax code to go and file their return. It's another country. They just don't want to do it. So some funds will do a feeder fund structure. For example, they will set up a fund in the Cayman Islands, okay? Now I know when I say Cayman Islands, you probably already think scam or tax evasion. Yes, that happens in the Cayman Islands all the time, but in this scenario I'm talking about, this is a legit way to do it, okay? So the Cayman Islands, you set up a fund. So Cayman Islands, you set up a fund, it's a feeder fund. All the investors come in to the Cayman Island feeder fund, and then they as one group, one entity invest into your fund, okay? There is the same amount of taxes are being paid, but what it does is it takes the tax burden and liability from your investors in East Asia and it puts it on that, just that one entity in the Cayman Islands that you control, okay? So you can, so what'll happen is your fund right here, your $100 million, it makes money, it sends money back to the Cayman Island entity, That entity fills out a US tax return for all these investors over here and then it turns around and it pays back all the investors a lesser amount because it's already paid taxes, but each investor in Japan and Hong Kong now don't have to pay tax in the United States. Now that is not tax advice, that's a metaphor of what can happen and funds will do stuff similar to that. To take tax liability from international investors. But again, understand how that works and to know the tax law between the Cayman Islands and Japan or whatever you're going to set up, maybe it's Ireland or Luxembourg or whatever these tax-exempt kind of places, you probably need to hire some pretty knowledgeable tax experts to do so. Again, right here on the number 2 is it's going to cost you more money to set up. So to review, yes, you can do it. Every time you cross a border though, you are now in 2 countries' securities laws and 2 countries' tax laws. So just understand it's gonna cost you a little bit more money and make sure that when you have investors from international that you can just justify the cost of doing so. Does that make sense? You guys with me so far? So that hopefully, that'll help run through and clear things up for you inside of here. Cayman Island funds or other, there's lots of feeder fund structures you can do as well. This video's not the purpose of that. We have other videos that talk about that but again, That's kinda what you need to know with international investors. Hope you guys enjoy it. Let me know what you think of this video. Like or comment, subscribe or whatever it is on this video. If it's in the backend course, just let me know in the group what you guys thought. Thank you guys and I'll see you next episode. Bye.