Bridger Pennington breaks down the three roles every fund needs: expert investor, fund manager, and capital raiser. Each typically gets one-third equity. He explains reverse-vesting schedules for capital raisers and shares his partner-selection rule: to attract level-10 partners, you need to be level-9 or 10 yourself.
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How do you find, attract, and incentivize partners in your fund? We're going to try to answer this question in 2 minutes or less. Now, my name is Bridger Pennington. I'm the founder of Fund Launch. We've launched 300 funds over the last few years. I currently run 2 8-figure funds myself. Now, down to the iPad here. Let's talk about team members. There are 3 distinct roles in every single fund. You have the expert investor. This person is amazing at trading options or flipping real estate or buying businesses. Okay? That's what I call them. The second piece is what we call the fund manager. This is the compliance, the legal, the HR, all the stuff that runs the fund is here under fund manager. And then finally, we have the capital raiser. This is the person that's well networked, goes to all the fund galas and parties and charity events, the person that's going out and raising money. Now, these are 3 distinct roles in your fund. Could one person do all 3 of these roles? Yes. Could 20 people do all 3 of these roles? Yes. Okay. But again, all 3 roles need to be satisfied or done in your fund. So for example, in my fund, we have a blockchain fund. Dan, my partner, is incredible at crypto and blockchain. He is here. Bridger, I'm really good at fund management. I'm here. And then both of us, Dan plus Bridger, we help raise capital together. Okay. That's the team that we have built. So we're 2 people managing these 3 roles. I've seen other firms where they have a number of people running these roles. And you have, you know, 2 people here, you have 10 people here, and you have 4 people here. Again, they split the equity there. Now, people always ask me, Bridger, how do you split up the equity or distributions? It's a negotiation. Every business is different. But I will tell you from experience, just seeing what I've seen, generally speaking, about a third goes here, about a third goes here, and about a third goes here. Now, I'm not saying for every— some funds, 60% goes here and 20%, whatever. But I'm just telling you from what I've seen with big firms and small firms, about a third goes here, about a third goes here, and about a third goes here, which is kind of interesting that it actually lines up like that. Furthermore, something you can do to incentivize specifically money raisers over here. Okay, so everyone and their dog will tell you, oh, Bridger, I could go raise you, I could go raise you $100 million easy without even catching my breath. And you go, great. And they go, yeah, I want to be a partner on your fund. Give me a ton of equity. What I found has been a very useful thing to do with money raisers is I do something like this. I say, great, you can be a money raiser for us. $100 million. I want to vet them. They're going to be a real partner with me. And I say, okay, great. Your core responsibility is raising capital. We'll do this. I'm going to give you, you know, 20% equity in my firm. Day 1, upfront, 20% equity. And you've got a timeline. Let's say you got 12 months to raise the $100 million. At the end of 12 months, if you've raised $100 million, you retain and keep all 20% equity in your position. Great. If you raise $50 million, you drop to— oh, excuse me, $50 million, you get cut by 50% down to 10% equity. If you raise $5 million, you know, you cut even further down to like, you know, 2%. So, and you do a— I call it a reverse vesting schedule. This allows them to be under the owner's exemption with the SEC. Owner's exemption, which allows them to go sell your security and be an owner with you. Again, you want someone who's a real partner. You don't want to do this deal with everybody. But then if they don't do their core responsibility, they can be cut back or clawed back on their equity. Been a very useful way to do incentives for specifically money raisers because everybody and their dog believes they can raise tons of money for you. We've even done similar things with fund managers and expert investors. Every single partner in our firm is subject To a clawback of 50% of their equity if they don't meet their core responsibilities. One way to do it. You don't have to do it that way. It's one way to do it. I've seen if you do the reverse and do a vesting schedule, money raisers aren't as incentivized to, you know, go. And sometimes they feel a little bit jaded. Furthermore, the owner's exemption, you don't want people earning equity by just raising capital. You want them to have other core responsibilities as well. Now lastly, what I'll share with partners, you know, you're looking for level 10 partners, right? Like people that are phenomenal, like on a scale of 1 to 10, I like using the analogy of dating. OK? Finding great partners is kind of like dating. What's the easiest way to date a 10, a 9 or a 10? The easiest way is to also be a 9 or a 10. That's the easiest way to do it. 10s, a lot of times, date 10s or 9s date 9s. 7s date 7s. OK? Now, sometimes, you know, someone who's a 6 like me, you know, someone who's a 6 will date a 10. And it's like, wow, they make movies about that kind of stuff because it's so cool how that happens. But generally speaking, if you're a 9 or a 10, you attract Attract other 9s or 10s. Same thing's true with partners. If you want to have a level 10 partner, also be a level 9 or 10 partner. My business partner, Dan, for example, he's on the board of Intel for 16 years, done hundreds of millions of dollars in sales in his businesses, on the board of AMD in Silicon Valley. Very phenomenal dude. He partnered with me because I think I showed level 10 expertise in the fund management realm. He was a level 10 in the expert investor realm. Okay. And so, like, you know, birds of a feather flock together. You need to sharpen the axe if you want to attract really great partners, really great people. Sharpen the axe. Become a 9 or a 10 partner. And it might be when you start out, you might be a 6 and you have to work with other 6s and maybe you guys both grow together. That's sometimes what happens. That's the advice I'd give here. Have the 3 roles and the fun. Find good partners. Sharpen the axe. Become sharper in one of these categories. You don't have to be a level 10 in every category, but be a 10 in one specific area. And then attract other people that are level 10s in other areas. Hope that's helpful. See you next video. Bye-bye.
