Richard C. Wilson on Deal Structure and Investor Terms
Richard C. Wilson speaks in a Family Office Club podcast about deal structure and raising capital.
Richard C. Wilson explains how deal structure affects investments and fundraising. He discusses arrangements for investors and capital raisers, using examples from real estate and operating businesses.
In this video: Richard C. Wilson (Family Office Club podcast speaker)
What they said
- Richard on repayment priority. In one deal, Richard says investors will get all their money back before he recovers his own capital when the asset is sold. He says he should feel the pain first, taking the first loss position if the deal goes poorly. (at 1:53)
- Richard on return terms and depreciation. Richard says a deal with 100% bonus depreciation the first year let him offer a 1.5 times return over five to seven years instead of 2X. He says investors could effectively receive a 2.3 times return after the tax benefit. (at 2:21)
- Richard on gross revenue payments. Richard says his deals often pay monthly or quarterly royalties from gross revenue, rather than waiting for company profits. He says he has done a dozen such deals across real estate and operating businesses. (at 4:14)
- Richard on returns and risk. Richard's view is that a very secure investment might offer a 7, 8, 9 or 10 percent return, or cap returns at 11 or 12 percent. For riskier investments, he cites 11 to 12 IRR up to 15 or 17, and 20 plus for real estate development. (at 7:31)
- Richard on collateral for repayment. Richard describes a health care deal where insurance receivables could continue arriving for two or three months after a shutdown. He says they are writing a provision into the deal that would give investors first access to those receivables if the company closes. (at 8:25)
In their words
"you might build trust with an investor because of alignment of interest and the way fees are structured"
"the savviest of families and those raising Capital are very smart on structure"
Why it matters if you are building or preserving great wealth
Richard says a carefully built structure can let investors recycle cash after one deal turn and can create more transparency. That makes the structure matter even when the headline return stays the same.
From Richard's exclusive Billionaires.com interviews
Lessons from Richard C. Wilson's one-on-one interviews, as published on each interview page.
- Anu Aga: Focus on one main cause. Her family found its giving more satisfying and impactful once it chose primary education for the underprivileged in India.
- Binod K. Chaudhary: Never chase a deal out of desperation. Stay cool and look at every part of the deal. Have your advisers and your finance team review it critically. Your counsel should review it too.
- Larry Connor: Learn from every mistake. Larry's team owns its failures and makes no excuses. They learn, change quickly, and keep getting better.
See the data
Frequently asked questions
Can a gross revenue royalty start before a company has revenue?
Richard says there is no royalty to collect until revenue exists. He says a startup could delay the royalty by 12 months, but investors would need confidence that cash flow will arrive.
What can make a tax benefit matter to some investors?
Richard says some investors focus on tax benefits when they begin planning what they owe. He says the benefit can help attract investors.
Sources
Quotes are copied from the video captions and checked against the transcript. Timestamps link to the moment in the video. General information only, not legal, tax or investment advice.