The Top 10 Arguments Against Starting a Fund
How many of these do you believe?
#10 - it's really expensive to start a fund
In the old days, it was true that funds could cost upwards of $50,000 to start. At Avestor, we have placed intense focus to bring down the costs of starting a fund. In fact, our funds cost close to what a single syndication deal will cost.
#7 - you need a large investor base to start a fund
With typical funds, sponsors need to raise $25 million or $50 million in a short period of time. That requires a large investor base. With Avestor’s customizable funds, even new sponsors with a small investor base can get started and grow their investor base and fund size over time.
#9 – funds must have a definitive start & end date
A traditional closed end fund does need clear dates. Avestor’s new customizable funds have removed that necessity. Our evergreen funds can last as long as you need them to last.
#6 – you need to deploy capital quickly if you start a fund
Most funds either collect all investor capital up front or they do capital calls. Capital needs to be deployed quickly if all capital is collected up front. Avestor’s customizable funds work differently. No need to collect capital up front and no need to do capital calls.
#8 - funds don’t work if you only do a few deals a year
With typical funds it is true that a sponsor needs a good flow of deals to get investor capital deployed. Avestor’s customizable funds are different. Sponsors with even 2-3 deals per year will find customizable funds an attractive option.
#5 – funds must focus on a single asset class
The belief is that investors will only invest in areas where a sponsor has previous expertise. This is because investors have no flexibility to select deals. With Avestor’s customizable funds, sponsors have the flexibility to invest in different asset classes and investors get the flexibility to determine if they want to participate in that asset class.
#2 - funds are really hard to manage & need a large team
Very true if you start your grandfather's style funds. Avestor has designed its technology platform ground up to make it easy for sponsors to create & manage a fund. Our technology enables you to scale your fund with little overhead.
#4 – you cannot change the business model of the fund
Traditional legal documents are written in a way that the business model for the fund is very difficult to change later. Avestor’s customizable funds legal documents provide sponsors enormous flexibility to change their business model down the road if needed.
#3 – you need a strong track record to start a fund
This again is the old way of thinking. Avestor enables new sponsors to use a fund to build their track record.
#1 - investors prefer direct syndications over funds
Investors want transparency and choice. With syndications, investors get both. With traditional funds, they get neither. Avestor’s customizable funds provides investors transparency and choice and so much more.