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Avoid The Daisy Chain

Avoid The Daisy Chain

Update: 2019-11-11
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On today show we are talking about conversations with potential funding partners. If you are in the marketplace for capital, you will invariably meet new people and develop relationships that a long way down the road could become a source of capital for your future projects.


The initial positioning of the person you meet might be unclear. Are they an individual investor who has capital to deploy? Are they a fund manager who places capital into projects using their funds? Are they a mortgage broker who simply wants to get another loan done? Are they an amateur who fancies themselves a connector of people? Are they a project sponsor who is out there in the market trying to raise capital just like you are and will never be a source of capital for your projects unless you join forces to work on a project together?


In my conversations I’ve encountered all of these.


It’s sometimes difficult to tell them apart.


The problem is that people like to make a good first impression. They will talk about their recent projects with the same level of ownership as if they were the principal in the project. Sometimes they were a broker on the deal. Sometimes they were a partner. Sometimes they were a principal. And then there are those who merely have friends who are principals in the project, but were not directly involved themselves.


I’ve even had situations where I’ve been talking to someone who is clearly not the money, but they tell you they are connected to the money. So after several lunch meetings and phone conversations an introduction is made, only to discover that the new player in the conversation is not the money either. They have some amazing relationships and can talk at length about the projects they have been involved with and how they placed $30 million in a project, or how they have continual deal flow. They’re a real player. So a few conference calls later it becomes clear that these folks don’t have the money either. If the deal meets their criteria, they might be willing to go out into the market and help you raise the money.


If you are listening to this, perhaps you have encountered the same situation yourself. These types of daisy chains are incredibly common.


I find that nothing happens in terms of a funding commitment until I’m speaking directly to the decision maker who has the funds and the authority to make the decision. Anyone else is just a connector. If they are not the decision maker or part of the core team that makes the decision, they are a connector.


So the question is, if you are dealing with a connector and not the money directly are you wasting time?

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Avoid The Daisy Chain

Avoid The Daisy Chain

Victor Menasce