Funds can benefit from running an effective pre sale process:
- They can delay legal and administrative costs until they have an economically profitable amount of investor commitments.
- If fundraising is faster, it will be cheaper. This increases investor returns.
- If they can get into the market faster, they may be able to make more money
A fund can offer shares or profit allocations from a fund management entity. The bonus will be a different security in the form of GP shares or fund profit shares. This will accelerate the commitment of early investors, and reduce their risk through potential governance rights.
The economics of this work out very similar to the economics of the warrants on the SPACs. The fund managers make money when the fund makes a profit, and some of this flows through to early investors.