Agree seeding arrangements
What can I do to put my business in the best position to get a seed deal?
Whilst it is not possible to enumerate every relevant factor that a seed investor may take into account, there are certain key items, described below, that are likely to help a business to convince a seed investor to agree to a seed deal:
- Experienced/credible Chief Investment Officer (CIO) / Chief Operating Officer (COO) and other personnel: Seed investors will want to deal with a knowledgeable and experienced team, ideally with a track record of having worked in the hedge funds industry. Having a strong CIO who understands the instruments that the fund will be trading and a COO who has a grasp of all operational matters of the fund and management business is essential. Seed investors will also want to understand how the rest of the business is organised, what other personnel within the business do and whether they have the necessary skill and experience to properly manage the functions allocated to them.
- Service providers: A start-up hedge fund manager should ensure that it has a good operational infrastructure in place. This means selecting experienced and well known service providers (prime brokers, administrators, IT solutions providers, legal advisers, auditors).
- Individual financial commitment: At the very least, seed investors are likely to be encouraged by the fact that individuals within the hedge fund manager have invested in their own fund product; however, they often go further and demand it.
- Uniqueness: If a product has an edge or a unique selling point which the management team can demonstrate has genuine potential to deliver returns, the hedge fund manager is likely to have a story with which to capture the interest of a seed investor.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.