Just how do you raise money for
a business? What's that

structure look like? And exactly
how do kickers work. So those

two are gonna get lumped
together in this video, that's

actually a blast from the past.
So this video was recorded about

two years ago, it is a video
that goes through those topics.

But it looks at them for my
elite mastermind that I ran,

that I used to run, I used to
coach very, very high level

people from the top of their
profession in primarily in real

estate, but also in other
industries as

well. All right, so let's say
there is a building

that you want to buy. And
actually, I'm going to talk

about this in the exact context
that I did this year. So I'm

going to tell you what that was.
And so one of the projects I was

working on, and I still think is
an incredibly great business

tool, this product project
actually never got started. But

we got everything formed, we got
we had investors who were

interested in we're coming in.
And fortunately, it didn't

happen. And you'll find out why
in a minute. So you've

identified a property so you
find a good property, but you

also the purpose for for
occupying that property is a

business entity, and I don't
know how to draw a business. I'm

going to draw, I'm gonna draw
money

All right. So this is the
business. So in my case, Anya

and I were working on a project,
which is still a tremendous idea

is was to do a, not a cloud
kitchen, but to do basically

executive suites for kitchen
space. So take an existing

warehouse, something like that,
convert it into commercial

kitchens, and then rent those
spaces out on a month to month

or a year lease, basically turn
it into an executive suites for

kitchens. Now, the advantage of
doing that is all of your co

packers also use this same
model. So people who sell to

grocery stores, people who sell
in places like that cannot

operate and you cannot sell
food, at least in California and

probably throughout the country,
you cannot sell food to, to a

grocery store. And you cannot
sell food to a to even a

restaurant, unless it's the
cooking itself takes place

inside of a commercial kitchen.
Excuse me, a commercial kitchen.

So whereas a cloud kitchen,
technically can. So it's, it's

really becomes a point on is
there a interface between the

the cook and the public, if
there is someone in between

there needs to be a commercial
kitchen. So you can do this

where you can sell at the
farmers market. There are a lot

that is allowed in California,
but you cannot sell to grocery

stores or to two restaurants. So
the people who occupy these

things are bakers, who bake
fresh baked goods and then sell

those to restaurants who then
use that as part of their

service or they sell to coffee
shops with a nice pastry. You

have school lunch programs
occupying these, these places,

or caterers have occupied these
places, because to be do

catering, you really shouldn't
be doing that in your kitchen

either that should be taking
place in a commercial kitchen.

So So our idea was that
executive suites for them. So as

part of that deal, we needed
some number of dollars and I

forgot what it was. And so we
would buy a property and we

would form the business. Now the
business in our case, didn't

need any capital from the
business. In order to get

started. We didn't need to put
in any money in the business,

but the structure is still the
same. So we didn't need money

for the property. So we were in
escrow to buy How much was it? I

don't know. It was maybe, let's
say it was a $3 million

building. I don't remember it
was in Van Nuys. It was very

cool building. So we needed $3
million. And then we, I mean,

total, so the building might
have been 2 million. All right,

2 million for the, for the
building itself, plus 1 million

to build out the space and to
kind of finish the business. So

we needed to raise this $3
million. So how do we do that in

terms of in terms of investors,
because Anya and I wanted to own

this business forever, right. So
we wanted to own the business

forever. The property, however,
wasn't the play here. For us, it

was, it was a good property, and
it would be significantly higher

value because it had all this
new kitchen standards in it. But

it wasn't, it wasn't like,
that's where we were going to

make the money, the profit on
the business itself was huge. So

are our estimates were it was
not going to be a problem in

order to pay, like 30% returns
to, to our investors back. Not a

problem by any means. So how
were we going to run that. So we

would basic, we went to the
investors, and we told them,

Look, here's the way that this
business is going to operate.

We're putting together an LLC

that owns the property right,
that owns the property, it's

going to do all of this work
ahead of time, in order to build

out the kitchen space. And in
exchange to for that the

business

was going to have a lease with
the property. Now it wasn't

going to just have any lease it
was going to have a percentage

rent lease. So a percentage rent
lease, says that the rent amount

wasn't going to be fixed, the
rent amount was going to be

based on the income of the of
the tenant. And in that way, as

the business took off, they, the
number of the rent that was

getting paid for the building
was going to go up and up and

up. And that's how we're able to
do 30%. So rather than rather

than having it be something like
the build a B, you know that

rent itself was going to be 10%
of our income. Or actually it

was 10% the sales, we said now
it's going to be and I don't

remember what the exact numbers
is, that's going to be 40% of

net. And here's how we define
and how we're going to monitor

the nets. And so ultimately,
that's how the investor gets the

money. Now, you can absolutely
do this model too. And I know

that some of you are looking at
the same model where you've got

a business that you want to buy,
and it will occupy a property.

But just how do you get the how
do you get how can you buy the

business with investor money,
but not give him any profit for

it. And so this is the mechanism
to do that. What we also did is

say okay, and in year seven, we
now have a buyout clause. Just

like we talked about Grant
cardones buyout clause, we have

a buyout clause for us and your
seventh act this way we

calculate it based on percentage
over the of what sales is so

that way we had a built in
mechanism in order to value the

property and the dollar amount.
So it was all spelled out in the

PPM. It was all spelled out in
the in the operating agreement.

It was very clear how that was
all going to work in our

business plan. So it was bad is
the structure that you do it, I

will backtrack just slightly to
say the reason that it was a

good thing that it didn't, that
this particular business didn't

happen was because our date of
estimating on when this would

start looking for tenants was
March 15 2021. I'm sorry, 2020.

I hear I had this great lead up,
and then I go and ruin it with

the year. March 15 2020, was the
day that tenants were supposed

to start coming in, oh, my God,
that would have been a disaster

of epic proportions. That was a
good example of God or the

Universe stepping in and saving
our bacon. So didn't work. It

was a really great idea that the
really the problem started

coming in as we got closer
towards getting removing

contingencies is the our
estimated costs was going up and

up and up. And the city of LA
was also being really inflexible

when it came to parking. And the
more they were strict about

parking, or the needs for the
parking in this area was it was

above what was there. So it was
currently had, it was under park

for a for the industrial
building that it was. And then

suddenly, we wanted to put in
all of these kitchens there. The

city hated that idea. So they
were getting very mean, they

were saying, Well, you know, you
need to find a lot more parking.

And we also don't think that
you've done the that the

handicap parking is, is really
accessible either. So that's why

the deal fell apart. So
fortunately, deal fell apart

because oh my god, what a
disaster that would have been

so. Alright, let's talk about
kicker. So anybody wants more

detail on that just asked me to
because I, you know, that deal

was I worked really, really hard
on that deal. And it was gonna

be amazing. And it's really not
very, it's very similar to what

business a lot of you are that
some of you I know are working

on right now. It's just in a
different kind of industry, but

it is the it's the same business
model. So think about it. And

you know, feel free to reach out
to me and we can collaborate on

on your business plan and make
sure that it's is awesome as as

this business man was gonna be.
So let's talk about kickers.

There are a few different times
when you need to start thinking

about kickers. So kickers are my
word for incentives for bonuses.

They're really their thing
things that you give certain

investors in order to in order
to come in to do certain things.

So when do you need kickers? So
certainly you need kickers when

it comes time to make your your
your deposit?

cash

cash for deposit. Another time
you may need kickers is you need

cash for due diligence.

never remember due diligence as
one L or two. So I think it's

too so we'll put into the wrong
sorry. A third time that you

need kickers for is signing on
the loan. So if for whatever

reason you don't want to be a
signer on the loan, you may need

to offer incentives in order to
get people to get somebody to

sign on the loan for you. So
what is these? How do these

typically work? Well, there's
two different ways to structure

and it comes down to are they
going to do it as an investor or

as part of your team? Right.
Those are the two choices If

it's going to be part of your
team, it's actually a little bit

simpler in some respects,
because this all takes place

internally, it does. So this is
your investment

this problem here, where they're
here doesn't have any visibility

to the outside world, you are
not under an obligation to say

to your investors, who all the
people on your team are as part

of your ppm, you can keep it
quiet, or you can keep making it

public, it's up to you.
Likewise, the deal that you get

isn't subject to or that you
give isn't subject to anybody

seeing it and knowing what it is
through the PPM you do want to

make disclosures for any money
that's being paid to you, but

there's money being paid out to,
to this to the your kicker is

totally irrelevant to them, they
need to know how much money

they're getting, they don't need
to know how much money each

person on your team is getting.
So, this generally takes place

just through the operating
agreement

to your to your company or it
takes place into just a side

agreement between you your
company and the and the person

giving it the kicker now when it
comes to the investor side, now

we need to start looking at it
from Okay, now it doesn't need

to be disclosed and when it
needs to be set up in a specific

way because as a matter of the
investment

they are getting a certain extra
piece out of that that dollar

amount. Right so that could so
here's how how it is oftentimes

structure. A good example of
somebody who did this and that

we talked about was again, Grant
Cardone syndication in his

syndication remember he had two
classes of shares he was calling

them shares they're actually
membership units but they're

their membership to classes of
membership units and what it

said was that well if you come
in under this time period,

because he wanted to close

and yeah, that's the third idea
is cash for closing. And this

means like if you're short any
money you know where that money

is going to come from. So so
someone who can take out the

rest of the shares so it can
just basically guarantee that

they'll take out the rest of the
money for you. So we have two

classes of investors in his case
and this is off the top of my

head so I have to remember it
was something like okay if you

come in here you are gonna get
it's gonna be a straight 8020

split of cash flows right that
was that was the is Class A one

shares if it's after that, so if
you come in later your split is

going to be 6535 split of cash
flows

and then after this what they
did was they said okay, if

you're on the sale of the
property, first everybody gets

their money back or when they
buy it from you because I think

that's ultimately what they're
playing is when they buy it from

you. Then they will get they get
everybody gets their money back.

And then out of the any prop
proceeds. That money is divided

pro rata between the two pools.
Alright, so pool one, let's say

pool one represented 70% And
then 30% was was the a two

shares So 70% of the profit goes
here. Right? And then then 30%

of the profit goes here. And
then out of this 70%, out of

this pool of money, it is then
split at 20. And then out of

this pool here, it's split 6535.
So that's how they did the

kicker through the investment.
Now, the easiest way to do it is

through the team. But it also
can be a nice way to kind of

incent people to invest now,
invest now give us your money

now, because you're gonna lock
this in, you can say very

clearly, look, we're only have a
certain dollar amount until we

close our cash or a one shares.
So you can buy in obviously,

that the two shares at any time,
they of course, would take that

why wouldn't they, but two,
you're only going to be taking

money in our a one shares. You
know, either until we close the

whole deal, or until we until we
decide, you know, which will be

on September 15, or whatever
you're going to choose. So that

is the way that kickers work. If
you're looking for work to raise

money for your business, or you
need to talk about kickers, or

really anything as it relates to
raising money under Regulation D

so that you can be successful
with your offering, whether it's

putting the legal docs together,
which of course we do, or you

just need the additional help of
also, somebody who's been there

before who's been in your shoes
is raised money, somebody who

does his own deals still. That's
me. So my name is Tilden

Moschetti. I am a syndication
attorney with the Moschetti

Syndication Law Group. I love to
talk with you and help you be

successful with your Regulation
D Rule 506b or 506c offering