GlobeSt.com: How does entity-level funding help alleviate these problems?

Choquette: This often-sought “Holy Grail”—it's just that rare—removes the efforts associated with serially funding unique deals, each with their own risk profile, investors and structure that aims to balances the risks and rewards of both investor and operator. Instead, an investor underwrites the target markets, projected business plans and the operator, then gives the operator discretion to deploy capital in pursuit of that plan. This frees the enterprise from much of the friction associated with one-off capital raises.

Importantly, this unfolds only in the “major leagues.” I hear frequent refrains of “if I could just get someone to put $10 million behind our firm, we'd make a mint.” While that may be true, if the statement comes from an operator who can't demonstrate his past successes, and net worth and liquidity due to those past successes, he won't be able to secure the attractive debt financing necessary to make the deal happen. There are simply better options for investors than supporting that risk profile.

With that backdrop, looking at the pros and cons for both side of this exchange proves instructive.

GlobeSt.com: What else can you provide to help our readers understand how this type of funding works?

Choquette: Here is a mid-level exploration of a handful of entity-funding sources who have come to us in the last few years. We love these investors. They tend to think differently about partnership, markets, cycles and risk; yet, they display some of the most particular, selective, finicky investment mandates that we encounter. Notice how each has designed a unique offering to address challenges in this space and thrive. All names have been changed to “protect the innocent.”

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SAN DIEGO—The often-sought Holy Grail method of funding known as entity funding removes the efforts associated with serially funding unique deals, each with its own risk profile, investors and structure that aims to balance the risks and rewards of both investor and operator, Fident Capital's founder and principal Kevin Choquette tells GlobeSt.com. Fident secures investment capital to support “risk projects,” including developments, redevelopments and repositions. We spoke with Choquette about why entity funding could be the silver bullet for investor and developer growth.

GlobeSt.com: What is the process that leads up to the need for entity-level funding?

Choquette: Commercial property investors—and their unique cousin, the developer—often get to (or start at) a point where real estate investment halts without the infusion of additional risk capital. It's that dynamic, at least partially, which creates the market that we at Fident Capital serve. Typically, we do so by engaging in single projects with qualified operators to recruit a joint-venture equity partner. We get them the capital they need, and their business continues to thrive.

But the work it takes to recruit capital always proves challenging. True, we're not working in the sun for 10 hours a day, six days a week, laying brick. But even the best-laid investment thesis is not too easily sold, then closed, so that a project can get moving. Equity, in contrast to debt, takes on almost all of the risk inherent in a business plan and, as such, needs to understand and structure the investment to mitigate risks and earn an appropriate risk-adjusted return. Because of that, the funding of each deal—for advisor, investor, and operator alike—is a major undertaking that requires an enormous amount of effort and attention to detail to conclude successfully. Doing it over and over can be, well, exhausting. Once you're doing more than two or three of these a year, a large portion of enterprise resource gets consumed by this fundraising process.

GlobeSt.com: How does entity-level funding help alleviate these problems?

Choquette: This often-sought “Holy Grail”—it's just that rare—removes the efforts associated with serially funding unique deals, each with their own risk profile, investors and structure that aims to balances the risks and rewards of both investor and operator. Instead, an investor underwrites the target markets, projected business plans and the operator, then gives the operator discretion to deploy capital in pursuit of that plan. This frees the enterprise from much of the friction associated with one-off capital raises.

Importantly, this unfolds only in the “major leagues.” I hear frequent refrains of “if I could just get someone to put $10 million behind our firm, we'd make a mint.” While that may be true, if the statement comes from an operator who can't demonstrate his past successes, and net worth and liquidity due to those past successes, he won't be able to secure the attractive debt financing necessary to make the deal happen. There are simply better options for investors than supporting that risk profile.

With that backdrop, looking at the pros and cons for both side of this exchange proves instructive.

GlobeSt.com: What else can you provide to help our readers understand how this type of funding works?

Choquette: Here is a mid-level exploration of a handful of entity-funding sources who have come to us in the last few years. We love these investors. They tend to think differently about partnership, markets, cycles and risk; yet, they display some of the most particular, selective, finicky investment mandates that we encounter. Notice how each has designed a unique offering to address challenges in this space and thrive. All names have been changed to “protect the innocent.”