Raising capital in the US is governed by law and therefore a legally structured approach is required. One solution for owner-operators fundraising in the US is to use Private Investment Funds, which provide investor protection for US accredited investors.
Private Investment Funds are regulated structures that investors often demand when investing in international projects.
Using international Private Investment Funds for international fundraising
International fundraising is when your oil & gas project or other business is located in Latin America but your potential investors are located in the USA.
Private Investment Funds provide a way for investors to gain exposure to exciting international ventures while also providing crucial protections, such as investor protection laws. By utilising these Private Investment Funds, owners can access the financial resources they need to grow their business and succeed in today's competitive global marketplace. Whether you are an existing industry player or a new entrepreneur just starting out, Private Investment Funds offer a valuable option for raising the international capital you need to take your business to the next level.
If you are doing international fundraising, you need a PIF
Without a regulated Private Investment Fund, US investors will view an international project as very risky, with high compliance risk and a severe lack of investor protection. The purpose of a Private Investment Fund is to reduce these risks and provide a balanced framework for information flows and investor protection. The main job of a Private Investment Fund for international fundraising is to provide a platform that enables investors and owner-managers to work together and unlock potential value.
There are several reasons why Private Investment Funds may be the best solution for Latin American owner-operators raising capital in the US. Private Investment Funds are regulated by the US Securities and Exchange Commission (SEC), which provides investor protection. In addition, Private Investment Funds are often structured as limited partnerships, which allows for tax advantages.
The US laws controlling fundraising communication
The biggest opportunity for you to raise capital outside of your own country is the USA, Canada, and internationally. With regard to the USA, an owner cannot just go to the US and start contacting potential investors and advertising investment in an investment project. The law of the USA that applies to all fundraising activity, and the laws governing the activity of financial fundraising, includes:
- The Securities Act
- The Securities Exchange Act
- The Investment Company Act
Do not take my word for it. Speak with any accredited US investor or securities lawyer and they will tell you the same. The type of US accredited investors who might invest in your project includes:
- Family offices
- Independent high net worth persons
- Small LP/GPs
- Some hedge funds
International project risk
The US is a huge market. It is the largest economy in the world currently. Many US investors can earn good returns from domestic US projects, because the risk of these projects is domestic in nature. Many investors in the US are sophisticated and are quite capable of investing in international projects, but they may be more attracted to domestic projects in order to avoid international risk.
As an owner-manager who wants to raise capital, you have to peel back the onion. What you see in mainstream media with the tech industry startups and all the press relating to large US hedge funds and private equity funds does not apply to you, a non-US person raising capital for a non-US or international project.
Owner-operators below USD 100M
If you own an oil & gas or mining property in Latin America in today's world, you are likely interested in raising less than USD 150M to grow your business. As an international entity, you likely will not be able to get big financial institutions or large private equity companies to invest in your project. One opportunity for you to raise capital outside of your own country is the USA and Canada.
It is important to know that for potential investors, raising less than USD 100M is seen as a small play. Let us face it, for owner-managers and families who are operators, USD 100M is not a small amount of money. But in the context of the global financial industry, USD 100M is indeed small. For some global private equity funds or large hedge funds, the minimum investment threshold is USD 100M. So if your net worth is USD 200M, you will not be able to invest in a fund like that individually. If you belong to a private bank or a fund of funds or family offices, you could then buy in at USD 20M as one of 20 investors in a fund of funds.
