Support letter from friends and family?

March 21, 2020

by an investor from Florida Institute of Technology in Melbourne Beach, FL, USA

I have several family and friend investors who are interested in putting in equity money for an acquisition, but I would like to show owners/brokers/bankers some level of preliminary commitment from these investors so that they take me seriously (considering my own net worth probably wouldn't warrant a multi-million dollar acquisition). So I'm wondering if anyone has any resources/templates for drafting a letter from equity investors showing their support and willingness to invest in an acquisition (assuming the right deal)?

To be clear, I don't have a specific deal that I am working on at the moment, but more interested in having this for future conversations.

Thanks

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Reply by a searcher
from Westminster College of Salt Lake City in Salt Lake City, UT, USA

I agree with Jim & would add that given the current state of things, you should expect soft commitments or soft-circled capital to vaporize quicker than the DJIA has been lately. Actually, the capital source is probably correlated to the DJIA, so vaporization should be expected to occur in parallel. But if you have friends & family who have created significant wealth & they have interested in supplying capital for an acquisition, they may have some potential targets they've had their eye on & they'd be happy to throw ideas around with you.. They might even make some intros that'd give you the credibility you need. Plus, if they're going to supply capital, the best way to get them to follow through is to make it their "idea."

Reply by a searcher
from University of Pennsylvania in Miami, FL, USA

Hi michael - first, never would you provide a non-refundable deposit.
Second, just like an LOI, these letters are not worth the paper they are written on. However, they can help you check a box. If you have a wealthy investor or family office, i would simply draw up a short letter that outlines that they will support you in your acquisition of XXXX at a valuation of $10M and they are willing to commit between/up to $5M.
Then the letter should highlight who they are. i.e. We are a family office with assets of $500M, etc. we invest in deals of xxx and yyy. Etc.
Keep it to half a page. very simple.

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