Seth Bradley, Esq.: The Fund of Funds Playbook

Hi everybody, this is Natu back with the Raises.com Top Capital Raiser Show. Today I'm joined by a fantastic guest, Seth Bradley. Seth runs a portfolio of firms. One of the main ones he focuses on is Raise Law, a securities firm that helps real estate operators, GPs, and people in the real estate world prepare offerings compliantly so they can legally raise capital. Seth is an extremely experienced securities attorney, IT expert, and entrepreneur, and we're going to have a wide-ranging discussion about what's next for capital raising in real estate. Seth, amazing to have you here.

Absolutely, brother. Natu, thanks so much for having me on the show.

No problem. It's not every day you talk to an attorney who knows how to actually do business and build platforms. Very refreshing. Can you kick things off by telling us how everything started with Raise Law and your other firms, how it originated, and where things are going?

Absolutely. I'll take it back a little farther because it fills in the gaps. I didn't come from money, real estate, finance, or investment banking. This was all relatively new to me. My dad's a retired coal miner, my mom's a retired grade school teacher, and I grew up in rural West Virginia. Trading time for money was the only thing we knew. A lot of us are doing that with our W2s and trying to figure out how to get away from it, which is why so many people turn to investing in real estate and business. Growing up, the best thing I could think to trade my time for money was to become a doctor. So I did that whole thing.

I actually went to medical school for a year and a half before dropping out in my second year. I could feel it wasn't for me. Entrepreneur heart. I went to business school, got my MBA, then went to law school and got my law degree. I did really well, ended up getting a big-law job, and started working in real estate and securities. Luckily I got exposure to these huge real estate developers, our clients, raising capital from investors and buying apartment complexes and retail shopping centers. Most attorneys say I'm just an attorney, that's all I do, I'll get really good at this and stay in my lane. For me, I've always been an entrepreneur. I always wanted to be on the other side of the table, owning the assets, raising the capital. So even though I started small, house-hacking into a duplex, fixing and flipping single-family houses, working up to small multifamily, then bigger multifamily, then passively investing in syndications, eventually I started raising capital for these deals. We have about $90 million in assets under management today, even though we haven't bought anything since the end of 2022 when interest rates spiked.

We've been waiting to see where the dust settled. A lot of folks got in trouble there. Luckily we've done pretty well. In the meantime I launched my own boutique securities law firm, Raise Law, and joined a company called Tribe Vest, where we do something similar. Tribe Vest isn't a law firm, Raise Law is, but Tribe Vest does fund setup and administration, very specifically for an SPV fund-of-funds. So if you're raising capital for somebody else's deal, their syndication or fund, Tribe Vest is a fit. Anything outside that narrow box we handle at Raise Law: more sophisticated funds, syndicates, or closing on commercial real estate.

Amazing. Sometimes my audience is a little confused about a fund of funds. Walk people through what you mean when you say fund of funds.

For sure. Folks new to the industry can't even understand what we're saying, and it gets worse because people use the same term for different things. You actually have to ask, what do you mean? When I say fund of funds, it is what it is: you create your own fund, take the aggregate capital you collect, and invest in another fund or syndication. There are two securities. You've got your fund, and then you're taking that capital and investing in somebody else's fund or syndication, as opposed to taking your capital and investing directly into the asset itself. Instead of buying the real estate, you're buying membership interests or shares in another company that's buying the asset.

Makes sense. On our side, a lot of what we do is M&A and business acquisitions. We see people: stage one they own their own real estate, stage two they get a lender, stage three there's an equity gap, so they issue a 506(c) or 506(b) to find accredited investors to partner with them. So you're saying this is a different stage: I have another person's deal that I want to raise money for, not my own asset.

Yeah, that's correct. You're seeing more and more of that now. If you rewound five years, the same folks doing fund of funds were probably co-GPs. We used to call them co-GPs. The term has become something you don't necessarily say, because you're either a GP or you're not. There really shouldn't be this other role called co-GP, because essentially you're just raising capital and not really doing anything else, and that's illegal. Non-compliant. We're entrepreneurs, we push, we always try to take a little more. A co-GP structure in theory makes sense: everybody pitches in, everybody takes an active part. But what it turned into was, hey, let's bring in five co-GPs, let's bring in ten, fifteen. I saw twenty co-GPs in a deal at one time. What are they actually doing? They're raising capital, often getting paid based on how much they raise, which is even worse, transaction-based compensation. You can't do that unless you're a broker-dealer. Just like I can't practice law without a license, you can't raise capital without a license unless you find an exemption. That exemption is blown when you're just raising capital, charging transaction-based comp, and not doing anything else.

Those folks have come around and found a more compliant way: the fund of funds route. You create your own fund. You're your own issuer. You're the active partner in your own deal. We're seeing this more and more, and a lot of lead sponsors who buy the assets are recruiting these fund of funds managers as part of their team. Hey, check out my deal, want to raise capital for me? Start your own fund of funds and invest passively into my deal. People are getting tons of momentum doing this. You're seeing special events, nice dinners, football games. It's a whole new market.

When did you see this market develop? You're a super-experienced attorney in California, hat backwards, guitars in the background, very unconventional. How did you identify this trend? It takes more than a simple business eye, it takes four-dimensional chess.

The SEC was actually cracking down on this a few years ago. They were examining sponsors abusing the co-GP structure and interviewing people. Not too many got in trouble, but they were getting questioned. This is a small industry. Everybody knows everybody, and word got around: well, what do we do, we still need a place for capital raisers because lead sponsors are scaling and having trouble raising all the capital themselves. The answer has actually always been fund of funds. It's not new. It's been used in private equity for decades, just not in this industry in this way, because it's expensive, time consuming, and complicated. You have to do everything the lead sponsor used to do for you: hire a securities attorney, a CPA, pick an investor portal, open a business banking account, file for your LLC, get an EIN. You have to form your own fund.

That's expensive. A securities attorney might charge fifteen to a hundred thousand to set up a fund. At my old big-law firm we charged $75,000 to $100,000. It's expensive, time consuming, and complicated. For folks raising $500,000 to $2 million per deal, the juice isn't worth the squeeze. That's the gap I saw. I was speaking at an event with the CEO of Tribe Vest in July 2023. He was trying to pivot from a group investing platform into capital-raising. People in those groups were doing all the work and wanted to get paid for their services. You can't do that through a group investing platform. So I said, look Travis, if you want to get into that world, fund of funds is where it's going, we just have to figure it out. I flew to Columbus, whiteboarded, and we built the product: cost-effective, economical, fast. You can spin one up in five business days. Once we're fully built out on the tech platform, it'll be immediate.

Does that include legal review, or is that before legal review?

That's right. On the legal side, we file your Form D for 506(b) or 506(c), file blue sky notices, pay fees, that's a pass-through cost. Then your offering documents. Everybody's working on this, fund launch, Bridger Pennington, a few others. I've met with a number of them. People have built automated docs for simpler things like purchase agreements and estate planning tools. It's much more complex with offering documents, because we're talking about 100 to 120 pages across PPM, operating agreement, and subscription docs. At Tribe Vest we've really simplified it. With a fund of funds it's easier because we leverage the target deal documents. The target deal's attorney has already done a ton of work on the asset, business plan, geography, disclosures, and risks. We attach those as exhibits to our fund of funds docs. Our docs are very simple and templated. Tribe Vest is not a law firm, so we can't give legal advice, so it has to be highly templated. We've simplified that to the basics fund managers actually need: not 20 fees, not 10 membership classes. An upfront, an annual, and a back-end carried interest, give your investors a preferred return and a profit split. That covers probably 90% of deals.

It's brilliant, especially at scale. We deal with similar deal sizes, mostly below $10 million. From the risk side, you mentioned Bridger and other platforms coming out with chat-first interfaces and instant document formation. Isn't it like building a bridge where one wrong piece is disastrous? Or because you leverage the original fund documents you don't have that pressure? How do you mitigate risk at scale, especially if you grow to 10,000 users?

There's risk in everything. It comes down to your appetite. We highly recommend that you engage your own securities attorney. We tell you our documents are templated and we disclose that. They aren't customized per deal beyond the basic facts. We use a fund manager worksheet, an intake form, where you give us factual things: addresses, name, entity, what you want to charge, splits, prefs. It's data input into a template. If you want them scrutinized and approved by a securities attorney, we encourage that. We make very clear we're not a law firm. We also leverage the target deal docs substantially. The very specific risks and disclosures tied to the target deal flow through to the fund of funds investor through those exhibits. The problem with some of the automated offering doc tech companies right now is they draft from scratch each time. They take all parameters in, hit go, and the LLM spits out a full offering document. Visually they look great, but the ones I've seen are 120 pages of brand-new content. Who's going to check every word every time? It's not even templated. If you bring that to a securities attorney they'll say there's no way I take on that malpractice liability.

Exactly. What about workflow? On our side, especially with more affluent clients, some are very done-for-you, white-glove, even reading an email is too much, just call me. Are you targeting that subset, or more DIY clients? Sometimes getting people to fill in a form is like pulling teeth.

We've made setup as easy as possible. If you're a do-it-yourselfer who wants to move quickly, we work with that. We used to call ourselves white-glove because we'd assign an account manager who walked you through every step. That isn't scalable unless you scale headcount, and that's a pain. We're trying to get away from it, but we still have humans in the background. If you want to pick up the phone or email someone, there's a Tribe Vest rep who'll give guidance and walk you through it step by step. We're dealing with securities, with other people's capital. We want to get it right. So we backstop everything with humans. DIY or white-glove human-to-human, we offer both.

Makes sense. With us on the M&A side, there are forms people fill out to draft documents, and 80% of the time during onboarding we just do it for them. If somebody works with you, is it a one-time engagement or are there yearly recurring fees, like Angel List with add-ons or renewals?

One differentiation in our pricing: we offer fund administration. Setup is $5,000, fund administration is $2,000 a year, and we're very transparent. Fund admin can get very expensive, so $2,000 a year is practically nothing. It includes your accounting and K-1 services. Even getting K-1s alone from a CPA is at least $2,000 a year. An investor portal in the marketplace is at least $500 a month, another six grand a year. Those two alone cover the $2,000 fee. That's up to 10 investors. After that we scale: every additional 10 investors is another $1,000 a year. It scales with the number of investors instead of AUM.

Makes sense. What about investor number 11, what's the next hurdle?

We go in $500 increments. 11 to 15 is $2,500. 16 to 20 is $3,000.

That's pretty reasonable. What are you seeing in trends over the next five years? AI on the text side seems already there if you prompt it right, but voice isn't there yet. What are you doing to stay ahead? And do you even need to be? Law firms still using fax machines are doing fine. Are you looking to be ahead of everything, or okay with the laggards being okay?

It's tough to predict. We've got $65 trillion getting invested into private markets before 2032. Right now I believe we're sitting at $15 trillion, five years ago it was $10 trillion. It's going to expand exponentially. Even though we've been in a down commercial real estate market the last few years, private money is there and you're seeing it start to turn. Over the next six or seven years it will go through the roof. Somebody has to take advantage of it. We didn't have AI during the last real estate runup that ended in late 2022. Now we use it every day, we don't even Google anymore. Four years ago that didn't exist. Combine AI, maybe blockchain circling back, with a real estate bull run and this wave of private capital, and it's going to be insane.

You don't need five computers running Claude on each one. I've seen people do that, and as soon as you build your system around theirs it's already behind. They're spending hundreds of billions on this stuff. You can't fully keep up, but you have to stay current enough not to get left behind. Like with iPhones, if you skip five generations you don't know what you're looking at. If you try to jump in from zero a couple years from now, you're going to be lost. So stay on it and utilize it for your business. Also be aware of how you'll get replaced. I'm a transactional securities attorney. I'm well aware that at some point AI will produce really good offering documents. It's almost there but not quite. I have to figure out where my value is outside that, deal structuring, counseling, your specific situation, how do you raise compliantly without getting in trouble. That human element won't be lost. Use AI to grow your business now.

I totally agree. If I want to find out the truth, I'm not going to just chat. For ideas, sure. But when it matters I'll talk to an attorney I've known for thirteen years who's a partner, even at $1,000 an hour, because at least I know him. I'm not going to trust an LLM scraping Reddit. What are you seeing on the law firm side? Is it mostly fund formation, or do you help with demand letters too?

Raise Law is squarely a transactional firm: filings, organizational structuring, keeping you compliant while you raise, drafting offering documents, communications with the SEC and state commissioners. We are not a litigation firm. We have partner law firms that only handle that. There are some boutique securities firms out there that try to do both, and some do an okay job, but for the most part those folks don't have the specialty. We can handle some communications if you start getting in trouble or you have an angry investor, and we'll work hand-in-hand with our litigation partners. Those guys have been doing this for decades, they're really good. We're not going to step in and pretend we're better. If we drafted the docs, did the filings, advised and counseled you, they'll need our input to help you through the situation.

When you do an eight or nine-figure transaction and have a great client relationship, do lawyers ever take part of the upside? I know there's red tape around taking commissions, equity, or parts of the deal. Or is it just hourly? You see a lot of deal flow, how do lawyers take advantage of it?

Typically they don't. The vast majority don't. Most attorneys are not entrepreneurs. They're service providers, W2s, people who like to collect a paycheck. The idea of additional risk doesn't fit. But you can partner with your attorney on a deal. They can take some upside. Maybe they take reduced comp on the deal and instead take a piece of equity. You need to be really careful, because there are state bar rules about this. It creates a conflict of interest, because the attorney is representing you while owning equity in the deal. It must be disclosed, in a written agreement, waiving the conflict and explaining why. So yes, you can do it. I've done it myself with syndications and funds.

Makes sense. The biggest legal fees I've seen are arbitration or regulatory matters, six figures, but I'm not a lawyer. It's good that lawyers can be versatile because there are a lot of deals out there.

For sure. With a syndication or fund, typically most legal work is done up front. Once the offering is closed there's some ongoing compliance, annual filings, but not a lot. You might have to engage a real estate attorney to review leases. You could be in a general counsel role. Funds have more ongoing administration, especially if you keep the offering open past one year. It might make sense to have a lawyer on staff, or fractional general counsel, when you're big enough. That's where an attorney might make sense as part of your deal if they want to negotiate it. There aren't many out there who want that.

You're in California, close to the mecca of tech in Silicon Valley. Have you thought about applying automations and systems to Raise Law too, or are you keeping the tech focus on Tribe Vest, or a little of both?

Right now Tribe Vest is a tech-enabled fintech SaaS company. Eventually the manual things we do in the background will be fully automated on our platform. Raise Law is more of a traditional law firm. Not necessarily tech-enabled beyond a portal to share documents. I'm watching the market. I have the contacts to build something, but I'm watching how it's received. There are a few law firms I'm watching specifically. I won't name names, but they're staying at the cutting edge. The big thing for law firms right now is private equity getting into the game. There's a loophole in Arizona where you put the assets of the law firm, IP, marketing, advertising, staffing, into a separate company, and you have the law firm over here. Traditionally a non-lawyer can't own equity in a law firm. They've split the two pieces and sold both to private equity together. Personal injury firms have had success with big equity multiples. I haven't seen it in securities or real estate law yet, but I'm watching closely. It interests me.

Yeah, I looked into who can own law firms about a year ago and saw something like that. You mentioned multiples. One inherent issue in SaaS multiples is they're driven by sticky retention and sticky revenues. The only stickiness I see in fintech is the workflow itself. The problem with our type of business is that it's very transactional, one upfront fee. To increase MRR or ARR you need recurring costs like administration. Accounting is super sticky. After we help people buy businesses we loop them into an accounting firm to get stickiness. So you've got the admin side covered.

From the Raise Law perspective I have that same question, how do we create recurring revenue? Right now it's transactional. You engage us as counsel for your fund, syndication, or commercial real estate closing. Once it's closed, a few fees here and there, but it's done. Yes, we have repeat clients buying multiple properties a year, but it's still one, one, one, one instead of you pay this much a month. I'm constantly thinking about it. Haven't solved it yet. Probably more lines of business: title and escrow services, maybe insurance. Tribe Vest is great with recurring revenue. Once you lock in our fund of funds setup and admin, the fund lasts the length of the target deal, typically five to seven years. They're sticky and they don't leave the platform. It's really hard to leave an investor portal. We've only had two users ever leave. We have something like a 99% retention ratio. You're with us for five to seven years. Really sticky.

We're tech-enabled service, not pure SaaS. After we close client deals, we offer accounting, and that gives us stickiness. Who's a good fit for Tribe Vest and Raise Law? And who isn't?

On both sides, anybody raising capital, typically for real estate, but it works for private equity or roll-ups too. We're a securities law firm at Raise Law, and we can also close your commercial real estate. At Tribe Vest, if you're the lead sponsor, syndicator, or target deal fund manager, we help you build a program to bring in capital raisers. We also help the capital raiser themselves set up their fund of funds on our platform. Anyone looking to raise capital for their business, real estate, or private equity, we can help.

Brilliant. What do you see happening with the real estate market and macro? Powell is on the way out, the new chair Kevin is coming in, the ZIRP era is over, rates probably aren't going down. What's happening with the market, and how can people benefit either way?

I was one of the people saying once Powell is out and Trump puts his guy in, the chair won't be someone who refuses to cut. I thought rates were going down. Now we're hearing they may not, maybe even go up, which is crazy. Whether they go up or down in the near term probably doesn't matter much, it'll be 0.25% adjustments over a couple quarters. I don't think it'll have the impact people hope. So we have to look at the market as it is. Some folks who punted adjustable-rate loans down the road are coming due. Banks are taking back properties. I don't think it'll be a huge Kiyosaki-style doomsday, but properties are being taken back, which is unfortunate for them but an opportunity for others. I'm seeing people with relationships with receivers, banks, estate planning attorneys, getting access to these deals at fifty cents on the dollar. Some are nice assets, not just C-class workforce housing, B or A-minus properties mismanaged by people who had no business running them. If you're a good operator and can take over a property that's 40% occupied with good bones in a good market, there are fantastic opportunities. I'm going to start raising capital again toward the end of Q3, Q4 this year. This is one of those times where it's a great time to buy, and five years from now we'll look back and say I wish we'd bought then.

Your platform is incentivized to offer a service that's valuable over a long time. Does that mean clients have to be successful in their deals? At first I thought of fund of funds for its own sake, but you've made it clear it's basically co-GP 2.0. Are clients who come to you already successful, or how does it play out, since high retention should mean they're succeeding?

All walks of life. There are folks who haven't raised capital before, all the way up to people who've raised 50, 100, $150 million in equity. The financial commitment itself is a nice minimum bar. Even though $5,000 isn't huge, it's still a commitment. If you're a novice fundraiser, you put down $5,000 and say I can do this, I'm going to commit. Like joining a mastermind. You'll take advantage of it. You'll try your best because you want to extract enough value back. Compared to the old co-GP model where you were just brought into the deal and if you didn't raise, you didn't raise, here you've made a real financial commitment, to Tribe Vest or your securities attorney. You'll do your best to raise capital and be at least somewhat successful. Not everyone is. We see lots of people launch and fail to raise. It's harder than you think. They see people on YouTube saying I raised a billion dollars, sure, maybe. It's hard to raise capital, especially if you haven't done it before. Hard to scale. But extremely lucrative. If you get good at it, there's no better place to be.

Exactly. Some people have shiny object syndrome, they say I have a crypto deal in Zimbabwe, or a gold mine in Alaska, there's always some story. So the $5,000 commitment is one filter, but what about the renewals as they try to raise?

If they didn't launch, didn't raise any capital, they're not paying the $2,000 a year, because that fee only kicks in if you actually have investors that invested in your deal.

Makes sense. Are there investment banks in your network, or training and courses people can take? Hey, I have my Raise Law for the future when I want to do a REIT, and I have my Tribe Vest for getting started, is there a coaching program to teach people how to raise money too?

We just developed one at Tribe Vest. Right now I'm the trainer and coach. We charge $2,500, very cheap, and that $2,500 goes toward your fund setup cost if you end up launching on Tribe Vest. From the business perspective, we want you to launch, so we'll credit it back if you complete the program and launch. Essentially the education is free, and if you're going to launch a Tribe Vest fund anyway, you may as well take the education. It's a six-week accelerator. We did the first one with 31 people in the cohort, we aimed for 30. The next will probably be 30 to 50 more, launching September 1st. We already have a waiting list.

Almost like an accelerator.

Yeah, six weeks. The goal is to get you to launch before the end of the six weeks. We introduce you to deals, lead sponsors, show you how to pitch investors, how to vet sponsors, how to scale and grow your business, the basics like how you get paid and how investors get paid through the fund of funds waterfall, soup to nuts. It's not a typical course, we're trying to get you to take action and raise capital. We're already in week three of the first cohort and students are launching their fund of funds.

It's almost like a B school for raising capital. For the more up-market person, it's a legitimate way to structure your deal so you can actually legally raise money for other people as a career.

Yeah. I've thought about doing my own coaching and consulting too, but right now I'm focused on growing the businesses, so it would be a distraction.

Before we wrap, what's one antipattern or common misconception that people who want to work with Tribe Vest or Raise Law have, and how do you correct it?

Really simple on the Raise Law side. People are still confused about whether to launch a syndication or a fund. Five years ago everybody was doing syndications, buying apartment buildings, grouping with different ownership groups. Because the real estate market has slowed so much, you're seeing more funds, lots of debt funds, mixed funds that say they're debt but also have the right to buy apartment buildings. I have lots of conversations about whether to launch a syndication or a fund. A lot of these folks haven't even raised capital before. Here's the thing: if you're stuck between the two and don't have a ton of experience, a syndication is so much easier to raise into. Investors can look, touch, feel the asset, underwrite it, make an informed decision on the asset, the market, the deal, and you. A fund is harder. You have to build a lot of trust with your investors first because you're raising capital into the fund and investing it into some deal down the road, semi-blind or blind. They're making a decision on you and maybe a buy-box. There's a lot of trust required. Harder to raise into a fund than a syndication. If you're not sure how successful you'll be and don't have that confidence yet, syndication is the way to go, then maybe later pivot to a fund.

I've been saying this for six years until I was red in the face. So if you don't believe me, you've got it from Seth. We call it the cherry-pick objection. If you offer a sophisticated investor a fund, they'll want to cherry-pick assets. Why are you telling me what to do with my money, unless you're a busy doctor who doesn't have time, and even then they may not trust you.

Right.

If we were to take one thing from this conversation you want the audience to remember, what would it be?

I've been pounding this drum: there's $65 trillion flooding into the private markets by 2032. A massive tidal wave of capital, and all of us listening or watching can be part of it. Whether you're a lead sponsor buying real estate or raising for private equity, or a capital partner raising from your investors and investing into someone else's deal, there's a ton of money about to flood this market and you need to be part of it. Stay up on AI. Get your systems in place. Get your pitch ready. Get your compliance and legal structure in place. As soon as this real estate market starts turning around, and it could be anytime, probably the next two years or so, it's going to be insane. Like the people who invested in 2010 and watched everything go through the roof. Real estate cycles run seven to eight years. The last one skipped a recession and ran for fourteen. The next leg is coming, and you want to be part of it.

Totally agree. This is Seth with Raise Law and Tribe Vest. Seth, amazing to have you. Thank you. Where should everybody go?

The best way right now is I'm coming out with a book. Anybody on your show who signs up for the book now can get a free copy. Go to sethbradleyesq.com/book.

That's it everybody, Seth Bradley, sethbradleyesq.com/book, and this will be in the show notes. Thanks for tuning in. Cheers.