Good sponsors invest alongside LPs in their deals. If a Sponsor does not co-invest, their interests may not be aligned with the investor. If a sponsor has put together a strong deal, they should want to share in the success of a project. Sponsors often participate in multiple deals throughout the year, which is why sometimes their share in a given deal may seem relatively limited, on paper. Furthermore, most Sponsors are also the loan guarantors and require some liquidity in their personal balance sheets. Structurally, sponsors are exposed to greater degrees of personal risk than many of their counterparts.
Smartland invests in its deals alongside with investors. A small portion is contributed by the sponsors to illustrate the belief in and alignment with Smartland’s offerings. In other words, sponsor involvement is a way for them to “put their money where their mouth is” and demonstrate that they truly think the proposed investment is worth taking a risk on.