Starting a deal-by-deal investment firm means building an enduring business around separately financed investments. The firm develops the strategy, sources opportunities and maintains investor relationships; investors decide whether to fund each identified deal.
Keep that business separate from the vehicles holding investments. Your management company may employ people, contract with suppliers and receive agreed compensation. Each investment arrangement has its own assets, obligations and governance. Incorporating either one does not, by itself, establish permission to raise, advise on or manage other people's money.
For a firm operating in the UK or US, the first plan needs to connect three things: an executable strategy, enough operating cash and a regulatory assessment of the activities actually performed.
1. Write the investment mandate
Specify the assets, stage, geography, cheque size, ownership goals, follow-on policy and investment pace. Explain how you will source opportunities, assess them and contribute after investing.
A strategy also needs boundaries. State what you will decline and what evidence would change the thesis. If the opportunity requires deals larger than you can finance or specialist diligence you cannot obtain, solve that before fundraising.
2. Build a management-company budget
Separate firm expenses from investment capital. Include people, systems, professional services, insurance where applicable, fundraising, travel and working capital. Identify which costs the management company bears and which may properly be charged to a vehicle.
Consider an illustrative firm with £120,000 of annual overhead. If each completed deal contributes £10,000 after its direct costs, twelve closes cover that overhead. Eight closes leave a £40,000 gap. These are planning assumptions, not a market fee schedule; any compensation arrangement needs to fit the services provided and applicable rules.
Timing matters as much as the annual total. Adviser bills can fall due before a deal closes, and failed transactions can leave costs without revenue. Fund that gap explicitly instead of treating a promising pipeline as cash available to pay the firm.
Model delayed fundraising and a period without carry. Carry is contingent compensation, not dependable cash for next month's payroll.
3. Map activities, people and jurisdictions
Prepare a concise brief for the relevant advisers: who makes investment decisions, who communicates offers, who receives fees, where the team works, where investors are located and which entities will hold assets and money.
For UK activity, financial promotion and regulated investment activity are distinct questions. The FCA explains the promotion restriction and its authorisation, approval and exemption routes in PERG 8.3. A small personal cheque or an invitation-only network should not be treated as a general permission to run an investment business.
In the US, an exempt reporting adviser reports under an exemption from SEC registration. Filing as an ERA is different from becoming a registered investment adviser, and federal, state and cross-border requirements need to be considered. SEC adviser information.
4. Design the first deal and the repeatable process
Choose the first transaction's holding arrangement around its assets, investors and decision rights. Establish what each investor owns, who can authorise a sale, how expenses are allocated and whether follow-ons require fresh subscriptions. Use the UK and Delaware comparison to frame the structure questions.
Then specify what carries forward to the next deal: diligence records, document templates, service-provider relationships and closing controls. Reusable procedures save work, but each offer still needs a review of its particular facts.
A committed fund provides capital within agreed terms, while an SPV programme requires repeated deal-specific fundraising. Neither route eliminates governance, reporting or conflicts. First-time managers can raise funds; a deal-by-deal record is one possible route to demonstrating execution, not a compulsory legal stage.
For the argument for remaining deal by deal, read our essay No, You Shouldn't Raise a Fund.
5. Assemble evidence for investors
Prepare a clear memo and data room covering the team, attributable track record, strategy, pipeline, portfolio model, budget and terms. Distinguish completed investments from intentions and realised proceeds from current valuations.
Where you cite work at a former firm, explain your role and ensure you can use the information. Include losses and difficult decisions alongside successes. Investors need to assess the process that produced the record, not merely recognise the company logos.
6. Put operations in place before the first close
Allocate responsibility for onboarding, records, bank controls, capital calls, valuations, investor communication, tax coordination and conflicts. Select service providers against those responsibilities and agree what remains with the manager. Our fund administration software guide sets out a practical evaluation process.
Define who can approve investments, expenses and payments. Document how you will allocate opportunities between vehicles and handle a personal conflict. Build a calendar for the recurring work that will continue after fundraising.
7. Close the first deal and keep a complete record
Before closing, reconcile the company's allocation, accepted subscriptions, cleared funds, costs and outstanding conditions. Agree the response if the raise is smaller than planned; do not assume the firm or lead must fill the shortfall unless it has accepted that obligation.
Afterwards, record the actual work, cost and time required. Keep investor updates and outcomes alongside the original case, including deals that fail. A repeatable firm needs evidence that it can finance and administer its existing obligations while pursuing the next investment.
FAQ
Do I need to raise a fund before starting an investment firm?
No. A firm can organise separately financed deals, with investors deciding on each opportunity. That changes capital certainty and business revenue, but it does not remove ongoing obligations. Budget for administration and failed transactions, and document a repeatable process before relying on deal fees to support the firm.
Do I need FCA authorisation to operate in the UK?
The answer depends on the activities and any applicable permissions or exemptions. Promoting investments, arranging transactions, advising and managing assets require separate consideration. A bare-trust structure, a private invitation or a small co-investment does not automatically exempt the firm. The FCA guidance linked above is a starting point for that assessment.
Is an exempt reporting adviser the same as a registered investment adviser?
No. An ERA relies on an exemption from SEC registration while meeting applicable reporting requirements. Registration and exemption routes have different conditions; state rules can also matter. Establish the appropriate status from the proposed activities and jurisdictions, rather than treating an ERA filing as a general investment-business licence.
Can a UK-based sponsor use a Delaware vehicle?
A Delaware domicile does not settle the sponsor's UK obligations or the rules applying to its investors. Assess the sponsor, offer and investment structure together. Confirm the provider accepts the arrangement and can support its reporting before treating a US entity as the solution to a cross-border raise.
