CAP Security Sponsor Campaigns
Top 10 Rookie Mistakes and how to avoid them
1. Spray and Pray — contacting a batch of candidates all at once without giving any of them individualized attention.
Better to take your time, do it right, seek potential sponsors that are aligned with your sector, geographic location or culture, and would have a strategic interest in the benefits to them or the greater community that your project would deliver. Sometimes this can be a sovereign government (such as with building social housing), a well-establish EPC firm that seeks to fill existing capacity for new clients, others along the value chain, an asset owner that would want the upside benefits such as when they are mission aligned, or countless other scenarios.
Individualized attention may seem slower than “mass marketing” approaches, but it is much more likely to be effective. We call this “go slow to go faster.”
2. Not asking questions — paying more attention to your deal’s merits than to the would-be sponsor.
People you can reach and engage in a conversation about this opportunity, presented in terms they understand, that show respect for what they do, and a willingness to explain how this type of Security is non-traditional, checking for their understanding, and asking them questions and find out what they do, and if they are interested in this.
3. Assuming they already understand what sponsors are asked to bring
Since our Security is not at all traditional (closest would be a loan guarantee, which is for the life of a loan, and not how “completion assurance” works), clearly present how this is different, and ask if they understand that their Security is relatively short-term — just until the project is delivered — and in a securitized position. They would receive step-in right in the unlikely event that you abandon your own project. See our FAQs for more.
4. Not finding a way to incentivize them
Either a fixed fee or a modest equity interest (usually for a limited period of time) or both, negotiated once they understand their quite low risk exposure.
5. Getting entangled with “leased” SBLC providers
See Tips for more on this. Rarely to never have such providers delivered what they promise, they are often quite expensive and often fraudulent, operating a fee scam.
6. Not verifying if they have asset depth
Security only works when there’s asset depth. Most banks won’t want to use their own funds, so collateral is needed.
7. Overwhelming a potential sponsor with too much CAP information, too soon
Offer specific information in response to their specific questions. Do not cover them in documents or other answers to questions they might not have.
8. Showing up as desperate, in a rush, or unprepared
Take your time; relax. You’ll be more likely to gain their support when you are not pressured as they will see that as quiet confidence, but also persistent, based on a belief that you will succeed. Prepare by learning as much as you can about the prospective sponsor. Demonstrate that you’ve done your homework. Ask smart questions.
9. One and done — not following up to take their pulse, check for objections or misunderstandings.
Don’t accept “no” as the final answer. Don’t expect the first party you ask to agree. Check that they understand what you are offering. Ask if it seems interesting enough to discuss further.
10. Not making the ask at all
After asking questions, listening to any concerns, and discussing what’s in it for them, remember to ask for their support … could be something like “Want proceed with structuring an agreement and asking our underwriter to verify capacity?” This is also a way of surfacing objections. Don’t argue, but do thank them for being candid (some won’t tell you what’s bothering them, they’ll just say “no thanks”), then get clear about what they see as the issue or obstacle(s). Do that first, before continuing to pitch or sell the opportunity to sponsor your project.
Letting them buy in rather than pushing them into a sponsorship role is usually going to be more effective in gaining their true commitment. You might even ask “What would make this a solid ‘yes’ for you?”
Don’t be surprised if it isn’t about their upside benefit. Most objections are about risk or lack of truly understanding what they’re getting into. Your In3 Affiliate may also be able to assist with this nuanced discussion to gain their full commitment.