Why “Skin in the Game” Matters When Choosing an Investment Partner

Why “Skin in the Game” Matters When Choosing an Investment Partner

Before you invest alongside a sponsor, it’s worth asking a simple question: is their own money in this deal, or just yours? It’s a useful way to separate a disciplined operator from someone who is simply good at raising capital.

We Didn’t Start as a Private Equity Firm

Green Springs began more like a traditional family office. My brother & I invested our own capital in deals around the area. That distinction has shaped how we underwrite and operate deals since.

A family office isn’t deploying a fund against a return target. It’s taking down deals with its own capital and living with the results directly. There’s no fee structure that pays out regardless of performance. If a deal underperforms, that cost falls on the same capital that made the decision.

For years, that was our model. We used our own capital to acquire and operate the same type of real estate we still pursue today, with no outside investors involved.

Why We Brought in Outside Capital

In 2023, we began taking on outside capital. The reason was straightforward: it let us compete for larger deals than we could take down using our own balance sheet alone.

Bringing in partners didn’t change our underwriting standards. It gave us more capital to apply the same standards to.

What Operating With Your Own Money Teaches You

There’s a difference between a sponsor who started underwriting with someone else’s capital from day one, and one who spent years underwriting with their own. The latter tends to be more conservative with assumptions and margin for error, simply because they bear the downside directly if the underwriting is wrong.

That discipline was in place before we ever raised outside capital, and it hasn’t changed since.

Competing With Institutional Capital

Institutional buyers are active in the same deals we pursue today, often with more resources and cheaper capital. Competing well requires being well-capitalized and disciplined in underwriting.

What we bring to that competition is the same approach we developed when it was our own capital at risk, now supported by the capital our partners contribute. That discipline predates the current scale of the business and continues to guide how we evaluate every deal.

Why This Should Matter to You

When evaluating a sponsor, it’s worth asking not just about track record or deal size, but about how they got their start, and whether they have their own capital in the deals they’re asking you to join.

Green Springs built its underwriting discipline using its own capital before taking on outside partners. That remains the foundation of how we operate.

-Brian

Founder

brian@greenspringsco.com