Investment approach
Why Investors Want the Operator to Invest Their Own Capital
The operator's own capital ties their losses to the investor's. But the size of the stake matters more than the fact of it, and it does not replace control, reporting or a review of the contract.
An operator's own capital in a project (known as skin in the game) means the operator puts their own money into the same project and loses it together with the investor if the project goes badly. This aligns interests, but only if the sum is noticeable to the operator. DNPI invests its own capital in projects; the size and form in a specific project are set by the contract.
What problem shared capital solves
An operator who lives on a fee usually receives it whatever the outcome of the project. If the fee is tied to the volume of the purchase or the cost of the works, the operator's interest is in the deal closing and the budget growing, even when that is worse for the investor. Other people's money in a project does not by itself impose discipline. An operator who risks only other people's money tends to treat risk as cheaper than it really is. So before signing it helps to find out what the operator's income consists of: a fee, a share of profit, or both.
Own capital changes the asymmetry: if the asset is mispriced or the budget overruns, the operator loses their own money too. This does not remove the conflict of interest entirely, but it makes it smaller. The DNPI model has a second element of the same kind: if the investor's return over the whole project is below the contractual 10%, DNPI pays compensation from its fee. More on this in the article on the contractual compensation. It is a separate condition and does not replace invested capital.
How to compare the operator's stake with their fee
Look not at the size of the project but at the ratio of money invested to fee. A worked example, not a forecast and not DNPI's terms: the operator invested €100,000, and their fee for the project is €50,000. The project makes a 15% loss, and the operator's stake loses €15,000. The fee stays, so the operator is still ahead by €35,000. Their interest in the result exists, but it is weaker than the phrase "co-investor" suggests.
| What the operator puts in | What it means for incentives | What to clarify |
|---|---|---|
| Only work, for a fee | Income does not depend on the result | How the fee is linked to the project's outcome |
| A small sum next to a large fee | The loss is easily covered by the fee | The size of the stake relative to the fee |
| A sum comparable to the investor's share, on the same terms | Losses and profit are shared close to what was invested | Return terms and the priority of payments |
| Capital with different rights (earlier return, a different order) | Interests diverge again | Who receives money, and in what order |
What to ask the operator
- How much the operator is investing in this specific project, not "on average across projects".
- Whether it is equity or a loan, and what funds paid for it: their own money or borrowed, including from the investors themselves.
- Whether it is on the same terms as the investor's money, or with priority of return.
- When the operator can withdraw their money, and whether they can do so before the investor.
- How many projects the operator runs at the same time, and whether the same capital is shared between them.
- What proves the stake: a contract, a bank statement, an entry in the libro registro de socios (register of members; art. 104 Ley de Sociedades de Capital) if the project is set up as an SL.
Ask for documents, not assurances. The capital structure of a project as a whole is covered in the article on the capital stack.
What the operator's own capital does not solve
It does not rule out losses: when a project fails, both sides lose, the investor included. It does not replace control: the budget, the contractor and the sale price should be checked independently of how much money the operator put in. It does not answer how good the asset itself is. And it says nothing about the quality of management: you can invest a lot and still get the calculation wrong. Project risks are collected in the article on investor risks in Barcelona.
Who this criterion will not help
If you choose between two operators only by whether each has invested their own capital, you miss the main things: the terms of the contract, transparency of calculations, timelines and experience of exits. Treat co-investment itself as one signal, not as the final conclusion.
Questions and answers
Why would an operator put their own money into a project?
So that their result depends on the project's result, and the fee stops being their only source of income. Then errors in the calculation or a budget overrun hit them too.
Does DNPI invest its own capital?
Yes, DNPI invests its own capital in projects. The amount and form of participation in a specific project are set by the project contract; ask for confirmation in documents.
Is it enough that the operator has invested at least something?
No. Compare the stake with their fee and with your share. A small sum next to a large fee hardly changes incentives.
Can the operator withdraw their money before the investor?
It depends on the contract and the form of the project. The procedure and order of payments should be found in the documents in advance; see the article on exiting a project.
