Why do some real estate sponsors seem to effortlessly raise capital while others struggle?
This is a question I've been asking myself for the past 15 years. My and my business partners were on the "struggle bus" ourselves in the early years and then one day we seemed to have cracked the code. The problem was that along the way we ended up spending tens of thousands of dollars trying everything under the sun. When you add the amount of time we spent chasing our tails while spending all of that money it was probably more like hundreds of thousands of dollars by the time we were done.
When people asked me how we did it and how some of my successful clients did it, my typical response was, "We all seem to use an education-based approach. You should try it." All of these years later, I've realized that my response, while genuine, wasn't really all that helpful. After all, what the hell does "education-based approach" even mean?
While in the process of putting together my comprehensive class on "how to launch your own investment fund", something happened when I forced myself to actually articulate what I actually meant when I said "education-based approach". I actually cracked the freakin' code! I figured out what all of us that have successfully figured out how to raise investor capital at scale have actually been doing which, as I'm sure you can guess is very different than what those that aren't successful at raising capital do.
Having helped well over 200 real estate entrepreneurs architect, form and launch their own investment funds over the past decade, I've had a front row seat to all of griping and groaning about many of these sponsors that are good at capital raising aren't actually very good at making investments. They're just good marketers, they'd say. They're crappy deals guys! For the most part, I never really disagreed with that sentiment.
Fundamentally, the fact that the "good marketers" were more novice at investing is what allowed them to more easily speak the passive investors language in terms they understood. It's like asking a PhD in Advanced Mathematics to try and teach a 5th grader Algebra. In theory, they should be able to do it but the problem is they know too much and will more than likely just end up confusing the hell out of the kids. Whereas the high school kid earning a few extra bucks tutoring the same 5th grader on the Algebra homework ends up being more helpful. Why? Because it wasn't too long ago that they were in their shoes struggling with the same concepts.
So that explained why less savvy sponsors tend to be better at raising capital but the real question became, "how can I help elite deal makers overcome the curse of knowledge?" I needed to figure out a way to break this down into a framework or a formula that anyone could follow, whether or not they were any good at active investing or not. As I mentioned earlier, the good news for you is that I did!
It's important you have a bit more background about me to fully appreciate why I cared so damned about this "problem" to spend the time to figure it out. In addition to being a partner in a real estate private equity investment firm, where nearly every single meeting we ever held ended up being highjacked by a discussion about how we were going to raise more money to do more deals, sound familiar?, I was also the accidental founder of a real estate fund administration company that catered exclusively to sub-institutional real estate investment sponsors that all raised money from high net worth individuals. We charged our clients a percentage of their assets under management which means that if our clients raised more capital, we made more money and unfortunately many of our clients weren't very good at raising capital so we'd end up going round and round with them to get them onboarded and then they'd go nowhere. Their capital raising problem became my problem.
On top of all of that, I was the primary fund architecture consultant which in a nutshell means that I sat on Zoom calls pretty much all day long with real estate sponsors that all had the same question after I helped them form their fund, "Great! Now I have a fund. How do I raise capital for it?" My response, "Good Question. Education-based marketing, of course!" Their response, "OK. Great! We'll do that!". Of course, most of them never did because, after all, that wasn't a helpful response.
I share all of that mainly as an act of admission - I'm not really nearly as sharp as I'd like to believe I am. It took me 15 years thinking about this pretty much every single second of my waking life to finally figure it out. But the good news for you is that you don't have to spend the next 15 years doing the same thing I did. All you need to do is plug your name and email address in below and watch 8 short videos over the next week and you'll have the answer.
The reality of it is that it's difficult to make hard things, simple. For the most part, I think that's what I've done and my hope is that it will help revolutionize your business and allow you to build the real estate empire that you've always dreamed of.