Best Practices for Raising capital?!?!?!?

Question

Greetings my fellow Biggpocketeers!

I've been raising capital to fund a deal I've been working on for the last month or so. In the beginning I've been pleasantly surprised who would actually give me funds towards this deal and more recently I've felt like I've hit a plateau of my immediate network, but yet to hit my fund raising goal. I've offered annual interest terms over the period of 1 year and showed them the ins and outs of the deal and exactly how it would be making money. I've also been open for negotiation to allow them to get a bigger piece of the pie for the deal. I've had a few people more interested in the bigger piece of the pie of it which I am open to.

However I felt it to be the right time to reach out to my pocketeer community to ask for help and see what some of your experiences has been and what have your best practices been! I am ALL EARS!

Taylor L. · Answer

The best advice is to dig the well before you're thirsty. Build those investor relationships beforehand next time.
You need to be very careful to stay in compliance with your deal. You haven't described the structure under which you're raising money, but you could be breaking securities regs.
Generally speaking, the more people you talk to the better. You'll keep refining your deal presentation style the more you try it!
@John Fortes has it right, there's no secret sauce to raising money. Everyone has a different strategy.

Alina Trigub · Answer

@Michael Porche

I completely agree with @John Corey in a sense that you want to ensure you're fully compliant with SEC when raising capital. This strategy will also put you on the right track of finding the right kind of capital and people wanting to invest with you when they know you're doing it the right way.

As far as raising it the right way,

1) create and build your thought leadership platform

2) establish and build the relationships

3) always remember to treat your investors like you'd want to be treated

Here're additional blogs that will give you more guidance: https://www.biggerpockets.com/member-blogs/10850/86199-how-to-find-wealthy-investors

https://www.biggerpockets.com/member-blogs/10850/75569-care-for-your-investors-like-mom-cares-for-you

John Corey · Answer

There is a legal difference between a syndicate that was correctly set up and one that you stumbled into. In other words, it is not about a decision to get a lawyer and file the paperwork. The issue is what you are saying, how passive the investors are, how many investors (more than 1?) and other criteria. You could already be operating illegally is you are not extremely careful.Even if you were just asking to borrow funds, you could trip over an unseen line.

Google 'sec howey test'. It will help you understand how the conversations can be taking you over the line. The 'test' was established in the 1930s. This is not a new issue.

Michael Porche · Answer

Thank you for your response!! I am looking to JV. It could be syndicated but it would be a small syndication deal and probably wouldn't be best for its use. It's a unique deal that has a lot of meat on the bone if in the right hands.

John Fortes · Answer

Can't tell if you're trying to JV or syndicate this deal.

Consult with the proper attorneys to help guide you through this.

There is no secret sauce to raising capital. Just have to be the one that specializes in these investments between you and your personal network. Once you've exhausted your personal network and have even potentially proven the concept use the referral from your friends and family network. Happy investing!

Best Practices for Raising capital?!?!?!?

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