"Am I experienced enough to raise outside capital?"

[Gregory Schwartz]

"Am I Experienced Enough to Raise Outside Capital?"

This question crossed my mind recently after reading a post and some comments discussing whether an investor is experienced enough to raise capital from outside sources. It got me thinking:

In your opinion, what are the minimum requirements someone should meet before raising money from investors (beyond family and close friends)?

What skills, experience, or track record do you think are essential to successfully and responsibly raise money from others?

[Scott Trench]

It's really hard to gauge this question. 

I think that the attempt to scale super quickly is more dangerous than whatever the first raise is. 

A young investor with just 1-2 properties, 3 years into their journey could potentially be a great partner for friends and family. If this person raises $400K from friends and family to purchase a $1M 6-unit apartment complex, they might be a great potential partner. Especially if they put in $35K, or what amounts to most of the then total of their liquid wealth.

On the other hand, we saw experienced investors with really strong reputations scale from a few million to a hundred million, or, in some cases, literally billions of dollars, in AUM at the worst possible time between 2019 and 2021. 

I'd rather invest with the local 26 year old who lives in their second house-hack, drives their 10 year old car, and is raising their first small apartment syndication that they will self-manage, putting their own money into the deal, than some 45-year old guru who is great at social media, with their ability to charm on TikTok, but really, their "secret" as an investor is their ability to (on a part-time, "passive" - for them, and remote basis) transform $300M in real estate into $215M between 2021 and 2025.