How do you scale your portfolio without any money?
How do you scale your portfolio without any money?
Many investors turn to capital raising. Capital raising is no easy task and often takes a long time to build relationships and establish yourself, especially when you’re newer to the game. If you’re struggling to find the right sources to fund your next real estate deal you’re not alone. For many investors, finding and securing financing remains a frustrating mystery full of rejection and dead-end conversations.
How I’ve managed to overcome this successfully overtime is what I call the enthuse, inform, educate framework. Which I’ll cover in a moment. Before I do I want to highlight a story of what this looks like when executed properly.
There's a scene from the tv show Billions where hedge fund manager Bobby Axelrod is meeting with an investor and the investor gives him a quiz on how particular stocks performed overtime. At the end, Bobby asks, “How’d I do?” To which the investor responds, “How would I know? I remember I gave you a quiz like that the first time we met, and it wasn’t the fact that you knew so much it was how you lit up. These companies are living organisms to you, and I knew that If I gave you my money you wouldn’t sleep until you put it in all the right places. You would do whatever you had to, you wouldn’t care what it looked like and that’s who I needed looking after it, that’s who I still need. And in case you can’t tell anymore, you still lit up.
This is an example from a fictitious series on the framework in execution. Breaking it down into three parts it operates like this:
Enthuse, talk enthusiastically about what you’re learning and your deals. I transition many conversations I have around real estate, why? I love it. We pay attention to what we love. My attention and conviction in the deals I’m doing is very high. Enthusiasm coupled with conviction is a captivating duo. I’ve found that when I speak enthusiastically about my goals, dreams and what I’m working on people are naturally drawn to it because they see how much effort and care I’m putting fourth into it which naturally breeds curiosity. It matters less to me what topic you’re into, I just want to see that you’re enthusiastic about something so much so that you have a hard time holding back sharing.
Inform, when you share information and enthusiasm with others you open the door to growth. People will respond with interest, curiosity, skepticism, debate, gratitude and much more. This presents many learning opportunities. The key is that the conversation has started. It’s now up to you to keep it going. Always seek to be understood and to learn from the perspectives of others.
Educate, you always want to lead with value in mind and tailor your conversation to the individual’s situation. I ask a lot of questions about them to understand their goals and tailor my educational examples accordingly. If they are more experienced I talk more investment thesis, market research, financial modeling, and risk management strategies. You demonstrate your expertise by teaching them something new about real estate finance or local market conditions. This in turn builds credibility. That can also be done by showcasing your track record and knowledge. The more you can educate in a way that speaks to their interests, the more trust you are likely to build. This make it non salesy which everyone hates. Instead, your role becomes an educator which helps position you as a knowledgeable partner versus just another salesperson. When you take the time to thoughtfully teach, you let your expertise speak for itself.
Most people that end up becoming investors in deals I’m doing don’t open with that. Its likely not even on their radar. How it works is I enthusiastically inform them of what I’m doing and through sharing this information I educate them. If this sparks ideas and they want to get involved, we continue the conversation and if/when it makes sense for them to do so they make the choice to invest. This has helped me talk about what I love, learn more about it from a variety of perspectives and help me reinforce that knowledge through educating others. This framework has helped guide me though countless conversations and raise capital. By having genuine care, a vast knowledge base and good intentions at heart you come from a similar frame as Bobby Axelrod in that scene I shared at the beginning. Others whether they invest or not have always responded positively just like the investor did in that scene.
I hold the belief that most people are very well intentioned. Whether or not your view is the same its difficult to argue that holding this belief would give someone a disadvantage which is one of the reasons I’ve adopted it. If you think people are always out to help you, you preprogram yourself to look at life through the lens of how you can help others and end up acting in accordance with that. If you believe that the world is out to get you, you enter the world with a negative viewpoint and often attract more challenges or get in your own way. It’s been helpful to me to think that since I think this is interesting and want to talk about it, others may find the same curiosity and desire to learn more. It’s not an end all be all, capital raising is far more complex than telling people you’re passionate about something. However, it’s a way I’ve found to start an organic conversation that sometimes leads to more.