Piggybacking on my last post, “The Importance of Being Nimble“, I’d like to blog today about something that is absolutely critical to your ongoing investing success: raising capital.
In my opinion, it is a skill you must develop.
Once you become very very good at raising capital, any amount of capital, you can accomplish anything.
Start any business. Buy any asset/investment. Build a nonprofit. Run a political campaign. Anything.
Get my point?
OK, now to the ‘how’.
This blog may disappoint some of you because raising capital is actually not a science. It’s an art. And you won’t become an expert by reading this blog. But, I hope it will open your eyes to a few things.
First of all, here are some ground rules.
Rule # 1: GET OFF THE COMPUTER! You cannot raise capital in chatrooms and forums. You have to get outside and network and mingle and talk to people. In person. Find common interests. Love golf or tennis? Join a high end country club. Get involved in charities. Like poker? Get the point? This is especially true for those of us among the ‘younger’ set.
Rule # 2: Relationships. Relationships. Relationships. Relationships. Relationships FIRST.
GIVE first. Focus on the RELATIONSHIP first. You will be engaging with very wealthy people who get hit up all the time for donations, investment opportunities, etc. They can invest with anyone. Why you? Why your deals? You don’t want to be one of those people looking for a hand out. You want to be a friend who also happens to have some good deals from time to time. Take your time. I sometimes know people for over a year before I even bring up a specific deal (after I’ve played tennis with them several times a week, gone to poker night after poker night, went to their parties and vice versa, hung out with their families and vice versa, etc …. they know what I do and most of the time actually end up asking ME if I have anything for them … “I don’t know, John, let me see if you’d qualify”).
This will help you: (a) establish trust and (b) learn more about their personality/demeanor, investment criteria, financial profile, and snap shot of current cash position (the last thing you want to do is put the wrong investment in front of the wrong investor).
Rule # 3: See rule #2.
Rule # 4: You still have to have a GREAT deal. You can have a strong relationship, but you ultimately want to establish a reputation for yourself as someone who deals happen to just follow around wherever you go. You’re a deal magnet. And you work hard to attract those deals and vet them before spending any of your investors’ time and money.
Rule # 5: See rule #2.
Rule # 6: You are not a salesperson. There is no SELLING involved here. After you have a great relationship and a great deal, either the investor will be interested in seeing a presentation or they won’t. If not, just leave it alone. They’re missing out, but just leave it alone. After all, you are not SELLING investors, you are SORTING through investors.
Finally, you must communicate with your investors once they’ve invested with you. You must
keep them informed, briefly and concisely, that you’re working hard on their investment to ensure their return materializes.
So, this should be enough to get you started. Work hard at building relationships first. Consistently bring great opportunities and don’t be bashful about asking for interest (and referrals once they’ve invested and have become cheerleaders of your deal).