14 Undisputable rules for building a strong fundraising pipeline
After 20 years and more than $200M raised for real estate investments around the 🌎 I created a simple set of rules that we use to raise money. These aren't hacks or cheat codes, just the right way to do things.
After 20 years and more than $200M raised for real estate investments around the 🌎 I created a simple set of rules that we use to raise money. These aren't hacks or cheat codes, just the right way to do things.
Before we start, I need to address the 🐘: Not all GPs have the same starting line for raising 💸. Some have connections that help them go big out of the gate. Over time, however, track records win out, and a GP will have access to the capital flow they deserve.
1 Operate with integrity - A GP has many opportunities to hide little facts or make things sound better than they really are. Don’t go down that dark road, even if it makes life easier in the short term. ALWAYS operate with integrity down to the penny in everything you do.
2 Do great deals - Better to be waiting patiently for the right deal than distracted on a mediocre asset while the right one passes you by. One bad deal can sink a GPs reputation and for good reason. Be disciplined and only jump in when you are certain.
3 Over-communicate – It is better to provide too much information than too little. Spend lots of time writing clear and accurate updates and share everything about the deal. (Bonus points: Put a TL; DR at the start for investors who are in a hurry)
4 Communicate early – The temptation to wait to send your update until an issue has resolved itself is very real. I firmly believe this is the wrong strategy. Instead, send the update with a clear and concise explanation of what is going on and how you are handling it.
5 Don’t “update” your timelines. I invested with a GP who would constantly update his timelines. His updates would always say, “We are on track and hitting our timeline” when in truth he was late by sometimes two years. Choose a timeline and stick to it, even if you are late.
6 Own the bad things that happen- Own the bad right up front and your investors will forgive you. Blame-shift and finger-point and they will never invest with you again. Go overboard with this one. “We underestimated the potential for tornadoes in the area”
7 Don’t be greedy – GPs who take too much in fees and promote risk getting blacklisted. When the market is good, you might get away with it, when the market turns, you don’t want to be stuck having to go back and change your structure. Investors never forget.
8 Be careful not to go too fast – When you get out in front of what you are capable of running with excellence, you will start to drop balls and lose the confidence of your investors. Pull back before it is too late, proceed with measure.
9 Take good care of your past deals – Don’t become a deal junkie who is more excited about doing the next deal than taking care of the ones you already have. If you are so busy that you start missing things, you will erode the trust of your partners.
10 Write a clear investment thesis for each deal in a pitch decks/offering memorandum. No matter if it is your 1st or 100th deal, or if you are assured to raise capital because of your reputation, every single deal should get a complete pitch deck with a sound argument.
11 Build great financial models – Go the extra mile and make sure that your thesis holds strong through a battery of sensitivity analysis checks.
12 Charge fees – Charge modest fees so that you have the capital to do a great job stewarding your deals no matter what the market throws at you.
13 Over-raise and keep a large reserve fund. No one likes a capital call. Most times when GPs make a capital call it was entirely avoidable. They failed to stockpile enough cash for a rainy day. We always choose to raise extra capital and are ok with the lower IRR.
14 Spend lavishly on your finance team and systems. Track every penny that your company spends not just on your deals. This second part should go without saying, but I will repeat it here for good measure; never-ever co-mingle funds with other deals or your company expenses.
The real estate market will turn eventually, and when it does two things will happen, 1.) Capital will dry up. 2.) Opportunities will come around to buy great real estate at great prices. The few who follow these principles will be able to keep going and buying during these times
Would appreciate a RT if you agree!🙏
• • •
Missing some Tweet in this thread? You can try to
force a refresh
