How to OUTSOURCE Capital Raising for Real Estate Funds – Natu Myers of Raises.com – Investment Banking – Capital Raises
So can you outsource the entire capital raising process? Is it possible for somebody who hasn’t set up a large private equity fund to acquire real estate? Is it possible to completely forget about having to do any of the equity sales and still have control over your deal? It is, but you really have to remember
that you have to maintain control of your deal. So we had somebody, you know, a new person who joined raises. com, who is working on raising a hundred million. dollars to acquire gas stations. So with this particular person, the real concern was for the person to understand not only how to create the private equity fund for their real estate attached to some of these assets, but it was also to make sure that it was really hands off.
This was somebody who had like, who was really busy and he needed, he had, he needed to have everything hands off. So the quick answer is, yeah, it is possible to have a capital raising team. Work for you on your behalf to sell the deals into like this. All your deal. The only problem and concern is that when many people depend on people to do done for you, capital raising, what really happens a lot is that people always lose control over the, their deal, because what typically happens is, you know, people would work with something called an investment bank, which is a company that is employed to raise capital for people, you know, and mainly investment banks.
They usually sell the, either their. two ways. Sometimes they sell private equity deals, deals that don’t go public, or sometimes they sell deals that later on go public. And that’s how a lot of investment banks make their money. So what a lot of people see and what a lot of people do is they give control over to these investment banks.
A few emails are sent out and then nothing happens. And when that takes place, there’s really nobody to blame but yourself. Because if you… Give somebody all your power to raise capital for you and you don’t have any insight and control into the capital raising process yourself. That’s what can happen.
So that’s one way of getting people to raise capital for you. Um, and I guess the, the reason why investment banks are sometimes like this, and sometimes they reach out to a few people and you have no idea what’s happening. The reason why this happens is because they’re supposed to, they try to get their commission and that’s normal.
So they’re incentivized to get their commission, uh, like a percentage of the money raised. But the, and they also charge, you know, quite often, you know, between, uh, between 000 to begin working with you as a retainer. So, you know, what, I guess the problem with this and the problem with, with what a lot of people see is that as people are raising capital, they are incentivized to make money for you by getting a percentage of the deal.
But then you’re also incentivized to hide information from you because they’re not like a platform or something. Because if somebody He gets access to that investor and they don’t have a good investor relationship. Why would the company, why don’t the investors just go around the investment bank and go directly to the company?
This is the number one problem that many investment banks face. So as a result, they have to hide the investor contact information from you because if they do, then you know, you’re not going to be able to know who did what. Uh, so that if they deal closes, they will be like the middleman so that can get, they can get the commission.
It’s the same thing as, um, honestly, it’s really. the same thing as being a broker. And with that, you know, an alternative way of doing it is to make sure that instead of getting a, you know, a registered investment bank to raise capital for you, or when you work with investment banks, another way to do it is to make sure that the investment banks don’t have an exclusive relationship with you.
One thing that kills deals is if the relationship is exclusive, number one. Number two, uh, or I guess let me elaborate. So if in a relationship is exclusive, that means that you’re not allowed to work with any other investment bank except for the one that you’re talking to. And you’re not allowed to. that person spoke to.
You would have to do something called a carve out where all the people that you’ve spoken to, you can just speak to other people. So that’s one way of doing it. The second way of doing it is making sure that the people that, uh, you reach out to, um, that you work with investment banks, but you also work on, you don’t get too excited.
Kind of like how you say in bolt back when he broke one of the, he was about to break one of the records. He celebrated too early and he lost, he didn’t run as fast as he could have. And he did this multiple times celebrating too early and thinking that the deal is closed before it’s closed can ruin you.
So instead of celebrating too early and thinking that the deal is closed before it has closed, you know, instead of doing that, what do you want to do? You want to assume that nothing will work and work hard and continue to work with as many investment banks as you can and raise capital directly yourself.
Which leads me to my third point. Make sure that you raise capital yourself, you know, and when I say by yourself, I don’t mean employing an external investment bank to raise capital for you all the time. I also mean like actually selling the deal yourself and getting salespeople underneath your company to sell the equity.
Because if you do that, then you actually don’t need an investment bank to raise money for you. In many cases, sometimes based on the exemptions and the rules, sometimes you do, but in most cases you really don’t. As long as you’re following the rules and in America, for example, if you’re raising.
something called a regulation D, you’re just reaching out to, you know, I credit investors and you only allow them to invest in your deal. And, you know, instead of just working with all kinds of random people, um, you know, to do things for you, if you just build your own sales team underneath you to sell your, your investments, you know, and then they’re probably, they’re fully parts of your team because many people get in trouble all around the world in a financial conduct authority in the UK, you know, throughout Canada, in United States.
for you. If they’re not like actually licensed to raise the capital for you, um, and they’re working on multiple deals at the same time, because if they’re doing that, then that would mean that you know, they’re breaking securities law. But if they’re fully part of your team, usually they don’t need to be registered because they’re fully committed to your team.
Therefore the solution is to get a trained salesperson underneath your company within the regulation that you, you know, you have to set up and get them to raise capital as a team member, full time team member for your company. Without any other projects that they’re raising capital for. So the way to do this and the way that we help people do this is really there are many levels to this.
One level is just to have somebody do some emails and some small administrative, uh, marketing, obviously through whatever laws that there are. The second way of doing it is to have somebody do voice calls and in person meetings. And this is more of the advanced salesperson. So, you know, these are the two things that we see people do.
And then when people get these salespeople underneath the company, ideally it’s good for the. Principle is the founder of the company, unless he has a really big problem with time to do it himself, but, or herself, but if they don’t and they really don’t have time, then yeah, you can get the salespeople underneath you to sell and just have a hiring process for the top 1 percent of salespeople to make sure that they can actually get the job done.
And so with this, I hope that brings some clarity into the, you know, what, like if you can actually outsource capital raising, the quick answer is you can, but 80 percent of the time, it’s probably a bad idea. I want to make sure. You keep the strategies in house, uh, and the tactics are outsourced. So you have to have all of the scripts, all of the processes, all of the documentation on your sales process in your company.
And you have to be leading from the front and be trained on how to lead from the front. And as a result, you know, you don’t, and also you don’t want to depend too much on investment banks, uh, if you have an exclusive relationship with them because they’re incentivized to win when you win, but then they’re also incentivized to hide information.
from you. So you want to be careful that you don’t over depend and celebrate too early before the finish line so that you get too excited and think that they’re, they’re your deus ex machina. Really they can fail. And many people in many senior executives, I’ve seen them fail because when people get too excited, but at one investment bank or one investor will come through, they stopped working on getting more investor appointments or they don’t continue to go on investor appointments.
So until the done, the deal is done and the money has been wired, nothing happened. And you want to make sure that you keep on. going and you keep on working until you actually get the results that you’re looking for. And finally, you want to get some trained salespeople that are full time underneath your company to follow out, like to carry out the actual scripts and processes in your company to raise capital.
And you need to do this and they have to follow you to a T. So with that, you know, make sure that you control your own capital raising process and it can. And it can save you a lot of time if you’re a CEO with multiple projects going on. So with this, if you can implement it, get it done and execute, and if you need help with implementation and building all of this stuff, including the paperwork and the team, just head to razors.
com and make it happen.
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