Raising Capital through Predictive Analytics
www.arrivatollc.com – If there is one constant in being a business owner, entrepreneur, or real estate developer, you are always raising capital. It does not matter whether you are a commercial real estate developer with a 20-year track record and 30,000 units in your current portfolio or a fledging technology company who needs capital to reach the next milestone in your business – capital raising is probably your most constant focus. As owners of commercial real estate and operating companies, we know a few things about capital raising to leverage our own liquidity.
If there is only one principle that holds true in scaling up a business venture or a commercial real estate portfolio, it is that your scalability grows only as your warm relationships to investors grow.
This is factor on why most business owners or commercial real estate developers level off and become stagnate. I hear from these people or become introduced to them on a daily basis due to this one challenge.
I will give you a couple examples.
I was recently approached by a commercial real estate operator. They have established a track record over the past several years of acquiring under-performing multi-family complexes. They have acquired approximately 2,500 units within their existing portfolio. As their track record has grown, they have been exposed to an increasing number of opportunities, including opportunities the next level in size and scope.
This operator currently has 57 warm relationships with investors that they can call upon to raise capital whenever they have a new asset under contract. Within this investor base, they are confident in their ability to raise up to a few million dollars in a short-period of time.
As they now have more opportunities and a few slightly larger assets becoming available to them, they are not as confident in their ability to raise capital on every promising opportunity. They are turning down good investment opportunities.
They are clearly out-growing their base. The bottom line is that they need a much larger base than 57 investors. The average commercial real estate developer has between 20-100 investors within their warm base. These developers and operators can only grow to the capacity of their existing base.
In another example, I recently had a conversation with a gentleman who owns a chemicals company that has experienced steady growth in its initial six years of business. They are a very profitable business that is primed for significant growth over the next few years. They have had occasional conversations about the need to raise capital, but have no idea where to truly start. I am sure they can list 100 affluent or upper middle class investors they can approach, but this would not get them very far. At the same time, they have not reached the size to attract an ultra-high net worth strategic investor at this stage.
These are only two examples, but they are fairly common of everyone in real estate and other levels of business.
Most of these professionals begin contacting investment advisors, presenting to high-net worth individuals, or cold-calling small family offices. This is a very long and time consuming process with only a small percentage of success. Over the past few years, the masses have turned to crowd funding and having their proposals placed on portals alongside many other groups seeking capital for interested investors to review. There has been success stories, but this has been hit or miss for most seeking capital.
Fortunately, with the growth of technology and big data, there is a unique solution that we have tested in recent years with proven results – we call it capital raising through predictive analytics.
This predictive analytics methodology is an effective process for companies that have reached the stage where they need to scale up and need to reach new and larger micro-level targeted audiences of capital. At the same time, it is a much more sustained model for raising capital within the parameters of the JOBs Act.
This is a very predictive process over the long-term that is math-oriented and through a track record of proven algorithms where a developer’s existing base of 57 investors can turn into a few hundred and in some cases, a few thousand investors that have expressed keen interest in their strategy or future opportunities that become warm proprietary relationships over the long-term.
How is this realized?
It begins by identifying the demographics. Who are you looking to attract and who are the right people that will resonate with your strategy?
It could be family offices, high-net worth individuals, mass affluent individuals, institutional investors, or perhaps people with specific historical behaviors. Ultimately, we understand how to aggregate these investors for a specific real estate developer or business owner’s own benefit without competing alongside other developers or businesses for their attention within some portal.
Once these specific relationships are identified, we understand how to create a compelling message and implement a strategy to build’s a developer’s or an entrepreneur’s brand over a long period of time. This allows an effective opportunity to build personal relationships with investors who are already warm to a specific fund strategy or future direct deal opportunities – ultimately building a very large base of relationships on a continuously basis.
As you can see, this process is not only very sophisticated in terms of methodology and mathematics to create a much larger audience of people specifically interested in the respective entrepreneur or developer, but also embraces the old-school philosophy of the warm relationship for the long-term.
If you are interested in expanding your audience to begin creating a warmer base of support to accomplish whatever is within your next level of goals, you are welcome to contact me today for a confidential discussion.