The "Second Close" When Raising Capital

Welcome back to the channel. Today we're going to talk about the second close of raising capital. Now, you know, on this channel we talk about raising capital, raising funds. Right now I run a hedge fund. We just raised $10 million for that fund last year, and actually we're still raising money for it. It's been awesome. But there's this thing, as we've been raising money, I've often in the back of my brain talked about the second Close. Now, a lot of us know the first close, that's having your pitch deck out. And we're gonna actually talk about that a little bit today's call. But more importantly, I wanna talk about the second close. After you've done the first initial pitch, you get a yes, and how to help a lot of people not fall through the cracks. And to be honest, over this last year, I've had a lot of people that I closed on the first close. I got a verbal yes. Actually, there was a guy 3 or 4 weeks ago, he gave us a verbal yes for $500,000 into our funds. We do the whole pitch, we had the first pitch, we broke through, The croc brain, the midbrain, we got to the neocortex, which is all included in the other stuff we're gonna talk about in a minute. We got there at the end, and I think you should all do this, but I always ask for money. Hey, can we put you down for $500,000 into our fund? Can we pencil you in? I know you gotta do due diligence or talk to your lawyers, but right now verbally, if everything checks out and it all looks good, would you invest $500,000 into this fund? And this guy was on a call with me, he goes, you know what? Yeah, I think it'd be awesome. I love you guys, I love what you're doing. You guys have done a great job. I wanna put in money. I got money right now. I'd love to have you in. So I said, great, sounds awesome. I'm gonna send you over documents tonight. Go look through those documents. LPS. Hey, PPM, send me your email. We got all the info, send the documents. And nothing happened for a couple days. 2, 3, 4, 5 days go on. I sent him a text. Hey, how are those docs looking? Have any questions for us? I'm happy to hop on and talk to you. He was a friend of my business partner and we text back and forth. And anyways, my business partner goes, hey, I'll give him a call. We hopped on another call with him. And this is again where we approach the second close. So what the second close actually means is getting them to sign the documents and getting money wired into your fund. That's a lot different different than the first close when they say yes, and even when they maybe even sign documents to get them to actually wire you $500,000 into your fund. There's usually a hurdle there of this repulse of, what am I actually doing? Why am I sending this money? And there, a lot of what I call the second close needs to happen. And then that leads into sometimes even the third close, which you can get crazy on these closes. But once they're in, are they happy? Are they sold? Because a lot of us get buyer's remorse. We talk about this in our group. We have courses and programs and coaching. I always talk about the first close, second close. Yes, we— somebody will Join our group. They're so excited they get in, but we gotta close them again. Once they're in, can we deliver that first day they join? I wanna give them so much value, so much content that they're not having buyer's remorse. 'Cause a lot of us, we drive the car off the dealership, we're so excited, and the next day we're like, shoot, I shouldn't have bought that car. I'm getting buyer's remorse. And you need to have a second close happen. So sorry, I digress. Let's go back to the example. So I'm with this guy, we hop on the call, we're working with him, and unfortunately we talked to him a lot and helped him out, but he, he had something happen in his life, other stuff, and he fell through the cracks and didn't close in what I call Now, most funds that we've worked with, I usually see about 50% of the money that they soft raise or they get verbal commitments on. Let's say you verbally got committed $10 million. I estimate on a first-time fund, about half of that money will show up. And I know that sounds terrible, but like if you get $10 million verbally, yeah, I'll put that in your money, usually about half shows up into your fund. And that's actually been the case for our fund. I think we've had verbal commitments of, on our first initial launch of anywhere from $25 to $30 million during the 2 months of April and May. So, you're saying that the first 2 months of the year, April and May of 2021, crypto took an incredible dive and people didn't want to be in the asset class. They had to move allocate money to other real estate projects, and some people put smaller commitments in before, and we ended up just over ten million dollars for that initial raise. But that goes to show you should probably over raise for what you're doing. Now back to the second close though. A few tips and tricks that have helped us a lot with the second close. Number one is speed. When someone gives you a verbal yes or they're on the call with you, yeah, I'd love to do it. Work with them right then. There's no moment like. than now. So what I like to do and what I've learned by sometimes sad experience, send those documents right away. So, okay, I got documents. They're going to be in your inbox in 10 minutes. Look out for them. And actually, I can stay on the call with you right now or stay in here and we actually can walk through them together to make sure you understand how it works, how it's put together, and fill them out with you. Now, some people will say yes to that. Some will say no. But at least the option is there to again get them moving quicker through the process. So number 1 is speed. Number 2 is clear communication and transparency. More often than not, they're gonna go home and they're gonna talk to their spouse or their business partner or their lawyer, and they're gonna come back with questions for you. So number one, the speed, and number two, the ease of communication is crucial. If somebody emails you a set of questions or wants to hop on a call, if you can hop on that call quickly, answer those questions effectively, it increases the— in my opinion, the odds of them actually hitting that second close, signing, and getting money wired into your account when Capital raising. So again, number 1 was speed. Number 2 was transparency and easy communication. But number 3 is following up with clear deadlines. A deadline gives a clear cutoff point of when they need to move things in, get things signed, get things reviewed. Nothing ever happens in this world without a deadline. If you can move up closings, and you can do this in your fund, you can actually set different closings, whether it's a real estate fund, private equity fund, you can do a closing and call capital down and then do another closing 3 months later for new investors and do another closing 6 months later for different investors. But if you can move those closings up, get money moved in. It helps all the emotion, excitement of investing in your deal or project. It keeps it in a condensed timeframe for them to number one, have speed, transparency, feel that emotion, that excitement, have the analyticals and not get distracted by other deals that could move in. So if you do those 3 things, it'll increase your chance of getting the second close and overall help your fund launch like crazy. Hopefully that helped you guys. Please like this video and subscribe. It pushes it out to more people and let us know if you have any questions down in the comments. Would love to answer them. Thanks. I'll see you guys next video. Bye.