This Money Raising Strategy Will Help You Raise Millions

What's up guys? In this video, we're gonna talk about understanding your investors. One of the biggest problems I see with a lot of our clients is that they just don't really know who they're talking to when they're raising money from investors. And you need to be able to cater your pitch to each person you're talking to. It shouldn't be the same thing every time. So let's, let's jump into it. In other videos, we talk about, you know, understanding the 4 different types of investors, your Accredited investors, qualified clients, your qualified purchasers not accredited. That's important, but that's not what we're talking about in this video. The purpose of this video is to give you a different lens in looking into and understanding the different types of people you might be raising money from. Now, first and foremost, you know, a distinction between the types of people you are raising money from is new investors versus current investors. So pretty self-explanatory. A new investor is somebody that you have never raised money from before. A current investor is somebody that, you know, has been in either one of your prior projects or funds. The problem with new investors is that these people, they don't know you, they probably don't like you, and they don't have any reason to trust you. So you need to convince them of that on your first interaction. With current investors, on the other hand, like they already know you. You've probably, if they're still an investor of yours, you've probably made them money. So there's a couple of things to understand when you're, when you're addressing these people. With, with new investors, yeah, you need to differentiate yourself. But you know, we talk about this in other videos, but you just need to get to know them. You need to give them a reason to know you and trust you and like you and want to work with you. One thing you can do that one way to do that is don't be aggressive on your fees with new investors. I see it all the time. People want to do 50/50 splits, and I'm just like, "Look, guys, you're not gonna start off any relationships great by you know charging outrageous fees." Now, when you have a working relationship and you've made money, you you can be a little more aggressive. So maybe on a on a on a later fund, or even just if you're syndicating deals on later projects. Um, you know, how do you think Renaissance gets away with charging a 4.44%? It's because they have consistently performed and shown their investors that they can make them money. So that's, that's number one. It's just like, understand, you know, the difference between new investors and current. Now the other one I think is even a little bit more important, cause that's pretty obvious, is the difference between an investor versus an allocator. So there's, there's definitely a different here difference here. So investors, you are trading, it's their own money. Okay. So this is kind of like high net worths, you know, business owners, whatever allocators, this is other people's money. So the difference there is here you're talking with the decision maker. Usually you're talking to the person whose money it is and they're going to make the decision. Um, now they're probably going to go before they make an investment, Yeah, they're probably going to go and chat with maybe a, you know, I'm just going to put a financial advisor or a CPA or an attorney. You know, they might just, or just a friend, you know, they're going to ask somebody, but usually the due diligence is a lot less for these types of people. They're not going to investigate you as much as an allocator will because an allocator This is somebody where this is like a this is like a CIO, like a chief investment officer, okay? Or a portfolio manager of a of a family office, of an endowment, and they have they have guidelines and parameters, and they have to go get a confirmation. So like let's say they choose to invest with you; they have to go get a confirmation from. Others before they actually make the investment, right? The investment timeline for investors, it really depends. I'm going to put 1 to 3 months here. But with an allocator, you're looking at at least 2 to— I mean, as long as a year. But I'm just going to put 2 to 6 months is a little more realistic. So, I mean, these guys, they have teams. Like if you're a chief investment officer of a family office or of a pension fund or endowment, like, you have teams of analysts that you are going to task on basically convincing, let's say, me as the chief investment officer, why I shouldn't invest my money with, with you. And then even if, even if it approves, like, you got to understand that these people probably still have to go talk to a board and get Permission from them, so it's good that you need to understand the dynamics and everyone that you're talking to here because they have very different needs. For example, like the liquidity of a you know the liquidity preferences of an investor versus an allocator radically different. Like an investor, it's usually it's their money. So you know when you tell them a ten-year lockup. On their funds. Like, that's a long time, right? Um, these people are probably going to write smaller checks, so be aware of your, your minimum commitment. They're probably not as wealthy, but I mean, 10 years is a long time for somebody. Like, you really need to understand their purpose of their wealth. Now, if it's in a trust or something, or a family office, that's different because it's usually long-term and goes on after your death, but A lot of people can't think about, you know, if they're going to need that money within the next 10 years or not. Allocators, on the other hand, I mean, their time horizons are very long. Um, you know, like, we'll take a pension, for example. If you're raising money from a state pension fund, they have pensions they need to pay out. Let's call it a 4% annual obligation of that, or whatever percent, like, that they are benchmarked, which lead them to more income-oriented assets, right? That they want to be involved there. Same thing goes for like an endowment, right? If the scholarship is in perpetuity and they'll take the interest accrued every year and pay that out in scholarship funds, and they want that principal to stay the same. So what is that? They're probably gonna be more income-oriented as well, meaning they probably like the thoughts of a real estate fund a lot more than a venture capital fund or even a private equity. Like you just need to take a minute and do your homework on each one of these investors that you are thinking about engaging. Okay, understand who they need to get a confirm. Like it's just like on a sales call, right? Like where you say, hey, like are you the decision maker? Obviously, when you're raising money, you don't want to be offensive to anybody, but you know you need to ask. It's the same practices. of asking, you know, what step— like, what's your process, you know, before making an investment? And is there anyone else you need to, you know, that needs to approve this? And just understanding the steps. Because for in this example of like a chief investment officer, they will need to be equipped with the proper knowledge. Like, you're not going to be in that room when they go talk to the board. You know, it's going to be them. So, you need to give them all the materials and everything that they need If they— if he decides— if this person decides they want to invest, they need to be able to then go sell the board on why they should invest. If that's how it works, he may just be the sole decision maker. It depends on, you know, the kind of the fund and the way things work. But you should understand that. So just as important as it is for, you know, your investors want to get to know you and trust you, like, you should get to know them, do your homework on them, cater your presentation and your needs to them. Understand their liquidity needs. Understand their minimum check sizes and their objectives. Maybe they've got a philanthropic motive that you can lean on as you're, as you're, you know, pitching. So a lot of things here. So these are— this is kind of a, you know, a different type of investor. But, you know, like, look at their past investments and, you know, see, see what they've done. So Kind of a bit to talk about there today, but I think it's really important. It's a it's a problem I've been seeing a lot with our clients is they don't understand who they're talking to and how they're going to cater an offering that makes sense for them. Hope you guys enjoyed this video. We'll talk to you soon.