Tips For Creating An Investment Business

Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, www.thelandgeek.com. and I'm super excited for today's guest. He's going to teach us how to raise as much money as we want for as long as we want for any worthy endeavor. But I'd be remiss if I didn't properly introduce my co host, the brain, the professor, your flight school sherpa, Scott Todd from scotttodd.net landmodo.com learn anything about anything. Investor ninjas.com Scott Todd how are you marking? Great, how are you? I'm great. But it wouldn't be great if we could just raise money really easily. I wish someone could teach us how to do that.

Just boom, it's there.

It'd be great if we were sort of like money magnets and just magnetically came to us. Imagine all the things we could do.

Scott be crazy, right?

It'd be crazy. So today's guest is Victor Menashe and he is the author of Magnetic Capital how to raise all the money you need for any worthy venture. Victor Menashe has raised several hundred million dollars for ventures, corporate buyouts and real estate projects. As a full time real estate developer, he raises funds on a daily basis. Victor Minash, welcome.

Great to be here.

So tell us a little bit about your background and how you got into development.

Well, certainly my pathway into development was not the traditional career path by any means. I started out as an electrical engineer designing microprocessors for telecom and all kinds of different embedded applications all over the world. So if you've traveled on an Airbus aircraft, the seat back display that shows the movies, it's got a processor that I was responsible for. I've been in pachinko, patchy slot machines in Japan with Sammy, Sega and Nvidia, Cisco, Wi Fi access points, Apple, Airport Express, Canon color printers, and for About a decade, 52% of the phone calls in North America were routed by a processor that I designed. So that's my background and it was not, like I said, not the traditional career path. About 2008, 2009, I was working on building a new cellular network in Japan with the number four carrier Wilcom traveling back and forth to Tokyo every couple of weeks, which, you know, that 13 hour flight is hard on the body, it's hard on the your rhythm. It was hard on me emotionally and it just wasn't the right thing for me, the right thing for my family. So I made a decision then to return Resign my vice president of engineering role and move into the world of real estate investing and developing on a full time basis. It was a hard left turn. Now, fortunately, that happened at a time when we thought it was the opportunity of a lifetime post 2008, because there were more bargains to be had than money available. And that was true. Little did we know that here we would be a decade later facing almost the same thing again.

Yeah, really interesting hard left turn. Victor Scott, what are your thoughts?

Well, is that a fan? Is that a polite way of saying what were you thinking? And there's no, no, it's great.

It's just, it's just such a sexy sort of analytical. You know, I go to a cocktail party and you're like, yeah, you, you know, all these things that you're doing, I built that is, you know, kind of really cool. But then to go into real estate from there, I don't see how, you know, like that light bulb would go off. But from a lifestyle design, can't argue with it for sure.

Well, here, here's the thing I was looking at. I was asking myself a very simple question. In the world of technology, especially in the world of hardware design, if I was looking to attract investment, what is the deal that I'm offering investors? You know, to design a new processor chip, you're looking at 40 to 50 million dollars minimum. To get anything done. You're saying, all right, maybe by year four, I'll get you your money back. Maybe by year five, I'm making you a profit. Are you lining up for that investment? Most people aren't. I'm not, no. And that is the reality of that business. I looked at the companies that had been successful to some degree in that space. You know, the poster child for me is an Israeli company called Cerf. They designed this first single chip GPS solution. You know, GPS came out of the military. Raytheon was one of the major companies, Rockwell International was one of the major companies. And Cerf, this little Israeli company, had a single chip solution. They owned the market, they went public on the nasdaq. They literally swung for the fences and they hit it out of the park. Even they couldn't survive as an independent company. Two or three generations of product before being absorbed. And so then it was like, damn, this is really, really hard. Whereas in the world of real estate investing, it's not like that. You've got so much more opportunity. People will lend you money to invest. It's more scalable. It's not a monopoly or a duopoly. Or, you know, something like that, where you need the depth of pockets over of an Apple or a Samsung in order to survive. In the world of real estate, it's much more democratic.

No, it makes sense, Scott. Todd.

All right, so, Victor, what is it? What's the one thing that I can do that will bring investors to me? Like, how do I attract this money to come to me? I've got a business model that I've proven out. How do I get the money?

What I discovered, the reason I wrote the book Magnetic Capital, is I raised a lot of money in the tech industry. And one of the hardest things to do is to raise money for just an idea. So if you have a proven business plan, something that has demonstrable track record, then raising money is much, much easier. And what I discovered is that sometimes even in the tech industry, raising money was hard. And then other times when it was remarkably easy, I thought about it deeply for a long period of time. And the core of the book Magnetic Capital, is based on five principles. And when all five of these principles are met, raising money is remarkably easy. And when one or more of those are missing, that's when it gets really, really hard. So the five principles, I'll go through it quickly and then we can go into them in a bit more detail. Number one, you've got to have relationship with the money. People, for the most part, are not going to invest with folks they don't know. Number two is trust. This is a more complex psychological contract. It's not just, are you dealing with somebody who's honest? Number three, what's your track record? Show me your results. Show me that you know how to be successful. Number four, have you got a compelling opportunity? That's where, by the way, most rookie investors start. They think they've got a deal, and that's all about the deal. And it's almost never about the deal. It's part of it, but it's not about the deal, really. And then number five, you've got to have perfect alignment between the goals for the money and the goals for your project. And if that match isn't there, don't take the money because it's not going to work. But if you have all five of those elements working for you, raising money is going to be remarkably, remarkably easy.

Makes sense. Makes sense. So if I'm listening to this and I'm new and I don't have a track record, what would your advice be?

Well, that's a great question. This is one of those things where people say, okay, I Can't raise any money because I don't have a track record. How can I raise. How can I get a track record if I can't raise any money? It's a circular argument. I'm stuck. And if you're living in the world of academics and you are collaborating with your neighbor on your grade three math test, that's called cheating. But this is the world of business. Business is a team sport. It's designed to collaborate. Success is built through collaboration. So, okay, you don't have the track record, fine. Go work with somebody who has the track record. Doesn't have to be for a decade. Could be for six months or a year or two. And now you can legitimately point to that track record because you've earned it by virtue of working in that organization. For example, even today, I've done a fair bit of development. One of my business Partners has built 10,000 units of apartments so far in his career. My experience looks like a rounding error compared to his. So when investors ask about track record, well, I push Bob to the front and show his track record. And now I feel perfectly confident and competent from a development standpoint that when people ask the track record question, we point to Bob. So I'm borrowing some of his credibility. And legitimately, because we're working together.

Makes sense. Makes sense. So, Victor, what's sort of some of the worst advice you see or hear given when it comes to raising capital?

Oh, my God. How much time do we have?

Just give us the highlights.

So the first. I mean, let me ask you, Are you uncomfortable asking for money?

I'm not. In fact, I don't pay for anything anymore. I just go to Scott, Todd, like Scott, and he doesn't even. I'm just so natural at it now. Like, literally, I use everyone's money for everything now.

Well, I'm going to make a small but important distinction. Asking for money feels a little bit like begging, and begging feels desperate. And desperation is never attractive. If you're not sure about that, just put the word dating in front of desperation, and you'll see that it's very unattractive. And it's not attractive in business either. So I don't ever ask for money. What I do instead is I offer people the opportunity to collaborate with me on a project. Has a very different feel to it. And it's not just semantics. It's a completely different posture. And so one of the things that I often see, especially rookie rookies that are coming into capital raising, is they. They approach the investor from the perspective Of I really need this money. Could you please fund it? I need this money. Well, that's desperate. And so. So the investor says, well, why would I do that? You're not putting yourself in the shoes of the investor and saying, well, here, Mr. Investor, here's kind of a neat opportunity. We think it's pretty compelling. We've assembled a good team around it. The team's got a strong track record. If we structure it properly, it's in a good sub market. It's got all of the right ingredients. From a due diligence standpoint, do you think it might fit for you? If it, if it, if you think it fits, then maybe we should have a deeper discussion. That's completely, completely different.

Yeah. Scott Todd, did this bring you back to your dating life?

Not my dating life. I think that that's the thing too, is like, yeah, look, a long time ago, in another life, I actually worked for an investment firm and sold some investments, right? And when you call somebody up and you ask them, hey, listen, I have a bond that is paying 5%, and I think that you should invest in it. Today, a lot of people got freaked out, right? Like, I'm selling something and I don't want to be the salesperson. But the reality is, is that at that time, 5% was a going rate. It was a decent rate. And, you know, it wasn't 20%. I tell you what, if people would take that 5% today, they'd be happy, right? But see, that's the thing, is when you have something that you should share, you have a fiduciary responsibility to mankind to kind of share that, right? Like, if you want to raise capital, you've first got to get out of your own mind and say, well, like Victor said, like, I'm not asking for money. I have a fiduciary responsibility to try to help my fellow man maximize their yield. How can I do that? Well, I can show them what I have now. They're going to decide whether they, like you, they're going to decide whether they want that investment, whether they want that yield, or they can make a yield somewhere else. It's not personal. It's all about money. And just take the response and roll with it. Like Victor. Is that kind of the right approach?

Yeah. And what you discover is that investors have a wide variety of criteria. And I really think about this, the analogy I use, it's like a pair of shoes, and you could be going down the shopping mall and see the most beautiful pair of shoes in the window, and you're really taken by them and gosh, it's your lucky day, they're on sale. But if they don't fit, you're not a buyer. It doesn't matter how beautiful they are or how deeply discounted they are, if they don't fit, you're not a buyer. So what is the fit? When we talk about money, when you're dealing with unsophisticated passive investors, they are less clear on what their investment goals are. They'll say very simple things like I want to make money. Okay, well, how much money they're not clear on even their risk profile or their risk tolerance. Whereas if you get with much more sophisticated investors, they are much more clear. They have upwards of a dozen very specific criteria that you've got to meet. A certain minimum investment size, a certain how long is the money going to be tied up for, what's the term of the investment, what's the liquidity, what's the tax consequence, what's the control structure, what's the rate of return? There it is way down the list and on and on and on. And if any one of those doesn't fit, then it's not a fit for them. So you can often go down a rather seductive path with a sophisticated investor where you have something that looks like it almost fits. And of course something that almost fits actually doesn't. You want to get to that understanding quickly so that you're not wasting their time, you're not wasting your own time going down a dead end path.

Yeah, no, it totally makes sense. I want to talk a little bit about the raising capital environment.

Yes.

So for a lot of the people listening, they're not living in New York or let's say San Francisco or la, these big cities where you're going to have just, you know, you could throw a rock and hit an accredited investor. You could go to a party and, or not that we're having parties anymore, but if one day we have parties or a networking event and you just, they're going to be there, these conferences. So if you're in Wichita, Kansas, let's say, and you know, we go back to those principles, you got to have a relationship, you have to have trust. How do you start developing that in these areas where, you know, your, your circle might be really, really small.

Absolutely. And that's a great question. That's one of the biggest difficulties is people often say to me, well, Victor, I don't know anybody with money. Just because they haven't traveled in those circles. And the relationship building process is A process. It's not something, you know, I used a distinction between, and I'm not the only one to use this distinction between farming and hunting. Hunters are very transactional. Some salespeople are hunters. They complete the transaction and then they move on to the next. Farmers recognize that they've got to plant seeds well in advance. You can't plant seeds, water like crazy and a week later you harvest. It doesn't work that way. So there's a much longer gestation period. And it requires building that trust, building multiple relationships, getting into those circles, getting into the right environment. So how do you get yourself in that environment? Well, if you are not hanging out with those people, it's going to be difficult. Often people talk about needing the knowledge in order to accomplish whatever it is in life. And that's important. You know, they say, well, I went to a workshop, I took the course, I got the credentials, I have the certificate, I have everything I need. Sorry, that's actually not true. So you need, you certainly need the knowledge, but it's not enough. Number two, you need the emotional fortitude to overcome whatever obstacles that you're going to encounter along the path. And number three, and this is the most important, you got to get in the right environment. That's why all the figure skaters from around the world train out of one of two rinks in Canada, even though they compete against each other, because if they're not hanging out with each other, they won't develop to that high level. All of the elite sprinters, they do the same thing, they train together even though they're competing against each other. And on and on and on. It's the same in business. So if you aspire to be a developer, hang out with developers. And where do you find them? Well, often if you want to spend time with money, well, hang out where they hang out. Maybe go to charity events, maybe there's an event where you can contribute time, maybe more than money, but you can start to develop relationships with those folks that have deep pockets. I know of a number of folks who started out as fitness trainers to high net worth families. And that fitness trainer then in the end was able at some point, long way down the road, to gain some investment from that high net worth family simply because they had developed the relationship, they developed the trust. So it is really all about relationship building. Now sometimes the most difficult thing to do is to relationship build with someone who's a big brand, someone who's a celebrity, because, look, let's face it, nobody wants to be used. I don't want to be used, you don't want to be used. And people with money are very sensitized to the notion that somebody wants to build a relationship with them for one reason, one reason only. That's because they have money. So why would they want to be used more than anybody else? They, they don't. So their guard is up already, automatically. So how do you break through that barrier? Sometimes developing a relationship with somebody who's in their inner circle may be just every bit as good. They know all the same people. Look, when you develop a relationship, if you're going around and you just see dollar signs on everybody's forehead, well, then you're using people. That's not relationship building. That's very utilitarian.

Right.

But you get different things from relationships. You might get, you might get advice, you might get access to opportunity, you might gain credibility. You might get, my goodness, a friendship. Oh, yeah. And you might also get access to capital. But if you go in thinking, well, if you can't, if you're not investing with me, I'm not interested, well, then you're just a user and just don't do that.

Yeah, I mean, you know, for those who love philosophy, Immanuel Kant, this is like his big thing is never treat anyone, even yourself, as a means to an end.

Right.

And that's essentially what you're saying. So when you go in, you know, just with this open mind of, hey, we're just going to develop a relationship, wherever it leads it leads it, you never know.

Exactly.

Yes. And so it's interesting, Victor, like a lot of what we're talking about is mindset from the dating analogy. You can't be desperate, you can't feel desperate. You don't want to be begging. 2 actually, on the other hand, don't treat people as a means to an end. These are just two very simple things that we can control just in our day to day interactions. Correct?

Absolutely. And you know, the other thing to remember as well is that, you know, I see a lot of people that are starting out hunting with a certain amount of desperation. You know, the person that's out there with a yellow business card that says we buy houses, they're hunting for deals. I can tell you with every bit of humility that I never go hunting for deals ever. They all come to me. They all come to me. And even if I'm not investing my own money, people see me as representing the money. So the deals come to me. I literally am inundated regularly with more opportunity than we could ever do in a lifetime. And so I have the luxury of being able to filter through that list and draw a line and everything below that line is out. And be very selective because there's really three answers to a yes, no question. Like, do you want to invest? Actually, there's four answers. There's a no, there's a maybe, there's a yes, and then there's a hell yes. And I would really only want to be saying yes to those items that are a hell yes. So you set that bar really, really high. But you can only do that if you've got a big buffet. Really an all you can eat buffet of opportunities to choose from.

Totally makes sense. Scott Todd, what are your thoughts?

I mean, Mark, it all comes down to utilization of resources. Right. And I like the hell yes idea. So I guess for everything, if we can't say hell yes to it, why.

Are we doing it? Right?

No, absolutely. Well, Victor, your mentorship has been really, really valuable, but we are at that point in the podcast where we're going to ask you for another tip of the week. A website, a resource, a book, something else actionable for the art of passive income listeners to go improve their businesses, improve their lives. What have you got?

I am the host of the Real Estate Espresso Podcast. Like the Italian Coffee, it's literally your morning shot of what's new in the world of real estate investing. It's a daily show seven days a week, and so. That's right, seven days a week. And so we'd love to have you as listeners. These are short form podcasts, so the weekday shows are literally just five minutes. The weekend shows involve interviews with notable people from the world of real estate investing. And so we'd love to have folks out as a listener on whatever your favorite podcast platform is. I'm on virtually every platform, so. Real Estate Espresso Podcast. Wow.

Victor, are you familiar with Treble fm?

I am.

Okay. Are you using it?

Let me see if we're on it.

Because that would be perfect. So Treble actually takes a short form and you can use it on your Alexa. You can say, alexa, what's the latest Victor Minaj podcast? And it'll just play it for you.

Got it, got it. So, no, I'm not familiar with Trouble. I know we are on Alexa, but. And we're on like 24 different platforms and all those platforms just take it straight off the RSS feed.

Very cool. Very cool. Before we get to Scott Todd's tip of the week, I just want to remind the listeners of today's sponsor, which is flight school. Learn how the next 16 weeks of your life can be literally changed. Start building passive income. It's a one time sale. Get recurring income every single month. No renters, no rehabs, no renovations, no rodents. Go up that mountain of land, investing with someone who's done it literally thousands of times. Go up there with Scott Todd and in fact that tuition investment, you're going to make back 180 days less, guaranteed. Learn more. See if this model is right for you. Go to landgeek.com training thelandgeek.com training Scott Todd. What's your tip of the week, Mark?

You know, man, people have different relationships with money. Some sometimes money scares people. We kind of talked about it. People have a lot of different relationships with money. Some people are good at it, some people understand the tool, some people are us. Some people are scared of it. Okay, so check out this book, Psychological. Sorry, wrong one. It's. It is the the psychology of money. Timeless lessons on wealth, greed and happiness. If you want to learn more about money and build a relationship with it, it's not always about being greedy. It's about understanding that it's a tool. This is a great book for you.

Fantastic. I don't even know how you're finding these books. Something in the Amazon algorithm.

I'm on fire.

You are on fire. Well, my tip of the week is, you know, learn more how to raise magnetic capital. Go to VictorJM.com VictorJM.com and start raising capital. Start becoming a farmer and get the step by step way to do that and start building confidence in raising capital. Because in our niche in anything in real estate, you are eventually going to need other people's money. This is how we're going to scale in life, right? We're going to use other people's money, other people's time and software and systems and that's how you scale. Because last thing we want to do is build another job. We want to build a real business and that's how we're going to do it. So Victor Menashe, are we good?

We're good and great to be here this week. Enjoyed the conversation very much.

Thank you. Thank you. Scott Todd, are we good?

We're good, Mark.

All right. I want to thank the listeners or just remind them the only way, the only way we're gonna get the quality of guests like Victor Menashe is if you do us three little favors. You got to subscribe, you got to rate, you got to review the podcast, send us a screenshot of that review. To support thelandgeek.com we're going to send you the $97 wholetailing course how to double your money 30 days or less for free. So please do that. All right, let's do this. One, two, three, Let freedom ring. Victor's like, oh, no. I had no idea they were going to do that. Thanks, everybody.