Entrepreneurs Boot Camp Interview #9 - Are You Wasting Investor Contacts
In my last post, we explored the importance of gaining multiple perspectives when you are establishing a new business venture. Actually, new perspectives can be helpful at any stage in the business cycle. But at the early stage, before you set out to raise funds, gaining an investor's perspective can make a measurable difference in your effectiveness at raising capital.
But what if a major part of your business IS raising capital?
And what if your business idea is 180 degrees different than anything you've done before?
That's the situation that Tate Hilmoe, Founder of 43 Bay Capital, faced when he set out to develop and manage a real estate investment fund. Tate had spent years as an attorney and had a lot of relevant experience in major real estate transactions. He'd seen clients make millions. He'd helped structure investment deals, funds, and partnerships.
But he'd never done it for himself.
In other words, Tate had a lot of perspective on the world of real estate development, investing and deal-making, but it was all the same perspective -- he saw all the deals from the view given by his role as a trusted advisor to one of the parties in the transaction.
But Tate had an idea that he thought was pretty solid. A way to invest in real estate that could consistently beat the market, grounded in a unique set of data that he'd learned to apply to property acquisitions. He knew it was time to create his own vehicle. "I've helped a lot of people make a lot of money. Now, I want to be my biggest client," Tate told me when we sat down to discuss his experience in the Entrepreneur'$ Boot Camp.
How's THAT for a change of perspective?
Tate shared some insights from his experience in the Boot Camp with me that will give you, too, a new perspective on how to be fund-worthy.
Tate, what's the essence of your business concept?
"I've learned how to gather and assess unique kinds of data about what's happening all around a particular property. I can apply this data in ways that predict the future value of a property based on what people are doing all around it. A lot of the focus is real-time human behavioral activity. That provides a truly unique view of a property and can help me understand it's potential value far more deeply than just looking at Loop Net or the MLS. So that forms the core information that gives me a leg up on the marketplace in terms of making property acquisitions. I can predict where future appreciation will occur a year in advance. It's like having a crystal ball for real estate."
Fascinating, so how is the work you're doing with George and me, on that hypothesis of core importance?
"Yes. I've always been a tinkerer. I love to do the preparation, create business models, run numbers. I know you guys do that every day as well. So, I've been looking at the data for quite a while and in terms of how to consistently use it to beat market cap rates. So, we're exploring that, tinkering, seeing whether it works well at volume. The idea is to create a fund that can produce terrific and consistent results. You and George bring the investor's perspective to this and definitely have a lot of experience in raising and managing funds. So, part of the Boot Camp process for me is learning how to speak the value proposition in language investors will like and avoid wasting all my hard work by losing investor contacts."
What new perspectives are you gaining regarding the fundraising game?
"I've managed a portfolio of properties before and I'm familiar with a lot of what it takes to manage a portfolio, but I've never raised capital before. I've been involved in helping form my clients' transactions, but not in the art and science of actually being the one talking to investors to get a "yes." A major thing I'm getting clear about in the Boot Camp is how investors are likely to think about my value proposition based on how well I can communicate it."
And that has to funnel down into the pitch?
"Exactly. Working on how the investors' "crocodile brain" gets activated and how to get past that so they can hear my pitch has been really interesting. As an attorney, I've spent a lot of time helping clients tell their stories, but have never really had to tell my own and definitely never to investors. Honestly, it feels more than a little uncomfortable to ask for the kind of money from investors that it will take to raise an entire investment fund. The strategy is not to find $25,000 here and $25,000 there. I'll be raising a lot of money and hopefully from just a few large-scale investors. The pitch has to be compelling at that level and we've worked a lot on that in a very detailed way."
Are you learning a process for accomplishing that?
"Yes, a process to continue to simplify the story, not to get lost in the weeds. You've both been helping me to simplify, gain permission and then ask for the money. Sounds simple, but it's not and that's something I've learned during Boot Camp as well. My sense is that the more I practice the more comfortable I'll be when doing the pitch and the ask. So, there's a coherence between who I am being and what I'm pitching and hopefully what they're hearing and responding to in a positive way."
What else are you hoping to gain from the Boot Camp experience?
"I'm hoping to develop a trusted relationship with you and George. I've learned well from my past business experience that you have to "pay to play." That's how the world works and it makes sense because it's a part of gaining trust, putting something on the line. In this case, it's not just the fee I paid to be in the Boot Camp, it's the time invested in mastering the principles and developing relationships. You guys are working within the financial and investment communities all the time. I've done it as an attorney, but now I'm looking to do it as a business owner with a fund. I want to gain your trust in me and in my concept because I know you'll connect me to others within the financial community if I am worthy of it."
Key Takeaways: Sometimes, the new business idea you come up with marks a distinctly new path for you in life. You may need to take on entirely new perspectives because your role as a vision master in your new company is very different from other roles you've played in the past. Unless you've spent your life raising capital or investing in companies, it's unlikely that you'll have a clear grasp on the investor's perspective of your business. Without understanding that perspective and practicing speaking powerfully into it BEFORE you go out to raise capital, you may find that you end up wasting many of your best investor contacts without getting the funds you need. Don't learn-on-the-job. Investor contacts are valuable. Be prepared in advance to understand their perspective and communicate powerfully into that and you're far more likely to get to "yes" and not waste your best contacts.
For more information about Entrepreneur'$ Boot Camp see our page on the Intelliversity website. Space is limited since each session is one-on-one with one company. To inquire about an opening for an upcoming Boot Camp contact Robert Kramarz here.