Raising capital is one of the most in-demand skills in our increasingly complex and integrated world. From the Masters of the Universe to the local big-shot, all successful people have one thing in common – the ability to raise massive amounts of capital in a brief period.
Obviously, choosing the right US market to invest in goes without saying.
Capital is the heartbeat of every company. The ability to raise capital is critical to successful growth. Every company, big or small, is interested in diversifying its capital base. Whereas big businesses have ready access to capital through public and private markets, smaller-to-medium sized firms prefer working with nimble capital providers who can deliver bespoke strategies to meet their needs.
A recent Grant Thornton research study found that two-thirds of the middle-market private equity firms are actively looking to raise capital. The majority expect this process to be difficult. The lack of readily available capital at reasonable terms is the biggest impediment to companies strategically taking advantage of opportunities.
As Gary Keller refers in his book “The One Thing” – one must channel their energies in one direction only to attain superior results. Focusing in this manner allows capital raisers to become high-performing specialists. This coupled with developing deep relationships with experienced operators allows capital raisers to prudently allocate investor capital to the right opportunities.
For this post, we wanted to outline key points that have helped us in increasing our capital raising prowess.
- Partner with Experts
You can leverage an expert’s track record to increase your experience and credibility. This is a two-way street. You must provide value and develop deep relationships, at the same time.
Doing the above accelerates the learning curve. Complex situations are easily handled as there is an expert available to guide you. As a result, your brand benefits by becoming known as reliable and credible.
- Authenticity – The Secret Sauce
How many people can truly say that they’re being themselves? Set yourself apart from the crowd by being authentic, providing top-notch advice and freely sharing knowledge. Don’t be in a hurry to sell and don’t be needy. Find your passion in the right balance for long-term success.
We, at Boardwalk, firmly believe that the Universe returns a multiple of what we contribute. Differentiate your brand by the quality of information you disseminate.
- Focusing On Strengths
If you’re great at forming relationships, focus on that. If you’d rather be pouring over technical data than meeting people, focus on that. By only focusing on areas where you have an unfair advantage, you can turbo charge your progress while providing the best client experience. Outsource everything else to trusted partners.
This involves being self-aware and undertaking a deep-dive analysis into your strengths and weaknesses. The key is to be critical of your actions and not of yourself. You will be surprised to hear about aspects of your personality when you ask questions to your trusted circle of advisors.
Within our company, we’ve started focusing on our biggest clients. We realized it was better to provide more value to our biggest clients than to solely focus on increasing our client base. This has resulted in two major results (one of which was a pleasant surprise):
- Our biggest clients are giving us a greater share of their overall business;
- Our referrals have shot through the roof as clients are elated about the depth and quality of advice that we provide.
This is not a one-off exercise but a work-in-progress as we are continuously tweaking our strategy. Change must come from within. We can go further by mastering our self and focusing on our strengths.
- Raise 25% More Than You Need
Another critical lesson. The capital raising process has tight deadlines. The best investors – the ones who love us and partner with us on most deals – can find unexpected obligations hindering their ability to invest.
Such occurrences should not be frustrating because it is the natural course of events. These types of situations must be expected. What truly sets the big boys apart is their ability to prepare for these eventualities.
Developing a deep investor database with a focus on long-term relationships based on value, respect and understanding goes a long way. In our personal capacity, we always seek to expand our capital sources. We strictly commit to raising 25% more than we need to help ease the nerves in tense situations.
A trick of the trade we’ve learnt is to always take a big investor commitment and halve it. Invest the half and put the other half on backup. Then diligently focus on raising the rest of the capital from other sources. This creates peace of mind as you know that reserves are available. It also creates demand as no one likes to be on backup on amazing deals.
- Craft the Pitch and Investment Strategy
The pitch should be sharp, precise and backed by an intellectually rigorous framework. It is easy to get overwhelmed by presentations, conversations, legal documents and meetings. Always keep things simple and easy to understand.
Active investor receive multiple investment pitches every week. The majority don’t make it past the initial review. You gain traction and get noticed by keeping things simple and easy to understand.
Simple and easy to understand does not mean senseless. In fact, this is more work than pitching a more complex strategy as you need to use less words and resources. This requires the capital raiser to truly understand the investor’s needs, link the investor’s needs to the proposed investment (if appropriate) and define how the proposed investment would fit in the context of the overall portfolio.
Don’t overlook the important stuff, but don’t over complicate things.
- Thought Leadership Platform
In the age of social media, having a continuous presence in the marketplace and mindshare of your target audience is critical. This is a modern approach to engaging with your investors than traditional methods.
As such, a thought leadership platform is critical in building a brand. The strategy is to create world-class content and give it away for free. Don’t hoard knowledge or make the exchange of knowledge a transactional affair.
We follow a similar strategy through our blogs, podcasts, videos, newsletters and special reports. We know that if we provide value, we will attract the right kind of capital at the right time.
Today, our new leads come from our thought leadership platform. Investors often tell us that they read and re-read our articles multiple times and referred them to their friends before entrusting us with their hard-earned capital.
In truth, capital raising is a non-stop, no holds barred sport. You need to always give value, provide top-notch support, always have time for investor and answer any questions that they might have. There is a ton of private capital waiting to be deployed and it is our duty to match it with the right opportunities.
This is not a get-rich-quick scheme. There are no overnight successes. This is about demonstrating that a firm has critical expertise in all stages of the value chain.
The key to attaining this level is through consistency and persistency. You must commit to ongoing efforts – whether fundraising or not – and to creative communications that consider the need of the investors.