One of the things that makes growing a multifamily investment business so hard is that the more investors you bring into your deals, the more time you find yourself spending responding to investor emails and phone calls instead of closing your next deal.
Not to mention the fact that, to investors, any hint of disorganization during the funding process or in communicating investor updates erodes credibility and trust.
Whereas in the past, the ol’ boys club was how deals got done, as more and more investors experience cutting-edge technology and more intuitive workflows, syndicators that don’t use investor management software are going to be left behind.
Questions Bog You Down
With closing deals, part of this problem is that it’s not just the phone call or email that takes your time. While it might only require a half-hour to have the phone call, look at some spreadsheets, dig through some files, and answer their questions, the part that nobody talks about is how much time and energy is drained by having to switch your focus between one part of your business and another
Every time you answer investors’ questions, you’re losing momentum that can take an hour or more to build back up again. Hiring an administrative assistant is a great idea to stay in front of things – and is the first hire made by 90 percent of the most successful syndication teams we work with – but these assistants, we find, are quickly running into the same problems as their bosses and their frustration with the inefficiencies will reach your desk before you sign their first paycheck.
Some Investors Never Make It to the Finish Line
A disorganized approach to raising capital will cost you investor dollars. One of the most critical points in your business as a syndicator occurs between the time your investor reviews the investment opportunity and the moment when they wire funds.
A poorly designed subscription experience leads to a high abandonment rate, with many investors never making it to the finish line. Scoring that first transaction with a client through a trouble-free process will likely lead to additional business with them, as well as referral business.
Balls Will Eventually Get Dropped, Eroding Investor Confidence
If you’re doing small deals with a few investors, it’s not the end of the world to have to email investors back and forth every step of the way through a capital raise.
But as your business and investor base grows, cracks will start to form anywhere your sales process lacks clarity, resulting in investors getting stuck in the process and not finalizing their investment.
On the sponsor side, without a clearly defined process (and ideally automation in place) even managing a small deal can feel like herding cats. These troubles multiply if you’re managing a big deal with 100 and more investors. It becomes nearly impossible.
“Where do I send funds?”
“Can you send me the signed documents?”
“Did you receive my wire yet?”
If you want to scale your business, those aren’t the types of questions you should be answering over and over again.
Even so, many sponsors are still managing that process in a completely ad hoc manner, often sending a dozen or more emails going back and forth to get commitments in the door, get subscription documents signed, provide wiring instructions, and confirm receipt of funds.
It’s no wonder so many balls get dropped during large raises. And that’s not even taking into account all of the manual data entry the sponsor has to do to get the investor information out of the subscription documents and into a spreadsheet.
It’s easy to see why so many syndicators feel like they’re losing control along the way. The problem is that every dropped ball represents a little loss of your most valuable asset as a syndicator: Investor confidence.
We know that there are several thousand sponsors in the market, all competing for capital. As a syndicator, your brand credibility is critical to securing the funding needed to close investment opportunities.
Great Investor Experiences Facilitate Future Opportunities
Do you feel like you are projecting the level of professionalism that will attract new investors and serve your existing investor base?
Many sponsors who achieve traction in their business quickly find that their level of presentation either has not kept up with investor growth or it is keeping them from attracting new investors in the way they would like.
As technology continues to evolve and utilization increases, investors you could be courting – or even the ones you are working with today – will make assumptions about your company based on the technology in place. The last thing you want is for one of your current investors to question whether you are the right long-term growth partner for their investments.
A great investor subscription experience leads to higher conversion rates, with investors quickly entering their commitment, signing documents, and wiring funds without your involvement.
And, for the sponsor, if you’re able to automate the process, it can be as simple as sending a single link to investors and then checking your bank account as funds begin rolling in.
What a lot of successful syndicators don’t realize is that the decision to invest with your company is about far more than just the numbers.
IRR, Equity Multiples, Risk Profiles, and Preferred Returns definitely matter to your investors, but if your presentation is lacking, you’re leaving money on the table.
And that’s even more true as your company grows and the number of projects increases. Investors who are already in deals with your company aren’t going to re-invest if your processes and communication come off as disorganized or unprofessional.
Now Is the Time to Upgrade Your Investor Experience
During the past year, the multifamily space has proved once again to be resilient during turbulent economic times. There is one thing that always remains true, people need housing and specifically rental housing, which is why multifamily is so attractive to new investors and why current investors continue to re-invest here.
Transaction volumes are on track to exceed CBRE’s initial 2021 forecast. If you’re planning a capital raise, this is a good time to check out Investor Deal Room. It’s an easy to use platform that helps you to manage all phases of deal-making, freeing up time and increasing investor trust. Why not watch our most recent webinar or register for a demo today?