7 Tips for Landing Venture Capital For Your Real Estate Company
More and more real estate investors are seeking out venture capital (VC) and seed money to spur their visions. It’s a shark tank out there. So how can investors successfully land the money they are looking for?
There are many VC firms, angel investors, and other investment firms eager to participate in the currently appetizing U.S. property market. Investing through new start-ups and other investors that will do the hands on work can be a great way to go. However, it’s no secret that there is also a lot of competition for this type of capital. So what smart practices can help increase the odds of success?
1. Create a Good Introduction
In order to get emails read, presentations seen, or get heard, real estate entrepreneurs need to craft an ‘elevator pitch’ or at least a good one liner that will stand out, grab attention and open doors. What’s really amazing about what you are going to do? How is it different to what everyone else is doing? What are the benefits for potential investors?
2. Get Pumped
More than anything else, passion is what can really sell the opportunity to investors. Potential VCs and backers need to feel that you are so passionate, that it not only gets them excited too, but conveys that you will stick with it and make it work, even when things are tough. If you aren’t that passionate about your real estate business plan, find something that really gets you excited. You need to light a fire under yourself to get results.
3. Create a Killer Executive Summary
Once you’ve got an opening, potential investors are going to want to see an executive summary. This applies to commercial mortgage loans, larger hard money loans and blanket mortgage financing too. Investors and lenders don’t want to be bogged down with piles of boring paper unless they are already sold on it. This is the job of your executive summary. It is a presentation that provides a powerful snapshot and highlights all of what’s great. It should show that you’ve done enough work to determine this is really a viable and worthwhile enterprise. The executive summary needs to tell readers what it is you plan to do, why it’s a great idea, how profitable it could be, and why you are the team to bet on.
4. The Team
Why are you the one to take the lead and make this real estate business a success? Why shouldn’t an investor just buy your idea and have someone else execute it? What do you bring to the table in understanding, expertise, and experience?
Note that the data shows professional VCs prefer investing in startups with at least two or three co-founders. This is the formula that has proven to produce the most success, time and again. Having multiple founders also gives you a strong support network that will keep you going on the tough days. It can also reduce the need for employing others off the bat.
If you don’t have the track record or key skills, who can you bring on to fill those gaps and make your real estate venture more attractive to those with the capital?
5. Know Your Numbers
Of course, passion and big dreams will only get you so far. You’ve got to know the numbers, and they’ve got to work. This needs to include the total size of the market, the potential market share for your real estate venture, the costs involved, and cash flow projections. While it is tempting to err on the side of big and bold here, serious and qualified investors will want to see realistic figures. Paint both the top end potential, as well as the worst case scenario. Work with adjustable spreadsheets so that tweaks can be made on the fly and everyone can see how different factors could impact the outcomes.
A review of the data from the reality TV series Shark Tank via an infographic at G-Code Magazine shows that founders of new real estate businesses should definitely try to negotiate. However, they also need to respect the position they are in, and be prepared to make decisions and seize on offers quickly. Know how much you need, and how much you are willing to give up or not in advance.
7. Look for More than Money
Money might be the main objective for real estate entrepreneurs going into business for themselves. However, investment partners can add a lot more than value to the mix. Their contacts, backing, and expertise, as well as being able to leverage their names for future fundraising can go a long way. In fact, sometimes the larger an equity position you are willing to give them, the harder they will work to make it a success too.