How I quit worrying and learned to love raising capital

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All the capital for my second through 12th deals came from one of my best friends from highschool.

Once he forced me to start raising money from other people, I remember complaining to him that I hated raising capital.

You should have seen the stupefied look on his face, right before he said: “You realize you’re in the most capital-intensive business in the world, right?”

I admit that I had not realized that until that conversation. Not my finest hour.

I bumbled along, asking close friends and family for money, but doing little to expand my network. I adopted this totally self-defeating mindset, where I felt like our results were so good that people should be falling all over themselves to invest with us, and that, if they didn’t it was because they were stupid. And I refused to do the type of things that other capital-raisers do, like quoting IRRs and ROIs, because I felt like doing so was totally dishonest.

If you’ve ever run any kind of business, you can spot the problem right away: I needed customers (that’s what capital providers are: very special, highly-valued customers), but I wasn’t doing anything to find them and tell them our story. This is conceptually stupid, and the results bore that out: Adaptive Realty Fund 3 boasted a whopping ~$2.3MM in investor equity.

Anyway, over the past few years, I have radically re-shaped my approach to raising capital.

First, I really examined my own weird, defeatist nonsense. No magic fairy was going to descend from the heavens to Historic Filipinotown and shower me with capital. I needed to take ownership of this process and get good at it.

Second, I realized that I wasn’t trying to get people to do something bad. We do really good deals. The numbers are great. Smart people who really pay attention invest with us once, then do it over and over again, because what we do makes sense. So telling prospective capital partners about what we do isn’t like being a sketchy used car salesman – it’s doing them a favor.

Third, I figured out a way to tell our story that doesn’t make me feel gross. We’re not sellers, I’m not going to quote IRRs and ROIs, and I’m not ashamed of it. That turns off the majority of potential investors and that’s fine. Instead, I focus on educating people about how we think about the world. There are enough weirdos with money who like to hold real estate forever to allow us to build a business. I just focus on those people and forget about everyone else.

Third, I realized that capital-raising isn’t really about sales, anyway. You’re not going to convince someone who doesn’t want to invest with you to change her mind. Instead, it’s about telling our story, over and over and over again, in blog posts, meetings, at conferences, over dinner or drinks, whatever, to as many relevant people as I could. Not in an annoying way (no one likes being cornered and bored to tears). But in an open, helpful way that meets people where they are and educates them about an opportunity that might be great for them.

Is capital-raising ever going to be my favorite part of the business? Nope… there’s just nothing that matches the thrill of finding the right building, seeing in my mind what it can become (physically, and then, as a result, economically), and then working with my partner and our team to actualize that vision.

But capital-raising is now something I enjoy. And that means I’m happy to do it, which has translated into major growth for our business. Which is what I should have known would happen, all along!

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