For commercial real estate developers, recruiting potential investors has always required stamina, consummate sales ability, and cast-iron confidence. So says Bill Florent, co-founder and CFO of Selequity, an online private placement platform for commercial real estate. “From creating high-gloss marketing collateral to hosting numerous face-to-face meetings, developers find themselves devoting copious time and money to the task,” he says. In the exclusive commentary below, Florent says that throughout history, this manual, paper-based fundraising process has been a necessary hassle every developer learns to live with — but today, it no longer applies. He dives more into how CRE has entered the digital era, and thanks to the emergence of online fundraising platforms, he says that developers can easily streamline and enhance the manner in which they raise money.
The Online Advantage
Today, CRE developers can market products and solicit funds from millions of accredited investors with just the click of a mouse. Online platforms open the door to an immense audience and allow for real-time, two-way communication between developers and investors.
This, however, only scratches the surface when it comes to the benefits developers reap from embracing online fundraising. Here are four additional key advantages:
1. Slashed Fees. In the old days, a developer relied on brokers or private equity firms to acquire capital backing—and generally, the price for these services was up to 10% of the equity raised. On a great online fundraising platform, however, fees will rarely exceed 3%.
There is a trade-off to these lower fees, though: greater hands-on involvement upfront. Brokers and private equity firms do all the legwork for developers, making the contacts, scheduling the meetings, presenting the opportunities, and following up until the deal is closed. Online, developers can utilize the tech-driven features of fundraising platforms to address these details in a highly efficient fashion. As a result, they can have complete control of the fundraising process.
2. Saved Time. On digital platforms, information exchange is smoother than ever, and because vital due diligence documents, data models, and tax forms can be housed on these sites, developers no longer need to visit the post office several times a week to send and receive hard copies. Investors (or their wealth advisors) can access and download any required material at their convenience.
Further, because all communication can occur online, developers no longer find themselves tied up in long (and expensive) lunch and dinner meetings with potential investors. Rather than devoting their undivided attention to individual investors for hours at a time, developers can spend energy and focus on all investors simultaneously.
3. Increased Retention. Because of enhanced transparency and ongoing communication, online platforms help developers build trust with investors and grow their business over the long run. When developers provide investors with frequent updates and easy-to-access data, investors feel empowered to make smarter decisions, and they feel more enthusiastic about investing in additional projects with that same developer.
4. Efficient Timing. It’s an industry maxim: Investors want to invest when they want to invest. By broadly marketing investment opportunities online, developers up their odds of finding motivated investors who are in the midst of a prime investing window.
Further, online platforms enable developers to create a following with people who aren’t currently looking to invest and ensure their projects are top of mind when the time comes.
For CRE developers, the benefits of embracing online fundraising are immense. Digital platforms offer opportunities to create connections with millions of investors, streamline information exchange, and raise funds with unprecedented ease and efficiency.
It’s still true: Time is money!
Article originally published here on GlobeSt.