In 2018 I helped a client raise over USD260m from one of the biggest real estate investors in the world, a process which took over a year to pull off. That investor became the anchor investor. And given it was a big-name investor, I knew it would now be relatively easier for me to raise the rest of the capital. That’s generally the case.
So began the countless calls and meetings. And trips. I flew to Dubai, Abu Dhabi, Kuwait, Muscat, Hong Kong, Beijing, Shanghai and other key cities to discuss the proposition. One of the investors I had shortlisted – a global investment firm with over USD 100 billion of real estate assets globally – was looking to deploy capital into real estate strategies similar to what my client was doing. Let’s call them XYZ Real Estate Investors (XYZ REI).
So I reached out to XYZ REI and arranged to meet them. And after walking my contacts through the investment opportunity and answering their questions, they decided they wanted to learn more. They signed an NDA and began accessing the data room. There ensued weeks of due diligence, including regular conference calls, in-person meetings and site visits. A great deal of time and effort was spent by both sites – XYZ REI and my client – to make a deal happen.
Unfortunately, just when I thought the deal was in the bag, XYZ REI called me and said, ‘You know, we took a long and hard look at the opportunity but decided to pass.’
There was a time I would have left it at that. I’d have thanked them for their time and consideration and told them that hopefully we’d try to work together sometime in the future. Instead, I called for a meeting.
The different shapes and sizes of ‘no’
I’ve learned from experience that there are various versions of ‘no’.
While, of course, a fundraiser must always respect an investor’s decision, they should equally be curious to understand the root of an investor’s decision to pass on an opportunity. And while there was a time I would accept a response such as, ‘We’re already too exposed’, or ‘It’s not attractive enough’, or ‘We’re not investing in the UK’, or ‘It’s too small’ and so on, I now want to know everything there is behind the decision. If they’re too ‘exposed’ then I’d like to know what asset class they’re exposed to already and where they are lacking or currently underexposed. If the deal is ‘not attractive enough’ then I’d like to know what makes it unattractive and what would, conversely, make it attractive for them. If they’re not investing in a particular geography – say, the UK – then I’d like to know why and also where they’re currently underexposed and wish to gain exposure. If ‘it’s too small’ then I’d like to know what ticket sizes they’d prefer to write and whether they could start with slightly smaller amounts and grow larger with time. Or, if a deal is very large, would they be OK to co-invest alongside another investor. In short, I want to learn as much as I can about them.
And there is no better way to do this than to meet with the investor in person or, failing that, via a video call. After XYZ REI came back with a no, I arranged to meet my contact again, in person.
From our meeting I gained two key insights: 1) they had not completely shut the door on my client but would require a compelling reason to reconsider; 2) I would need to wait around three to four months to revisit the opportunity given that some of the high-level changes going on within their firm would distract them from anything I presented.
Second attempt
Near the end of 2018, I re-approached my contact. Fortunately, within the last couple of months the proposition had further improved. Several very positive headlines had emerged in real estate news about my client. Additional, blue-chip investors committed to the investment. Also, some of the initial concerns and risks XYZ REI cited earlier could now be addressed with the benefit of further supporting evidence and material.
Going into December, XYZ REI reopened the case and reviewed the opportunity.
Unfortunately, however, they passed. But that’s fine. Sometimes, there’s not a whole lot one can do to persuade an investor. But, as I’ve mentioned in previous sections, it is a numbers game. It may not work nine times out of ten but all you need is one win and that makes it all worthwhile.
Understanding why someone says ‘no’
The main takeaway here is to never shrug off a ‘no’ from an investor. Try and understand why they’ve come to that decision.
You may only receive a brief response such as, ‘Thanks for sharing the opportunity but we’re not interested.’ Yet, without being overly pushy, you ought to try and obtain feedback. The more the better. Usually, there’s a much longer story behind why they’ve passed on your proposal. Convince them, with professionalism, charm and patience, to share their rationale with you. And take a keen interest in what they tell you. Your genuine curiosity will paint you as a genuinely thoughtful fundraiser.
Through this process you’ll learn a little more about the investor. This information is power. The more of it you have the more powerful you become. For there will come a time when another opportunity may arise, and when it does you’ll know that it will fit perfectly with that investor.