Entrepreneurs Should Put Themselves in Investors’ Shoes

At ReDev Properties Ltd., we invest in commercial real estate properties. A lot of our work goes into selecting properties that are in a position to increase in value. However, we know that our business starts and ends with our investors – building value for our investors is a hallmark of ReDev Properties, as is attracting new investors to our real estate opportunities.

To attract investors, I think you have to have an understanding of how an investor thinks. As asset managers, we look at properties that aren’t maximizing their income potential and work to increase their value. Investors, much like asset managers, want to know how to get as much return out of an investment as possible. But, there are nuances to an investor’s thought process may not be apparent to entrepreneurs, especially new entrepreneurs.

The following are a few tips that will help you as an entrepreneur build a narrative that will speak to investors in a way that makes sense to them.

Illustrate value

Smart investors want value. Entrepreneurs oftentimes focus too much on marketing or plans for expansion in the distant future. Consequently, they lose the interest of their potential investors. The first question savvy investors want answered is: ‘How are you making me money?’”

Business expectations for the future and marketing-type materials can be a part of your investment proposal. However, the main point of an investment proposal should be an explanation of your core business model and how it creates value.

Manage expectations

Although this is oversimplifying the picture, there often are two types of investors: investors who want to assume a lot of risk with the possibility of a major payoff and investors who  want to assume as little risk as possible, with the idea of gradually acquiring wealth.

As a lifelong proponent of “turtle investing”, I believe in secure investments that give investors a high probability of acquiring wealth gradually. My relationship with  investors makes that fact very clear: I’m upfront with investors in explaining to them that investing with ReDev Properties is not going to make them money overnight.

It’s important to be realistic and honest here in order to manage investment expectations. The market is inherently unpredictable, and fast returns are possible. For example if you had invested in Volkswagen immediately before their buy-out by Porsche in 2008, you could have made a lot of money very quickly.

People without a firm understanding of the market are often tempted by “lightning strike” gains like this.  However, many achieving investors, including Warren Buffet, favor a more conservative, long-term investment approach. At ReDev, we are advocates of that exact same investment model and we invest in properties that have already proven themselves to be winners, and have never lost investors’ money.

If you can offer fast returns, make sure your data illustrates to investors you’re not running a get-rich-quick scheme. Believe me, they are going to scrutinize that data before deciding to give you their money. At the end of the day, you also need to be clear about the time frame in which you expect to see results. Without a realistic time frame that is supported by data, you lose all credibility.

Utilize perception

Making a good impression is half the battle with investors. If you are working with investors online, make your website a professional and informative one. However, the power of perception is best applied to the big picture. Maintaining a great reputation is a must. If you’re seen as an honest businessperson and are running a company that consistently makes money, investors will come to you.

The names “Richard Crenian” and ReDev Properties I believe mean something to investors in my market, and that’s because we’ve worked hard to build our reputations.

If you’re just getting started in a market and in need of seed money, you should make sure to project decisiveness and confidence. Demonstrating competence isn’t enough: investors are trusting you with their money. You must demonstrate mastery within your industry. And remember: while perception is valuable to get your foot in the door, at the end of the day investors are interested in the facts and figures that prove you can make them money.

Lastly, assume investors know the market

My final tip seems self-evident, but it is extremely valuable because it’s one people often oversee. Many entrepreneurs are so confident about their product that they forget investors within a given niche are nearly as informed as they are. Savvy investors are aware of what’s going on in the market today and are very conscious of where the market is heading.

Investors today also have more options than ever before. You are simply one of many competitors and your job is to make your company the best option. Much of that work is done “behind the scenes” in the process of creating a successful company. However, a presentation must also be tailored to how the financial markets are looking. If the market for your product or service is projected to grow, communicate that to your audience. If the market for your product or service is on a downswing, communicate why your company is different – and as always, have the numbers to back it up.