In my conversation with Richard Wilson, who is an investment advisor for millionaire and billionaire families, he laid out a 5-step process that has allowed him to raise over $3 billion in private capital. The 5-steps are (1) analyze (2) position (3) architect (4) execute (5) iterate.
Step 1 – Analyze
Richard finds that many people skip the first step. They come into the investment space without understanding their competition, without listening closely to the potential investors, or not even knowing if the investors are interested in the asset class they want to raise capital for. Others try to raise capital when they aren’t experienced or “mature” enough.
Before starting, you need to know what is going on, in regards to your marketplace, investors, and competition. That comes through analysis. A deep analysis enables you to emulate the best practices. This is the most simple and common sense step – look around through networking and research to determine what is going on in your specific niche. Do not rush into investing without conducting a thorough analysis because if you do, the subsequent steps are not going to mean anything. This is the foundation that you will launch from; don’t skip it!
Step 2 – Position
Positioning means that you know what you want to stand for and how it sets you apart from the competition. Richard provided a beautiful analogy to explain positioning:
In Rio, Brazil during the most recent Olympics, you would have found over ½ million people on the beach at once. If you Google Image search “Rio Beach Olympics,” it will look like a massive blob. It would be impossible differentiate from person to person, so you wouldn’t know who was the tallest, oldest, youngest or sharpest looking person. If you were a real estate investor attempting to position yourself on the beach in Rio, how would someone know if they could trust you with their money? They wouldn’t. You would be a generic face that is only provided them with your title, so why would they trust you?
Instead of positioning yourself on a Rio sized beach, define a “sand box” that you want to play in that only has 1 or 2 main competitors. Also, try to position yourself at the top end of that niche or in the most profitable, easy-to-move-in, or the one with the most low hanging fruit.
It is really important to not position yourself by trying to be everything to everyone. Figure out the valuable “sand box” that, no matter how long it takes, you will have the conviction to become the dominant force in and reach the top. It must be worth any amount or magnitude of work, even if it takes 5 to 7 years to get there.
Ironically, by having that conviction, combined with having a long-term vision versus a short-term vision, you will actually get to where you want to be faster. When you are all-in, your passion, conviction, and long-term mindset will be projected onto others. You will come off as the person that knows their stuff, is connected, has the off-market deals, and has the ability and focus to actually execute and follow through.
Step 3 – Architect
This is the most critical step and is also the step where the most people get lost. Many people might have a niche or two that they want to go after, but they don’t have conviction. As a result, they never architect. Even those with high conviction, another common mistake is that they stick to the old school money raising methods. (i.e. call through their lead list, reaching out to their network, cold calling, etc.)
At this point, you should have already selected the “sand box” you will be playing in. Now, it is time to build your sand castle that will attract the investors. Richard believes that the best and most efficient sand castle is an investor funnel. He provided another beautiful analogy on how to catch a fish that explains the old school vs. ideal approach to an investor funnel:
Old School Mentality: Going to a lake to catch a fish dinner and blindly stabbing a spear into the water, hoping that you will eventually catch something.
Ideal Approach: Going to the part of the lake where the fish are jumping out of the water and right into your boat. Minimal effort is required.
When Richard began his investor advising business, he only reached out to a single client. From that one client, every other client cold called him, asking for his business. He attributes this success to the value he provided to the initial client, but more importantly, the valuable content he architected and put out in his space. Here are some tips on creating content in tandem with an awesome funnel:
- The top layer of your funnel consists of valuable content
- Examples of valuable content to attract individuals to enter the top of your funnel
- Books, podcast, hosting or speaking at conferences, blog posts, article writing, PR writing, white papers, YouTube videos
- Create evergreen content
- The fundamentals of your space
- content that will still be true 10 years from now
Here is a real world example of a client that Richard obtained from architecting a funnel:
- Top of funnel
- Someone purchased a book that he wrote
- Next layer of funnel
- Because of the book, they figured that Richard was the expert in that field and gave him a call
- Bottom of funnel
- They invested with Richard without even meeting him in person
That is an example of how powerful the funnel can work for you!
Another example of the power of the funnel is how to promotes long-term growth and exposure. For example, when Richard hosts a live-conference, he creates a ton of connections. First, 700 people attend the event in person. Secondly, the individuals that attend the conference will discuss it with family, friends, and business colleagues, so now they know who he is too! Finally, Richard finds that for every 1 person that attends his event, 100 people will visit the event page online. Combined, that is thousands of connection made from only one conference.
Step 4 – Execute
Richard advises that you execute in a systematic way. You need to put systems in place that allow you to delegate as much as possible. You need to have capital raising habits. Every single one of your habits are either helping or hurting. Therefore, it is important to understand the key performance indicators (KPIs) you are measuring for your team and for yourself. Then, take inventory on your habits and determine which ones are having positive or negative effects on the KPIs. Having KPIs allows you to tangibly understand what is critical to pushing the ball forward every single day, every single week, and every single month.
Richard and his team run KPI reports at the beginning of each day, at the end of the day, weekly, and monthly. Also, they create and update a one-page document (i.e. one pager) that explains their capital-raising plan.
Step 5 – Iterate
During his 10 years as an investment advisor, Richards has discovered many valuable opportunities via iterations of his current business (i.e. businesses within businesses). It is important to always look for more valuable ways to use your time. One of the best ways to do this is by leveraging your current business and relationship to create new opportunities. Identify a niche within a niche, and then run that through the same 5-step process. By leveraging your already existing content and riding the momentum of your first business, you may be able to create something that is worth twice as much or more. Be creative here!Dan Kennedy believes that the worst number in business is one – having one business model, one way of making money, one way of attracting investors, etc. When you have a nuanced, multi-dimensional business, you have a competitive advantage in the marketplace. Also, you will have layer upon layer of ways to attracting capital and executing deals. Iterations from current practices is the most effective way to create additional layers and dimensions to your overall business.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.