Ryan has been on the show in the past (previous episode linked below) he brought great value to the show by discussing his investor relations. Today we’ll stay on the subject, but now discussing how he’s been growing his investor base, while still keeping current investors updated, happy, and willing to re-invest. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Depending on your list, 25% of people will open the email” – Ryan Gibson
Ryan Gibson Real Estate Background:
- Chief Investment Officer and co-founder of Spartan Investment Group
- Has raised $14M for SIG’s self storage investments
- Listen to his previous episode:
- Based in Seattle, WA
- Say hi to him at https://spartan-investors.com/
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Theo Hicks: Hello, Best Ever listeners, and welcome to the best real estate investing advice ever show. I’m your host today, Theo Hicks, and today we’ll be speaking with Ryan Gibson. Ryan, how are you doing today?
Ryan Gibson: Good, Theo. How have you been?
Theo Hicks: I’ve been great, I’m looking forward to our conversation today. This is his second time on the podcast. Make sure you listen to his first episode, episode 1226, “Why investor relations are paramount, and how to keep investors happy.” We’ll have a link to that in the show notes as well.
Today we’re going to build off of Ryan’s first episode. In the first episode he talked about how your first batch of investors when you’re raising capital are most likely going to be people you already have personal relationships with, so people you know… And we’ve talked about that plenty of times in the podcast before. But what happens when you’ve exhausted all of your personal relationships and you need to start raising money from strangers, other people you don’t know yet? How do you go about doing that?
We’re gonna talk about that, as well as a few other things about investor relations and raising capital… But before that, Ryan’s background, again, is he’s a chief investment officer and co-founder of Spartan Investor Group. He has raised 14 million dollars for self-storage investments. Again, his previous episode is episode 1226. He is based in Seattle, Washington, and you can say hi to him at Spartan-Investors.com.
Ryan, before we get into the meat of the episode, can you give us a little bit more about your background and what you’ve been focused on?
Ryan Gibson: Yeah, sure. Thanks, Theo. We are focused on self-storage acquisitions, development and value-add. I live in Seattle, Washington, but our company is actually headquartered – we have up to 11 employees now – in Golden Colorado, which is just outside of Denver. That’s where our head office is. We focus on finding self-storage opportunities that come with expansion or operational upside improvement, where we can cash-flow day one and expand onto the facility and build equity while we expand the units. Or we look for ground-up development of self-storage opportunities, so we’ll find a high demand area piece of land, and we’ll take the process through its development.
Our company basically backs all of the aspects of the business, so we do everything from acquisitions, capital raising, property management, asset management, construction management of the process – we oversee that – and then all the way to even handling some of the dispositions side of it as well. So we pretty much do the whole value chain in self-storage.
Theo Hicks: Perfect. Okay, so the two things that I wanna focus on is 1) as I mentioned in the beginning, what happens when these personal relationships end and you’ll continue to raise capital. And then secondly, we’re gonna talk about how your investor relations process has changed now that obviously you’re bringing in people that you don’t necessarily have a deep relationship with, or I guess a long-term relationship with.
First – you can take this any direction you want – what happens after you’ve exhausted all of your personal relationships. What’s the next step in order to find more investors?
Ryan Gibson: Sure. And I think it’s important to say that after you’ve sort of exhausted your network of people that you’ve known for a long time it’s kind of easy, because raising capital under 506(b) – it’s easy to say “Well, I’ve known this person since I was in kindergarten” as far as a preexisting substantive relationship… But when you start meeting new people, you have to establish that relationship, especially if you’re raising capital under 506(b). You’ve got to quantify and qualify that person, and really annotate where they came from.
But I will say, before we jump into the exhausting personal relationships and going in and finding new people, is take care of the people that you have, and a lot of times the people that you have are people that will reinvest. I’ve seen too often where people spend all this time marketing for new investors, but not any time taking care of the people they already have in place… So I think that’s why people have a tendency to want to reinvest – it’s because you keep them updated. You keep them updated with quarterly updates, you make it very clear to them what is going on with the project at any given time… And I think that really takes effort to kind of keep those existing relationships in place.
Transitioning out, I would say that get out into your community… One of the things that I did is I joined our city club, which is a good place where people go work out, and there’s a lot of community activities for higher net worth individuals… And that is a great way to get out there and see what the more high net worth community is doing.
I joined a community called the Washington Athletic Club, and that is really kind of a hub in the city to many other different aspects, of different clubs. For example, at the city club I learned about a new investor forum called Keiretsu Capital, that meets at the club. That really helped us understand the VC and angel investor community that’s in the Seattle, WA area. Lots of leads can come from stuff like that.
The other thing that the club kind of helped us provide is it gives us meeting space. When we throw investor happy hours and things like that, the club will provide us the opportunity to have the venue at a nice setting, that’s a little bit more prestigious than just going to your local community library, or your community center, things like that. So that really kind of helped attract awareness to our business in the community.
The city club is really one of those things that I think is a little bit overlooked. Some clubs have a little bit longer waitlist to get in, some require a little bit more referrals, and things like that… But I really think that that’s one way to branch out to find new investors.
Theo Hicks: You mentioned that when you’re going out there and forming new relationships, and you’re still raising capital under 506(b), you need to put forth that effort so that you can quantify that you have a preexisting relationship with this individual. Can you walk us through what that looks like? Is it a certain amount of time, is it a certain number of conversations? Do you need to know a certain amount of information about them? What specifically are you quantifying for these new investors?
Ryan Gibson: There’s an urban legend out there that it’s two months… And my SEC attorney actually put some collar to that. The two months – the time to pass to make a sophisticated investor an existing relationship, I should say – actually comes from a company that did a no-action letter… And it’s two months, but I think it’s also a very, very extensive application process. Think of the application process that somebody goes through to get a home loan – background checks, credit checks, lengthy application status… Some people say it’s two months, but you have to really take that in the context of what other information did you get from that person? Is it just a handshake, and then you just disappear for two months, and then “Okay, two months is here. Qualified”? No, it doesn’t really quite work that way.
It’s a little bit of an art, but it’s definitely a process. So the first thing that we do is we have an investor consultation with that person. We get them on the phone, and we ask them questions about “What are your investment preferences? Where have you invested previously? What did you enjoy most about your investment experiences from another operator/syndicator or maybe in the stock market?” We ask the person if they have any questions… And it’s usually kind of the types of questions that they’re asking really provide insight as to their level of sophistication.
So some of it is a judgment call, but some of it is “Have you invested in private placements before? Have you had experience with these types of syndications? Tell us more about your process.” So we kind of have specific questions for that.
The next thing that substantiates the relationship is when that call concludes, we send marketing materials on our business, so they can understand more about our process. Sometimes I tell the investor “I’ve really enjoyed talking to you. We think that you need to learn a little bit more about the investment community and syndications, things like that”, and I invite them to go to our YouTube channel, The Spartan Investment Group YouTube channel, and watch our webinars and become more sophisticated… And I sort of put that investor on ice, so to speak, and say “Hey, come back when you’re trained and more experienced with this.” And it’s important that you turn some away in that regard. It doesn’t happen very often, but it does happen from time to time.
So once the call concludes, we send out our marketing materials, but we also send out a purchaser qualification form, which is basically an 11-question form that the investor fills out, on all the experience that they have investing, net worth, liquidity, income, things like that. With those two things checked off, that’s a great way to start the sophistication and onboarding process for an investor.
Theo Hicks: So you said it starts off with that investor consultation, and then it sounds like then these people kind of go into two buckets. One, they are sophisticated enough, and then two, they aren’t sophisticated enough, and then based on that you’ve got a different process that you put each of them through. What kind of system do you have in place that helps you track when to follow up with these people, what you’re gonna follow up with? …just making sure people aren’t falling through the cracks.
Ryan Gibson: We use Podio, and we have a couple of back-end – Zapier, and Globiflow, and things like that, that help us build out our CRM system for that. When the consultation is happening, I have my Podio up and open, and there is lots and lots of information that we fill out on the investor. Where they came from, what their background experience is, notes on the call, what we discussed… And the thing that I always like to make sure we report is the needs, wants and objectives of the investor. That way, if an investment comes up, and maybe they didn’t get the email, or it went to Spam, or something like that, we’re able to circle back to that investor and let them know that “Hey, this is a cashflow deal. I know you really like cashflow deals.” Or “This is development. I know you really like development. I wanted to make sure you had a chance to look at this.”
But the follow-up and those notes – you can assign a task to follow up, and you can make it a time-based task, where we circle back to that investor at a specific date and check in to see how they’re doing. So we reach back out that way.
Theo Hicks: Okay. In my notes it says that you have 1,200 investors with over 15% of the list active. Before I go into how to keep people engaged, what percentage of those investors would you say are repeat? You’ve mentioned something that I really like, which is “Before we go into how to find new investors, make sure you’re taking care of your existing investors first, because they will reinvest.” I’m just curious if you have a ballpark number of how many of those 1,200 have invested one time, and how many have invested multiple times.
Ryan Gibson: Yeah, I would say — I don’t have the exact statistic, but there’s very few that have never reinvested. So I’d probably say it’s in the mid to high 90% have reinvested in our projects.
Theo Hicks: Okay. And then 15% of your list is active. Does that mean that you’re getting a 15% open rate on your emails, or 15% click rate on your emails? Or 15% of those 1,200 investors are actively investing in your deals?
Ryan Gibson: This is really interesting… So when you have a 506(b) offering, you cannot send the offering to all the investors on your list. Because there may be some people on our list that are not engaged; they haven’t gone through our process. It’s really important that you have a system that says “This guy just filled out an investor intake, but we haven’t talked to him, he hasn’t filled out a purchaser qualification form”, and we don’t know anything other than what he’s submitted – first name, last name, email.
So we have a process for reaching out to that person and taking him through our process. However, out of the 1,200 only about 700 of those at this point in time are qualified to actually receive an investment. So you take 1,200, narrow it down to 700, and then out of the 700 that we have, our open rate is about 56% to 60% for projects. So if you take 1,200 investors, really only about 350 of them are gonna get the actual email when you send a deal out.
So it’s important to keep that in mind when you’re adding people to your list – about 25% are gonna see the email, depending on how you qualified them and brought them through.
I know other investors/syndicators do 506(c), so they can blast their deal far and wide to the world, but I think the reason why our list engagement is so strong is because we take the time to contact each investor, understand what they want, and follow up with them and build a relationship with them that’s stronger than just always having a blast far and wide to the world and try to raise money from random people through the 506(c).
Our mission statement is more aligned with getting to know everybody and establishing personal relationships with everybody we do business with. I think that engagement, and understanding the data behind that engagement really helps attract people and keep people engaged in the process.
Theo Hicks: From the last episode to now, how has your investor relations process changed? Specifically — I’m not sure [unintelligible [00:14:50].20] but how has it changed now that you’re focusing on bringing in new investors, as opposed to doing investor relations with people that you or people on your team have known for years?
Ryan Gibson: The legality of the process hasn’t changed. However, the strategy and tactics to getting that person to being a qualified investor for Spartan has changed quite a bit… And it’s more just the attention to detail, and specifically identifying how that person became attracted to your business… Because when you’re raising capital, you’ve gotta make sure that the person that comes into their business – you have a record of how that person was attracted to the business.
So how has our investor process changed? It’s just gotten better. We have a monthly webinar on how to better improve your passive investing career – a tax, a legal strategist on our webinar every month… We do that as a way to engage our network, engage our list. Maybe the investor heard about our company, Spartan Investment Group, through a webinar, so we annotate it that way. The detail that we have to go and put into our CRM is intense. We have to make sure that we are tracking everybody that comes in.
Now that we’re adding anywhere between 30 and 100 investors per month, it’s important that every single time somebody comes in, we’re tracking that information more closely. I think that’s probably been the biggest change… Versus just “Oh, I’ve known this guy forever. He’s my friend.” It’s a little bit more casual when it’s like that, but when it’s “Hey, who is this guy?” and it’s “I think I’ve talked to that guy three months ago. Yeah, I’m not really sure what he was all about, or his background…” That’s where now there’s a call, there’s specific notes, there’s specific buttons that we’re pressing, there’s annotations that we’re making in the system, and there’s a purchaser qualification that the investor filled out. So now we have a ton of information in the background on deciding when this person ultimately becomes qualified to receive an offering under 506(b).
Theo Hicks: Do you have a breakdown — because you said you’re adding 30 to 100 investors per month. You’ve mentioned the webinar, you’ve mentioned the Washington Athletic Club, and you host happy hours there, and how each time someone comes in, you have to say “This is how I met them…” Do you have a breakdown of where those 30 to 100 investors are coming from?
Ryan Gibson: Yes, I would probably say that the number one source is between webinars and podcasts. Online, digital, things like what we’re doing today. That’s probably been a big referral. The next in line is probably referrals from people who’ve had good experiences, that referred us to others.
The referral is the strongest thing out there. People get referred to our business. The podcast and the conferences – that’s a great list builder; however, the people that actually pull the trigger and decide to do investments are referrals, because they know it’s the trust bond between the person who is in the deal or somebody that they know referring you to the business. Those are probably the most effective list generators.
The other one is through SEO, online advertising, or just social media. I shouldn’t say online advertising. We don’t really do any paid advertising. Just through online and meetup. That’s probably the three major ways that the 30 to 100 come in per month.
Theo Hicks: So your number one source for people that come to your list is webinar and podcasts. Do you have a specific call to action that you have at the end of your webinars and podcasts, or is it something that happens more naturally, because you’re providing them with information on how to passive invest, and you mention that “You can passively invest with me”, and so they naturally go to your landing page? Is it more of a proactive call to action?
Ryan Gibson: We try to keep it strictly value-add first. If you say “Oh, invest with us” — apparently, my SEC attorney doesn’t really like that too much… So it’s gotta be generic, and not specific. What we do is when somebody comes in and watches a webinar, we will follow up with that person and say — if they’re somebody that we’ve never had any contact with, we’ll reach back out to them and say “Hey, thanks for attending the webinar. Here’s a link to the recording, and here’s the slide deck. We have some deals coming up this quarter, but you’re not qualified to receive them yet. In order to do that, jump on a call with our investor relations department.” Then we take them through the process and get them qualified that way.
That way it gets us time to get some one-on-one with the investor, and then get to know them a little bit more. Then they go on our list as a more engaged investor, versus just a random person on our list that may or may not even know who we are, or forgot how they got on our list in the first place… So that’s probably the number one way to do it.
Theo Hicks: Alright, Ryan… Anything else that we haven’t talked about as it relates to investor relations, finding new investors that you wanna mention before we close it out?
Ryan Gibson: No, I would say just make sure you’re getting out in the community. I always just say that one thing always leads to the next… So like I said, you join one club in your community – it can lead to so many different other things, like Rotary, going into a different investor/angel capital or VC investor capital forum, it makes great connections… So just get out there, and I think that’s really the best way to do it.
Theo Hicks: Alright, Ryan, this has been a very informative episode. I’ve got a lot of notes… Just to quickly summarize what we’ve talked about – again, the main focus was what happens after you’ve exhausted all of your personal relationships and you’re going to go out and find investors that you don’t necessarily know.
First and foremost, I got this bolded — one of the main things I have bolded is take care of the people that you already have, because they will reinvest… And you did mention later on in the episode that referrals have the highest conversion rate of all of your lead sources. So if you’re out there and you’re beginning to branch out to new investors, make sure you’re not doing that — make sure you’re still focusing on your current investors as well.
One of the tips you gave early on was to get out in your community. More specifically, you gave an example of how you joined an Athletic Club, where people with a high net worth work out, and there’s other activities… That’s kind of like a nexus that allowed you to join other clubs, as well… Plus, it gives you a more sophisticated space to host different events.
You went into specifics on what you do to qualify a new relationship and to convert it into a preexisting relationship, so that you can raise capital from them under 506(b). The first thing you talked about is your investor call consultation, and you went into specifics on that. You talked about how at the end of the calls you’ll send them marketing materials on your business, and went into specifics on that, and then you also said that you will send them an 11-question form that allows you to get some more information on them as well.
We talked about your follow-up system, how you use Podio… We talked about your list breakdown, and how if you’re doing 506(b) you most likely can’t send your deal to every single person on your list. So make sure if you do have every single investor contact on your list, you’ve got some sort of breakdown so that you’re not sending your deals to the wrong people.
You mentioned that your open rate is 60% of the people who are qualified on your list, and your explanation of how you’ve been able to have such a high open rate is that you really know these people a lot, you know what they want, and you follow up constantly; it’s a lot of one-on-one time, it sounds like, which creates a much stronger relationship.
And then lastly, we talked about how your investor process has evolved over the years, now that you’re bringing on these new people, and also mainly it’s just more attention to detail, identifying how they became attracted to the business, making sure you have a record of all that.
Specific examples you gave were hosting a monthly webinar on how to improve your passive investing career; that and the podcast are your number one source for new investors to your list. The number one source for people who actually pull the trigger are referrals; next, SEO and social media, and below that is meetup groups.
Then when you are doing any of these lead generation strategies, you specifically focus on strictly adding value and being more generic when asking people to try to get people to invest in your deals, as opposed to saying “Hey, do you wanna invest in this deal?”
And then your overall advice was to make sure you’re getting out into the community, put yourself in situations where you can meet high net worth individuals, and those situations will lead to more opportunities, and it will basically create a [unintelligible [00:22:55].14] effect.
Ryan, again, very powerful interview. I’m looking forward to actually writing a blog post on this, or multiple blog posts on this for our website.
Ryan Gibson: Oh, great.
Theo Hicks: I’ll make sure I include a link to your website and those blog posts as well. Best Ever listeners, thank you for stopping by. Have a best ever day, and we’ll talk to you tomorrow.