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How Social Media has Changed the Way We Raise Equity

During COVID-19, online is the only effective means to communicate that you actually know what you are talking about.

Even before the days of social media—and the internet itself—information marketing played an important role, both in real estate and many other industries. Essentially, if a firm is hoping to ask for people to do something, such as invest in a project or enterprise, one of their most pressing and important tasks will be to establish a sense of credibility. Without credibility, it will not matter what the promised ROI might be; your enterprise will be unable to get the funding it needs and, inevitably, will be stuck watching on the sidelines.

The need for credibility is universal and exists even on the consumer level. A credit score, for example, is an attempt to quantify whether a given consumer is likely to pay back a loan (mortgage, credit card, etc.) in full and on time. Importantly, just one metric, the credit score, is a single numerical indicator that consolidates a vast array of data and serves as the entry point for a lender to want to learn more about a borrower. Individuals with a good credit score, have proven that they are likely credible will have a much easier time accessing funds. Those who have not—or even worse, have proven that they are unreliable—will have a much more difficult time accessing affordable capital.

Track record and experience in real estate development are both vital in demonstrating an ability to deliver on your next project and any real estate enterprise trying to attract investors must effectively communicate these aspects of their background. As with the way lenders screen borrowers using credit scores, investors want to screen sponsors with similarly simplified indicators of ability to perform.

In the past, to raise capital for a project, a real estate entrepreneur would have to navigate multiple meetings with individual prospects before knowing for sure if they were going to become an active investor. This process has always been tiresome, time consuming, and inconvenient for both sponsor and investor.

Each meeting, be it in a board room setting or over lunch or golf, would be made up of a series of key points of communication the sponsor wanted to transmit to the investor and each meeting could last for hours, including scheduling and travel time.

These days, and especially during the COVID-19 crisis when in-person meetings are effectively banned, reaching prospects and investors online is the only effective means to communicate that you actually know what you are talking about and the benefit of that is that to be effective, you must use short, abbreviated highlights—a series of “credit scores” if you will, to attract attention and communicate effectively.

Relying on intensive, in-person method—providing as much information as possible in order to establish yourself as credible during meetings like these—is a strategy that, while still beneficial in many regards, is somewhat outdated. The world has changed, and if a prospect is undecided about whether they want to learn more, as social media has continually demonstrated, the best way to attract their interest is not to overwhelm them with your sheer volume of knowledge during lengthy meetings, but to give them bite-sized bits of information that they can realistically digest in a very short amount of time.

Twitter, for example, has in many ways, has reversed the way a sponsor can raise money. A tweet, which consists of no more than 280 characters helps industry thinkers consistently show their knowledge and wherewithal, bit by bit, slowly growing their perceived credibility over time. In essence, each additional tweet can function as a seed that, once you have begun to attract someone’s attention, will grow the idea that you are truly credible.

Reading a single tweet or other social post requires a commitment of just a few seconds and is, therefore, extremely efficient. When an investor is comparing multiple different sponsors, they do not want to sit through multiple full-length meetings before making a decision. The decision-making process is one that, thanks to the information era, has become incredibly streamlined.

Realistically, when there are many comparable options available, you may have less than one minute to attract a prospective investor’s attention. Even just a few well-crafted tweets, either demonstrating your active involvement in the industry or demonstrating your unique knowledge of the subject matter, can have a tremendous influence on developing a relationship with a prospect.

Having a large mass of followers on social media, in addition to a desirable following to follower ratio, can also help build your credibility (though is not essential) by showing that others consider you to be a valuable source of information. Maintaining consistent, informative messaging on social media is more important than number of followers, however, in positioning a sponsor as an authentic thought leader, and will drive investor traffic that ultimately leads to more money raised.

In other words, there’s been a major shift: getting your foot in the door with a well-positioned social media post has become a more effective alternative to attempting to prove you know more than anyone else through lengthy, in-person meetings. A tweet, for example, is a seed that can someday grow into something bigger. This will take time, but it is a more practical, efficient, and realistic approach than shoehorning a prospect into meeting with you over a lengthy, unwelcome (and today, prohibited) lunch or office meeting.

Adam Gower Ph.D. is an authority in content marketing and online communications for the real estate industry. He has more than 30 years and $1.5 billion of transactional experience in commercial real estate finance and investment. Today he builds best of class digital marketing platforms for private clients so they can raise more capital online and provides online courses for those who want to do it themselves – all at and learn more about how to syndicate real estate projects online, click here.

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