Venture Capital for Short Term Real Estate Investments

[Rick Wagner]

Hey Everyone,

So during one of my brainstorm sessions to come up with ways to finance more deals, I thought to maybe branch out to Venture Capital Firms in hopes that they would fund the acquisition of more property to grow my company. However, I am unsure whether or not this is truly possible. I would think they would lend after showing a track record of development deals and a well thought out business plan. If I were to start branching out to local firms, what exactly should I look for as far as terms go? How do I entice them to lend me money on a deal? Has anyone on this forum gone this route before? 

I appreciate any and all input!

[Jay J.]

I think the SEC would have issues with your idea..  I'm not an expert, but there are laws about soliciting for money for investments..  

[Douglas Dowell]

Hello Rick,

The term venture capital is a narrow subset of the institutional capital universe.  I think your idea of working with institutional capital is good but when you have have established a solid track record or marry into the family. 

 Venture Capital money is looking for 10x plus moonshot investments.  They generally are not interested in real estate as a whole.   True you might find a partner of a vc that likes to deploy her own capital in real estate but that is more a function of my suggested targert.  

The biggest problem of working with institutional capital is that they find investment chunks under $10M to be bothersome in that they have that opportunity all day long so why bother with the real estate start up firms that work generally in th $1M to $5M space.   Firms like Family Offices and pensions do love to invest in real estate but not start ups absent an unusual relationship.

I would build your proposed pitch deck of what your model will look like and then start meeting people in your network who are interested in real estate and also ask then who they know. The best way to win in CRE is to leverage the six degrees of Kevin Bacon.

Consider partnering with a track record sponsor in the process to hyper accelerate your objectives as well.

[Mark Beckwith]

Hi Rick,

As stated before the return requirements for VC money would make it tough, many also would require an equity position large enough that it is counter productive for you. Potentially there could be interest if you identified a trend and a plan to deploy a substantial amount of capital to make the scale worthwhile for a VC firm; similar to what some SFR operators did raising institutional money through private equity and VC firms 5-8 years ago. That all being said would it not just be easier to establish a sizable line of credit instead?

Mark

[Rick Wagner]

Thanks for the helpful replies, everyone. I think I'll stick to more traditional methods of financing rehab properties as I doubt I'll be able to do it at a scale large enough for a firm to consider. I will try to stick to establishing lines of credit, yet that is hard being a startup LLC.

[Account Closed]

Hi Used to work for the ( Hedge Funds/Venture Capital firm you talking about ) I was a Investment Analyst, basically the 3rd guy up the ladder, like @Jay J. says it could be tricky you could solicit money i believe threw direct contact with first step of the ladder the equity/debt Recruiters, the owns looking for deals, but you'll run into some bumps getting to them since the keep there contact private most of the time, you cannot solicit threw the information emails the websites provided but you can say you would like to speak to somebody in the company that may help you with some questions, and wait they might respond or they probably won't. second of all the transaction volume has to be in chucks of 10-15M minimum and they are considered type D investments that are not wow, don't peak there eye, but if you could bring a cluster project into the table once you get a seat at the table this means like group of projects 3 or 4 that add up to be 20M+ you might catch there eye, but as i just read your last post you think this might be too much and it is, but there is what it the business we call Family offices this are type D equity or debt investors that are maybe one step above your local hard money lender and does might be the kind you should target, or the garage ban hedge fund which in the industry is a capital firm with less then 250M in AUM, this are hard to find but they will work with smaller investors i hope this was helpfull

@Rick Wagner

[Jorge Manguane]

@Rick Wagner if your business is at least six months old you may qualify for a line of credit.  Send me a message to discuss further.