Go Big When Raising Private Money

Raising money can be a tricky thing. All kinds of factors are in play. There are various levers to pull and buttons to push.

One button that can and should be pushed is the "more money" button.

Let me explain...

Everything starts with mindset. You have two choices for how you operate yourself and your business: abundance or scarcity. An abundant mindset means you believe that there is more than enough for everyone to go around and you have no problem staking your claim. A scarcity mindset means that you believe there are finite dollars and a static sized pie so everyone better be careful or there might not be enough.

Similarly, when raising private money, an abundant mindset means that you set high numbers and pursue them. You believe you have a home for as much money as you can get. A scarcity mindset would leave you happy with some scraps thrown from the table.

To make big money you must have a seat at the table - not squabble for scraps.

When raising private money for your real estate investment project, raise A LOT of money. Set a big number and go after it. Don't set a small, meager, "oh I'll just settle for this" number. Go big.

Easier said than done, right?

No.

Easier done than said.

Raising $500,000 is easier than raising $50,000.

Raising $5,000,000 is easier than raising $500,000.

Hmm...now I've got you thinking, right? Hope so. Let's press on...

First of all, if you are raising bigger money, you are pursuing bigger projects. Bigger projects tend to have bigger profits (on an absolute scale). Bigger profits tend to attract bigger money. You see where I'm going? Big investor money needs to be placed in bigger projects or businesses. It needs a home. If you can make a home for $5,000,000, you have a better chance of getting $5,000,000.

Secondly, the pool of investors for your projects changes as you raise more money. Nothing wrong with someone placing $50,000 with you for a nice return, but if you want to really grow your business with private money, you'll have to grow. Growing means taking on more projects and doing more deals. As your funding needs grow, you'll want to tap into the 'accredited investor' pool, where six figure investment checks are just the starting point.

Think about it: young hedge fund managers with barely a few years of experience out of college regularly raise $25-$50 million to start their funds. They don't necessarily have any particular 'edge' on you, but one thing they do exploit is raising a lot of money from a different investor pool.

But Adam, I just want somebody with $25,000 to fund my next house flip rehab!

Ok, no problem. You should be able to do that quickly. However, if all you think about or try to raise is $25,000, how much are you going to get? Probably $25,000.

The example I'm often reminded of in these instances is the salesman that hits his quota halfway through the month and then coasts the rest of the way. He's conditioned himself to only make "X", so when he makes "X" it's mental checkout time. If our salesman buddy were to have a rough first half of the month, he'd no doubt bust his butt in the second half so he would make his quota. Again, he's conditioned to make "X" so that's what he makes.

Don't fall into this 'salesman's syndrome'.

Also, you should always raise more money than you need. If you set your sights on raising $500,000 and you would be happy with $250,000, then $400,000 is going to make you pretty happy. Raising more money than you "need" is also a vital tool in making sure you don't run out of capital.

When thinking about raising private money, consider this quote attributed to Donald Trump: "if you're going to think, you might as well think big."