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Transcript

The Challenge of Getting Investors to Commit

One of the most challenging and frustrating times in the role of a syndicator or fund manager comes when you’ve already put the deal together, assembled the documents, and are shopping in front of investors. Now you’re trying to get the investors to “latch on” to the investment – to give you their money and sign the subscription agreement, so that you can close the fund you’re raising money for.

I am an active syndicator myself. Not only am I a syndication attorney, but I’m also actively syndicating deals. So I know exactly what it’s like to feel that pressure of needing your investors to latch on to get their money to make this deal go forward. I know that frustration and challenge. So I have a six-part system that I hope you’ll find helpful. Let’s go through it.

Step 1: Provide the Necessary Documents

The first step is to provide the necessary documents after your investors have already given you the “Okay, that sounds interesting, I’d probably be interested in something like that.” That is the time when you provide those necessary documents. Here we’re talking about the private placement memorandum, subscription agreement, operating agreement, and I like to provide a questionnaire as I find it helpful.

You want to also include anything else that would be useful: financial projections, marketing material, whatever it is. Put it all in a nice cohesive, good-looking package. Well-put-together presentations and required documents packages get you funded, where messes do not. An investor is going to see a mess and run away scared. So make sure everything looks as nice, cohesive, and clean as possible.

Step 2: Address Questions and Concerns

Step number two: address any questions and concerns they have. Make sure that you’re getting those questions and provide good answers. That’s one of the necessary things that takes place in a Regulation D syndication; you have a duty to provide those kinds of answers for any question they have.

Now, it’s okay when they give you a call and ask you a question, if you don’t know the answer to it, you can say “I don’t know. Let me get back to you” and make sure that you get back to them quickly and promptly to give them a full, nice, well-rounded answer.

As a syndication attorney, I like to help my clients with this. When those questions come in, my syndicators give me a call and say, “I’m getting these sets of questions. Can you help me craft them?” And I am always happy to help them come up with good answers that are not only thorough, complete, and accurate, but also push the deal forward and make it more likely for people to invest.

Step 3: Obtain Soft Commitments

Step number three is to obtain soft commitments. In a perfect world, you’re getting written soft commitments, because when a person writes it down, whether it’s by email or on a piece of paper or a letter, they’re much more likely to follow through and invest in your deal.

You need this information anyway. If you’re raising $10 million, you need to know where you’re at on the deal. You need to know how much money people are likely to invest so that you can hit your targeted raise amount. People who have soft committed to you are more likely to subscribe than those who haven’t committed at all.

Step 4: Provide Social Proof

Step number four is to continue to provide social proof. That can be something that tips the scale. Social proof can include testimonials, case studies, reviews, or real-life interactions.

If it’s a 506(c), that’s not an issue at all. If it’s a 506(b), it can be. One tactic I use is connecting interested investors with existing investors in casual settings. This builds trust and creates organic encouragement without violating the rules.

Step 5: Create a Sense of Urgency

Step number five: offer a sense of urgency. Urgency is a great motivator; people fear missing out. Let investors know where you are in the raise, how much is left, and that the deal may be oversubscribed.

What you should never do is pressure investors aggressively or act like a used car salesman. That not only damages trust but can cross legal lines. Urgency should be real, honest, and respectful.

Step 6: Follow Up Consistently

Step number six, and probably the most important after providing documents, is to follow up regularly. You can’t let interested investors fall through the cracks. Follow-up shows professionalism, persistence, and confidence.

You don’t want to be pushy, but you do need to stay present. A consistent, respectful follow-up process helps investors make decisions and keeps deals moving forward.

Closing Thoughts

This is Tilden Moschetti, syndication attorney for the Moschetti Syndication Law Group. These are the six steps that I use to help investors latch on to investments when I’m raising money for my own syndications or private equity funds.