In the dynamic landscape of real estate investment, the advent of online syndication, or crowdfunding, has reshaped the way capital is raised. Best Ever Show host Slocomb Reed and Adam Gower, the founder of GowerCrowd, recently delved into the intricacies of online syndication, its evolution, and the strategies capital raisers can employ to navigate the changing market dynamics.
With a portfolio boasting over $15 million in assets under management as a general partner and an additional $12 million as a limited partner, Gower is able to shed light on the current state of commercial real estate syndication and provide a glimpse into the future landscape.
Online syndication has undergone a transformative evolution since the enactment of the JOBS Act in 2012. The regulatory changes, particularly in Regulation D 506(C) offerings, have played a pivotal role in reshaping the landscape of capital raising for real estate ventures. These regulatory adjustments, lifting constraints and paving the way for online syndication platforms, mark a significant departure from traditional syndication models.
In distinguishing between traditional syndication and online syndication (crowdfunding), there has been a notable shift from personal, in-person fundraising methods to the adoption of digital platforms. The advent of online syndication platforms, exemplified by companies like GowerCrowd, has become instrumental in facilitating this transition. This shift not only brings about efficiency in the fundraising process but also expands the reach of sponsors, allowing them to connect with a broader and more diverse investor base.
The emphasis on the use of Regulation D 506(C) offerings further underscores the regulatory framework that has been instrumental in enabling online syndication. These offerings, which allow companies to broadly solicit and generally advertise their securities, have been a key enabler, paving the way for data-driven advertising strategies and a more inclusive, efficient, and digitally-driven era in capital raising for the real estate industry.
Online syndication has introduced a host of benefits for capital raisers, simplifying the capital-raising process through the integration of digital marketing platforms. The shift from in-person fundraising to creating robust lead-generation systems has proven to be a game-changer. This approach not only streamlines the investor acquisition process but also aligns with the preferences of modern investors who increasingly rely on online research.
One of the distinct advantages online syndications provide is the ability for accredited investors to research and invest anonymously. This aspect provides investors with the flexibility and autonomy to explore opportunities discreetly, contributing to a more investor-friendly and accessible environment. The evolution of online syndication, coupled with these benefits, signifies a paradigm shift in the real estate crowdfunding landscape, presenting capital raisers with unprecedented opportunities to navigate the market dynamics with efficiency and innovation.
Common assumptions about crowdfunding include the perception that it involves impersonal online transactions without the development of personal relationships. Gower challenges the notion that personal relationships are sacrificed in online syndication, asserting that historically, in-person meetings were mandated by regulations, not necessarily by investors' preferences. Today, digitizing the pitch and using technology to streamline the investor acquisition process has become imperative. While investors value personal relationships, they prefer to initiate contact after conducting their own research.
One key metric that plays a pivotal role in online syndication is the cost of acquiring accredited investor leads through various digital marketing platforms. Changes in market conditions, such as fluctuations in interest rates, directly impact the cost of acquiring these leads. Specifically, there was a spike in the cost when interest rates started to rise, reflecting investors' heightened caution amid economic uncertainties. It’s important to adapt narrative strategies in advertising to mitigate the impact of economic shifts. For example, shifting emphasis from passive income to highlighting discounted or distressed deals can prove effective in bringing down the cost of acquiring investor leads.
According to the outcome of a recent accredited investor sentiment survey Gower conducted, investors are currently placing a heightened emphasis on principal preservation over growth, reflecting a broader sentiment of concern for the safety of investments. These insights underscore the dynamic nature of metrics in the online syndication landscape and the importance of aligning marketing strategies with evolving investor sentiments.
Gower emphasizes the importance of authenticity and advises capital raisers to tailor their content exclusively for their ideal investors. He suggests creating a mental image of the perfect investor, putting up their photograph, and producing every piece of content — be it written, video, emails, articles, or pitch decks — exclusively with that ideal investor in mind. This approach ensures that the language used resonates naturally and authentically, focusing on the needs and preferences of the target audience.
Gower's advice revolves around the idea of connecting with a specific demographic rather than attempting to cater to a broad audience. This targeted approach is aimed at attracting like-minded investors who align with the sponsor's vision, ultimately leading to more meaningful and successful fundraising efforts.
In an ever-evolving real estate landscape, Gower encourages capital raisers to embrace adaptability and leverage technology and authenticity as guiding principles in attracting like-minded investors. This fusion of digital strategies, authenticity, and a targeted approach to investor relations positions capital raisers to not only navigate the complexities of changing market dynamics but also thrive in this dynamic era of online syndication.
Disclaimer:
The views and opinions expressed in this blog post are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.