How to Find High-Net-Worth Investors for Commercial Real Estate Deals

Background – Bringing Cutting-Edge Digital to CRE Syndications

In 2015, I joined the real estate fundraising platform Crowdstreet as its first VP of Marketing. The JOBS Act had recently opened up solicitation of private equity investments, and the market was wide open for innovation.

When I joined Crowdstreet, I brought with me over 15 years of world-class programmatic & performance marketing experience, designing and optimizing cutting-edge data-driven, algorithmically-optimized marketing campaigns for Fortune 100 companies (Microsoft, Stellantis, BMW, and more) and developing innovative techniques to generate multi-million dollar efficiencies on annual media budgets exceeding $100M.

CrowdStreet and the new real estate crowdfunding space was the ultimate ‘green field’ for applying these high-performance marketing techniques to an industry that had traditionally relied on low-volume, high-effort friends-and-family and “country club” fundraising techniques.

The result was explosive growth. Over 2.5 years, I designed and built Crowdstreet’s first digital HNW investor recruitment platform – a platform that has grown to over 100k accredited investors and delivered in excess of $5B in individual investor equity capital for Crowdstreet Marketplace CRE offerings.

My subsequent role as the first VP of Marketing at Cadre further refined my playbook of investor recruitment and sales techniques as I helped launch and oversubscribe Cadre’s first Opportunity Zone Fund to a total of $200M in less than one year.

Having worked inside two very different CRE fundraising marketplaces, it was clear the business model of two-sided capital marketplaces had a limited shelf life.

When I started my company Capstacked in early 2020, it was with the goal of ushering in “Phase II” of online CRE solicitation – by creating private platforms that enabled top sponsors to directly connect with highly-qualified HNW/UHNW investors.

Phase II is now well underway, individual investors are moving on from middle-man platforms (with their high fees and limited due diligence) and actively seeking out direct connections to quality sponsors.

Capstacked’s business is booming – we’ve been very successful at ensuring our clients are the first sponsors HNW individuals find once they move on from the platforms. Our private investment platforms not only enable sponsors to accurately find and acquire high-net-worth individuals – but specialized content, databases, and automated nurturing systems significantly reduce client Investment workloads and have emerged as essential tools for educating and building trust with prospective investors.

Our platforms are not simple, they’re not cheap, and reaching peak performance can often take months or even years of continual iteration and optimization.

However, the results speak for themselves. Our longest-running client, Trion Properties, now owns a private platform that can deliver all-in, investor cost-of-capital of less than 2% for deals that offer back-end terms far more sponsor-favorable than anything possible from institutional capital sources.

The Top 10 Secrets to Building a Successful Sponsor Investment Platform

A recent SEC study identified over 24 Million households qualifying under accredited investor financial criteria in 2022, and this number is expected to grow significantly as SEC rules and regulations change. There has literally never been a better time to build and grow a private accredited investor platform.

The top 10 secrets detailed below represent a small selection from the Capstacked playbook, but they’re an excellent way for sponsors to get started creating and growing their own online investment platform. Getting started early and setting aside resources to grow now, will ensure HNW capital is available when you need it for later deals.

1. Standing Out from the Competition Using Brand Strategy
2. Techniques for Building Investor Relationships Online
3. Quality HNW Prospecting Databases Are Essential
4. Gifting Valuable Content Builds Trust & Relationships
5. Targeted Paid Advertising Accelerates Growth
6. Optimizing Registration & Investment Processes Minimizes Friction
7. Programmatic Direct Mail Breaks Through Digital Saturation
8. Marketing Automation Builds Early Investor Relationships
9. Focusing Investment Teams only on Capital Generating Conversations
10. Measure + Optimize Everything Until You Reach < 2% Cost-Of-Capital

Standing Out from the Competition Using Brand Strategy

A strong brand strategy is crucial for differentiating your firm from competitors in the CRE syndication space. The idea is to create a distinct brand identity that resonates with HNW individuals, focusing on trust, expertise, exclusivity, and a clearly differentiated and advantageous investment thesis. For instance, employing storytelling to showcase a sponsor’s successful investment history and emphasizing unique market insights and acquisition processes can create a compelling narrative that attracts HNW investors. Utilizing high-quality content that speaks in the language and tone expected by this sophisticated audience is essential to success and is the most common tactic non-specialist digital agencies get wrong when attempting to adapt their expertise to CRE investing.

Techniques for Building Investor Relationships Online

One goal of any successful online investment platform is to replicate, as closely as possible, the kinds of relationships Sponsors have been building with Investors in the real world for generations. Country clubs, golfing, and steak dinners are clearly not replicable online Instead, building investor relationships online typically relies on a mix of personalized communications, targeted content of interest to the investor, and creating seamless transitions from automated to 1:1 communications.

Effective techniques include engaging investors through educational webinars, personalized email campaigns, and incorporating educational videos from the GP or personal Investments rep whenever possible. One highly successful Capstacked client (recently public via SPAC) took this process one step further – re-recording several educational videos to feature the specific Investment representative assigned to each Investor.

Quality HNW Prospecting Databases Are Essential

Access to a high-quality HNW prospecting database is crucial for identifying and reaching potential investors. Truly effective investor databases are few and far between; at Cadre, I had the opportunity (and budget) to test six different providers side-by-side to evaluate their respective performance. One database firm stood out from the rest, and years later, this firm still remains my top choice for actionable, targetable HNW data.

Be wary of any database firm that provides you with direct access to investor PII (name, email, phone, address, etc.), as these lists are often abused by sponsors (cold email blasts, direct phone calls, etc.) and consequently quickly lose effectiveness. The best data providers use a blinded model where the sponsor helps with identifying the type of prospect they want, but the final investor PII is pushed directly to the sponsor’s ad platforms and vendor partners – preserving its integrity and privacy. The offer of a $5k Transamerica ‘Investor List’ is tough to resist, but a great data vendor will deliver 10X the cost-effectiveness and won’t result in your domain emails being spam-listed by Google and other email providers.

Gifting Valuable Content Builds Trust & Relationships

It’s been known for some time (and recent science validates) that gift-giving is a powerful tool for creating long-standing, meaningful relationships. This inevitably leads to the question – what do you give the person who can buy anything (e.g. most HNW/UHNW individuals)? When building Sponsor/Investor relationships, the best gift is often expert educational content.

Loss Aversion is another major subconscious driver of investor decisions, and educating a prospective investor to the level where they feel competent to make an intelligent investment decision is an excellent way to, build trust, strengthen long-term investor relationships, and increase investment conversions.

Providing valuable content, such as educational 101-level articles on CRE investing and specific details on your asset type(s), exclusive market insights, detailed investment analyses, and sector-specific reports, are great places to start.

The content should be both informative and educational, helping investors make informed decisions while positioning the sponsor as a knowledgeable and trustworthy partner, without openly promoting the sponsor or their current offerings.

Targeted Paid Advertising Accelerates Growth

When talking with clients about the services Capstacked provides, I often liken our work to building a car from scratch. Software systems, content, and data form the basics of the vehicle – enough to get it idling and rolling down the street (organic growth & investments).

Paid advertising is high-octane fuel to accelerate the capital machine once assembly is complete. Targeted paid advertising (using HNW data) enables investor platforms to scale from tens of Investor prospects per day to hundreds or even thousands a day. The effective use of targeted paid advertising involves using data-driven strategies to place ads on platforms and websites frequented by HNW individuals (70-80% of the web shows data-targeted ads).

Leveraging HNW data from quality database firms delivers significantly superior investor lead quality compared to leads sourced through platform demographic/behavioral data (ex: META/Facebook Lead Ads). Top data firms are able to project net worth and RE investment activity based on explicit data (houses owned, yacht/private plane registrations, philanthropic activity, etc.), Facebook however can only infer these qualities from the type of content a user consumes (are they HNW or just aspirational?)

While Cost-Per-Lead may initially be higher using a database firm approach, leads sourced using quality HNW data convert significantly better at every stage of the investment funnel – resulting in far lower Cost-Per-Active Investor and Cost-of-Capital metrics (the only metrics that really matter)

Optimizing Registration & Investment Processes Minimizes Friction

Going back to our car analogy, you’ve now gone through all the trouble to build your vehicle (software, content, data) and power it (paid ad budget), and you’re finally moving down the road at a decent clip (leads are coming in) – it’s time to look at tuning your vehicle for maximum performance.

The process of optimizing an investor platform can be never-ending if the sponsor chooses (cost-of-capital almost always continues to improve). However, there are two key areas that should be always be addressed first due to the outsized cost/benefit they deliver.

Streamlining both the registration and investment process is essential to minimizing platform friction and enhancing investor conversions.

Some of the simple ways to streamline registration include simplifying online forms (e.g. minimizing registration to fn, ln, email, zip, and self-accreditation), providing clear instructions on how the platform works (info on how to evaluate a deal, how investors get paid, etc.) and ensuring that the investment process is transparent and straightforward (what to expect once you hit the Invest Now button).

Many of our client sponsors use animated explainer videos as a powerful tool to convey complex processes (keep total run-time under 90 seconds). Others use a combination of graphics and live video featuring the investors’ designated Investment rep to further strengthen the investor relationship.

Best practice among our clients and the hundreds of sponsors we’ve interviewed is to leave AML/KYC and Accreditation Verification until the investment process is underway. Outsourcing some of these tasks to outside vendors (Verify Investor, InvestReady, etc.) can further streamline the process and improve investment throughput.

Programmatic Direct Mail Breaks Through Digital Saturation

In an increasingly digital world, programmatic direct mail can be a standout strategy for reaching HNW individuals. Personalized, high-quality mail pieces sent exclusively to prospects identified by your HNW database firm deliver cost-effective, relevant, and engaging content that breaks through the clutter of digital advertisements. Integrating direct mail with digital campaigns to create a cohesive multi-channel strategy can further amplify its impact.

Programmatic Direct Mail provides nearly limitless options for engaging with prospects. Some examples we’ve used include sending deal-specific postcards to prospects who’ve viewed a relevant deal page multiple times, sending robotic ‘handwritten’ thank you emails to investors after completing their first investment, and even VIP invitations, gifts, and other physical goods.

Marketing Automation Builds Early Investor Relationships

One challenge all sponsors inevitably face when building a high-performance investment platform is efficiently scaling their investment team to address significantly increased investor flow. While this challenge can never be eliminated entirely, it can be significantly reduced and delayed through the use of personalized marketing automation systems.

Marketing automation tools enable the efficient scaling of personalized investor relationships. Automated email sequences, lead scoring, and targeted educational content delivery can remove much of the workload of nurturing investor leads at scale. These tools also provide valuable insights into investor behavior and preferences, allowing for the continuous refinement of marketing strategies.

At Crowdstreet and Cadre, we developed a weekly process between Marketing and Investments that continually optimized our marketing automation systems. Investments would list and rank the top questions they received from Investors during the week, and Marketing would add information answering these questions to the existing automation workflow email queue. The result was fewer generic/low-value questions for Investments – leaving them free to focus on more specific, investment-centric questions.

Focusing Investment Teams only on Capital Generating Conversations

As discussed above, iteratively optimizing marketing automation email content to eliminate generic questions is a powerful tool for freeing up investment staff to focus solely on high-impact, capital-generating conversations as a way to dramatically increase efficiency and effectiveness.

This process not only improves investor conversion throughput but also enables the Investment team to run lean for much longer than typically possible for a given investor volume. Delaying new hires is just one of the many ways a well-designed and managed investment platform can drive significantly improved Cost-of-Capital.

Measure + Optimize Everything Until You Reach < 2% Cost-Of-Capital

You can’t optimize what you can’t measure. Continuous measurement and optimization of all marketing and sales activities are essential to improving the performance and cost-effectiveness of your investment platform. Your primary, bottom-line metrics should always be active investor growth, cost-per-active investor, and cost-of-capital.

However, there is a wide range of other intermediate metrics that can be extremely useful when diagnosing and optimizing inefficiencies in your investment platform performance. Additionally, almost all metrics can be segmented according to the referring channel that first brought the lead/investor to your website. By analyzing the Key Performance Indicators (KPIs) according to channel, sponsors can easily assess which channels are delivering the most cost-effective capital and reallocate paid advertising budgets or resources accordingly. Advanced automation systems update these KPIs in real-time, enabling GP and staff to assess platform and channel performance at any time.

The goal of all of this measurement, troubleshooting, and optimization, should always be to increase investor capital allocations while minimizing Cost-of-Capital. Constant focus, analysis, and iterative optimizataion based on data and KPIs is the final and definitely most essential secret to building and managing a successful sponsor private investment platform.

Going Beyond the Basics – Expert Guidance for Maximum Performance Platforms

The above ’10 Secrets to Building a Successful Sponsor Investment Platform’ is clearly a substantial read for the newly initiated, but in reality, the tips above represent only a small fraction of the tools and techniques we use to design, build, and optimize Capstacked client’s high-performance investment platforms.

If you’d assistance in building out your own platform, advisory guidance on refining an existing platform, or would just like to have the experts build you the best platform possible from scratch – please don’t hesitate to reach out to Capstacked. We’re always happy to chat and we’re always available to help at a level provides the best cost/benefit to you, the sponsor.