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CRE Insights Blog

3 Trust Curves

Hello, this is Richard Wilson, CEO of the Family Office Club, and today I wanted to record a short video on the three trust curves that you need to move up with an investor in order to raise capital. Essentially, what I’ve found over the past 11 years in running the Family Office Club and 93 different investor events over that time, is that most investors will not allocate to something unless they’re familiar with and have a high level of trust in three different things. The first thing is your industry overall. If they don’t know your industry, if they don’t know the trends going on, if they’re not familiar with it, it’s going to be hard for them to get in their minds it being okay to make a significant allocation to the space, regardless of how much they trust you or like the individual opportunity. That leads me to the next two ideas. The next one is getting to know you, yourself, your team, the executives who will be managing the money or managing the operating business that they would be potentially investing in, and they have to really have a high level of trust in the team as one of the most important things. Many investors say that matters more than the industry, and it matters more than the individual opportunity itself. That’s the second one of the trust curves. So the first one is the industry and the overall ecosystem around the opportunity, the second one is the team, or the individual, or yourself it might be, in your case. The third one is really in the individual opportunity available. So that is in the specific investment offering that’s being made, whether it’s a debt investment, equity investment, a co-investment of some type, et cetera. So an example of this would be that somebody might be approached with an investment for a self-storage facility, and it might be based in San Diego, but if the investor doesn’t know much about the self-storage space, and doesn’t know whether it’s a great deal or not, then they might not have confidence to move forward. Even if they really like you, and they really think that the debt note on that self-storage facility sounds great and has great collateral behind it, they might stall and not go forward because of the lack of knowledge on the industry itself. That’s one example to make this clear. In short, if you look at why people do and do not invest, I just find that these three trust curves almost always have to be in place, and it’s why people usually start with their friends and family when it comes to finding money, because those people are all the way up the trust curve on you, and your team, and your abilities, and they trust you. Even if they’re not up the other two curves, they’re so far up that trust curve on yourself, they’re willing to overlook their lack of knowledge perhaps on the other two curves. If you cannot go to friends and family, you’ve already gone through those leads, the next stage is to look at who else knows your industry very well. That could be someone who made their money in your industry. It could be someone who is a titan in your space. Could be someone who is known for allocating into your space commonly, and they’re so familiar with your space that when they see your deal, they’re going to know that your deal is excellent, because it’s in a great context of the space.

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Richard Wilson

Richard Wilson

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