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What’s up, everyone? Hope your President’s Day weekend was great! Today, we’re talking about the “second close” of raising capital.
I’ve been raising a lot of capital lately, and I often think about, but not necessarily talk about the second close.
First Close
There’s been multiple times where I get a “yes” on the first close, and it still doesn’t go through!
For example, I said to a certain investor…
“After you do your due diligence, and everything looks good, can we pencil you in for $500,000 in our fund?”
He said yes!
I immediately sent him the documents, but nothing happened…
After a couple days, we finally got in contact, and we hopped on a phone call with him.
This is where we get into the 2nd close…
Second Close
The second close is getting them to sign the documents and wire in the money.
Sometimes, this is more difficult than the initial soft commitment!
For the record, the second close mentioned above was not successful as our investor fell through the cracks…
From the funds I’ve seen, I’d say 50% of the soft commitments actually go through.
For example, on a first-time fund of $10 million committed capital, I’d say only $5 million shows up.
Here are some tips and tricks that will help you get that second close:
#1 Speed
When someone gives you a verbal yes, work with them on that same call. Don’t wait!
Send those documents instantly! Offer to walk them through the documents if they desire.
#2 Transparency
Chances are that your investor will go home, consult their community (spouse, friends, co-workers, internet), and return with questions.
If you can hop on that call quickly or answer that email effectively, then that will leave less room for them to doubt.
#3 Clear Deadlines
If the cutoff line of when they need to get things signed or when they need to wire in the money is unclear, there is a slim chance you’ll get their capital when you want it.
Like I said in my video…
“Nothing happens in this world without a deadline.”
If you don’t set personal deadlines as well as deadlines for your investors, it’s likely that you’ll get distracted or disappointed.
Conclusion
Hopefully, you learned something about the “second close” of raising capital.
Remember, a second close is vital to your fund and only happens if you have speed, transparency, and clear deadlines.
If you want to learn more about starting funds, visit Fund Launch!
That’s it for today!
Thanks,
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
