Crowdfunding Millions for Your Deals with Dr. Adam Gower

Raising capital can be tough, but it doesn't have to be. Dr. Adam Gower has helped syndicators raise hundreds of millions of investor capital through his crowdfunding platform, Gower Crowd. Today, we're diving into the ins and outs of crowdfunding for commercial real estate, how crowdfunding can help you close on you 1st or your next deal, and any challenges or pitfalls that new commercial real estate investors should be aware of when using this deal structure.

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Key Takeaways:

• Crowdfunding is effectively just online syndication using regulations like Regulation D 506(c) to allow general solicitation

• Building your own crowdfunding platform gives you more control and makes the process more scalable and cost-effective than using a third party site

• Automation is critical for scaling and generating leads efficiently while freeing up your time

• Conversion rates for leads to investors are typically around 2%, so follow up is important but requires a large volume of leads

• The future may involve more market distress as interest rates rise, so having systems in place could help weather market challenges

Action Items:

• Set up a simple landing page with a lead generation form to start collecting investor leads

• Attach an automated email response system like ConvertKit to follow up with leads automatically

• Consider setting up additional automations like auto-responder emails and social media posts to continue nurturing leads

• Personally follow up with leads via phone to try converting them into investors

About Your Host:

Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors as a board member for the Real Estate Investors of Nashville.

Episode Transcript:

0:00

This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls on how to confidently buy your first commercial property today at www dot c r e launch pro.com.

0:25

Welcome back to the commercial real estate investor podcast excited to be diving into this conversation today with Dr. Adam Gower. He is the founder of Gower crowd, and he helps commercial real estate investors, syndicate or crowd fund the equity for their deals, he's helped commercial real estate investors raise over, I think it was over $300 million to date already. And it's gonna be very exciting conversation, we're gonna dive into the ins and outs of crowdfunding real estate, how crowdfunding can help you close on your first or your next deal. And any challenges or pitfalls that new investors should be aware of if you're going to utilize this strategy. So, Adam, that was a very brief introduction of yourself. But why don't you tell us a little bit more about your background?

1:03

I will do at first of all, thanks for having me on the show. It's really Yeah. And just to be clear, I am a very conservative person. And I'm very precise and clear. And what I tried to say and I can evidence 300 million that my raised but in reality is probably in excess of a billion. I just can't show you that. video testimonials that 300 million. But reality is significantly more than three times that my background actually tailors. I'm a real estate sponsor. I've been a sponsor since mid 1980s. Gosh, I don't even like to admit that. That was during an era when interest rates were Are you sitting down? I can see you are sitting down. Yeah, they were interest rates to wait, if you took out a loan 18% And up in the early two in the early 80s. They were I remember seeing them in the 20s. I got I used to get 12% on deposit at the bank when I was first here. So it was a completely different world. So I've been in real estate as a sponsor for you know, since then, however many hundreds of years that is, but in the last 10 years or so I've been doing capital raising or helping sponsors to raise capital online primarily from accredited investors. We, we well, I say we track the real estate crowdfunding and syndication world, we really lead it in terms of best practices for digital marketing, primarily to, to generate leads, accredited investor leads, nurture and convert them into being active investors. So that's, that's what we do. And our clients actually manage over 35 billion of, of AUM. So we have some very big sponsor clients and some smaller ones.

3:01

Yeah, that's just a couple of properties in the portfolio. Right.

3:05

Yeah, that's some very big salts. Yeah.

3:08

No, that's, that's great. I mean, that, you know, that's a really refreshing way to look at commercial real estate, because I have felt for years that commercial real estate is stuck in the 1980s. I don't understand why more deals, sponsors, and more commercial real estate professionals don't treat themselves like marketers. Because we're in an online era. You know, I mean, back in 2020, we started focusing on our SEO, we started doing a YouTube channel, we started the podcast. And it's brought in, you know, an immense amount of clients, for the brokerage investors for the deals that we sponsor. And it's it's the best way to find investors nowadays, in my opinion, would you agree with that?

3:42

Oh, it's the only way really, I mean, this, if you don't have a good online presence, Tyler, you are basically invisible, you're invisible, because what's going to happen is that all of your prospects they're going to use, they're going to go online to figure out how to how to manage their world, they're going to do research, right? They're going to use their phone or their computer, and they're going to find a pathway to a solution to whatever problem it is that they have online. And if you are not online, they won't find you. You are invisible. So it's no longer optional, to have a good presence online. It's mandatory. That's that's what we do. We have that's that's exactly why we build these systems for sponsors so that they elevate themselves from invisible, not just to being visible, but also to being recognized authorities in the industry.

4:43

Yeah, I completely agree. I mean, it's always, you know, interesting to me. I mean, the older shops, right? They've had their LP lists for decades. They won't have a presence because they don't really need one, right? But the newer guys, the guys that have popped up in the last five to 10 years that don't have an online presence that always makes me You're a little weird. I'm like, I don't know if these guys are legit. I don't know how this process works, are they a fly by night kind of group? I mean, it really does lend a lot of authority to you to have an established online presence.

5:10

Yeah, you know, what's interesting, though, is that you make this distinction between people that have come on stream, if you like, in the last 10 years or so, versus those that have been around for decades, potentially, there really is no difference, in fact, right. It's the oldest shops that typically have the the worst online presence because they are not of the digital era. What do they call digital, not digital babies, there's a term for it, I forget. But, you know, they're not brought up in the digital world, it's not something they use to in fact, on the contrary, they have become accustomed because of regulations, historically, they've become accustomed to raising capital, in person and through in person networking. So the idea for them, and it's been successful. So the idea for them of migrating to a digital world is, is very foreign, and very difficult for them to really internalize and to accept, that is becoming more and more commonplace. But most of our clients, in fact, most of in fact, I would say, almost all of our private clients, the ones that we build these systems for actively, they are multi, multi cycle seasoned sponsors, in some cases, multi generational sponsors. And they have realized that they need to be online. And that's why they come to us. The newer sponsors, it's more, they're more familiar, right? They use social media anyway. So they know they need to push their messaging out that way.

6:47

That's exactly right. I mean, we just grew up in that age where that was the best way to, you know, use that soapbox, if you got it. So let's talk about the ins and outs of crowdfunding, how does that process work for a commercial real estate investment? Because our audience here is largely, you know, maybe they've bought, you know, five or 10 residential properties, and they're tired of dealing with that they're ready to kind of scale up in a commercial or maybe they're higher net worth individuals who still want to raise capital for their deals. So how does how does crowdfunding work?

7:13

So crowdfunding is actually a misnomer. It's really just another word for syndication. So we've got if you're not using only your own money, if you are bringing in money from third parties, it doesn't matter, friends, family, or whatever it is, you are a syndicator. And the chances are that you are using offering documents you're raising money through one of the SEC regulations, probably regulation, 506 Reg, Reg, D 506, B, which is the old one, or the new one is reg D. So Reg, Reg, D, 506. C, and what C allows you to do, and this is a little bit technical, but if you've gone to if you raise money from anybody else, this, you've almost certainly got one of these documents got offering documents, ppm, you've got some kind of document you've put out there, usually one of these regulations, all it means is that you can now raise money you can advertise. So anyone that's come on stream in the last 10 years, this is normal, right, you are able to advertise to attract investors into your deal. Before 2012. Actually, when the laws changed, it was prohibited to do that. So Tyler, that's really all it is, is the ability to, like go on a podcast and say, Hey, I've got an offering. I've got a deal at the corner, walk and cross walk, would you like to invest in that deal? You were not allowed to do that before? Now you can. So that really is all crowdfunding is right? It's the regulatory chain. Now, what that means is that, okay, that's great. Let's say you put up a website, and you've got a thing that says invest in my deal in my multifamily deal as a value add property. No one's gonna see that deal. And that's why you have to be proactive in marketing it to generate visibility. So that's all really crowdfunding is is the act of marketing a deal online into a syndicated transaction.

9:30

So it sounds like you're basically using a 506 b or a 506, C syndication, likely a 506 c in this case, so that you can actually market it publicly.

9:38

I'm not a lawyer, so I can't give legal advice. Don't take any of that. But a fact but I will tell you that 506 B does not allow you to solicit from anybody you don't already know. So you got to have a pre existing relationship with somebody that you ask to invest. If you're doing a 506 b if you're doing a 506 C All bets are off. You can you can advertise on Facebook, on Google on LinkedIn or wherever you want. You can solicit it's basically security style. I mean, it's not really it doesn't it's, it was an it was an unintended consequence in a positive way of changes in regulations brought back by the jobsite to 2012. That allowed for what's called general solicitation, we're getting into the weeds a little. But that's the term of art, general solicitation, meaning you can ask anybody, even if you don't have a relationship with them to invest with you.

10:36

That's exactly right. And they probably have to be accredited. In that case, if you're using a 560.

10:41

Correct. They have to be that is the provides. So you've got to be accredited. So they have to be relatively wealthy, defined as defined by standards. Sec standards, but yes, accredited is correct.

10:53

Yep, that's exactly right. So if you're looking at doing you know, your first or, let's just say your first deal, you want to raise capital for it, maybe it's a $5 million purchase price, and you're gonna go raise, you know, one and a half million dollars in equity. Using crowdfunding for that, what should a first time commercial real estate investor that's going through that process, be aware of as they're going through it?

11:16

Okay, so what to be aware, I thought, you're gonna say, how do they do it, but what

11:22

we can do both let's, let's cover both,

11:24

let me start with how you can how you do it. So what I would recommend for somebody who's starting out look working with us, we, I'll just, I'll just, I'll just tell you straight up. So we charge anything from 15 to 30,000 a month to build systems for six months, for our clients. So they're bigger clients, they're typically raising hundreds 10s or hundreds of millions of dollars, we have a smaller program that's 15,000 that we can show you, uh, you know, we can guide you through the process. But even that, for somebody that's raising a very small amount of money might be you might be challenging. So what I would recommend, they're big, they're big systems, these are like robust systems that will last you for the rest of your career. Basically, it's a one time thing, and you end up with something that lasts for the rest of your career. But if you're really just starting out, what I would recommend you do is set up a simple landing page, right, so it's a single a single page on your website or on a website, just get a landing page. And put all the details offer to provide all the details for the deal that you've got in place with a lead generating form. So you want to lead gen form that says, if you're interested in earning such and such percent in multifamily, or whatever kind of deal you've got, then please give us your name and email address, and we will follow up, I'll send you all the information. Now what you're doing is you are generating your lead generator, right, you're generating prospect leads. And if you've got a landing page like that, you can talk about it on LinkedIn, you can talk about it on Facebook, you talk about on podcasts, et cetera. And you tell people to go to that landing page and fill out the form, then what you really need to do is to attach to that form an automated email response system. And there's all kinds so the one that we like to use is called ConvertKit. Again, it's a little bit into the weeds. But what that means is when somebody actually fills out that form, they automatically and immediately get whatever it is you're offering, it might be the offering docs, it might be a deal. Malmo might be who knows what our case study, whatever you've got there that you're offering. And that means that you can be generating leads, you know, one of these classic expressions you can be generating leads while you sleep. Right? So leads are coming in while you're you're not, you're not proactive once you set it up, and you do it right. And plus, you can also auto post to social media that we also set up auto post to social media. So this whole machine becomes a kind of flywheel generating leads for you that that funnel into your network. And then you can follow up the really the best way to convert is to follow up with a phone call. Now our clients will do some of that we spend up to 150,000 a month on Facebook advertising for for individual clients for particular aces. And when you have that kind of velocity you're looking at, you know, 3500 leads a month 100 leads a day. That is incredible velocity and very, very difficult to keep up with that's when you raise it, you know, into the 10s of millions. But and that's very difficult to keep up with but if you're a smaller shop, you can not only set an automated email to go out again, we build these for our clients or we show our clients how to do it. You build when you're proud prospect gets an automated email, guess what, you get one that says, hey, so and so just signed up, they said they're accredited, they're interested in that thing, this much money, and here's their phone number and email address. So the best thing that you can do then is call them, that's really the highest, you've got the highest likelihood of converting somebody, if you get back to them, within minutes of them signing up on your website, however, I will tell you some specific numbers, your conversion rate, meaning the number of people who once they sign up will actually respond will actually be available, when you call them is going to be around 11% or 12%. And the number of people who actually invest is only going to be 2%. So just hold that number in your mind for a moment, what that means is 98% of the calls you make will not yield a result, right, not in the first 30 to 90 days. That is a lot of follow up. Now, some of our clients, they don't follow up with them. You know, we have one client that came to us they had 300 million of assets under management, Aum there today at over 2 billion of AUM. And they don't make phone calls that right everything is conducted via email. So prospects get a sequence of emails and nurturing sequence of emails. And then a follow up sequence of emails, either pitch emails or continual newsletter, nurturing emails. So and that's how they do it. So really depends on who you are, and what your preferences are. You can also use text messages, you can respond to people, you can communicate via text as well. And everything can be automated. So that this is what to understand. You asked me what should people understand? It's not easy. But what you can do is scale. That's the key, what you're doing is you are making your time vastly more effective by setting up automations. And that is what enables you to go from 1 million raised to 10 million raised to 50 million raised in a relatively short period of time.

17:22

Yeah, I mean, that makes all the difference in the world, right? We started syndicating back in 2019, I had zero assets. And you know, today we've scaled to over $50 million in assets under management. And for me to have gotten there without being able to syndicate and raise capital for it, it would have taken decades probably right. I mean, if you think about how much money you're gonna have to put down, instead of raising a few million dollars from investors, it just, it really helps you scale quickly. And and you know, look, there's there's pros and cons with that. Right? There's there's the good side, which means Hey, we get more deals, we get more deal flow, we've got more consistent income in some ways. But then now you're bait you basically have a job, right? You're you're reporting to investors, and you're having to deal with all that. All of the all the fun stuff that comes with it.

18:05

Yes, indeed, what kind of assets? Do you invest in? Tyler? Sorry, I didn't see that. multiview?

18:11

No, no, we actually don't do any multifamily we've got, we've got mostly retail and mixed use. And then we have some office, we have some industrial. And then we do some ground up development as well. So we're kind of all over the board.

18:23

So the other issue is that two things happen if you don't automate. If you don't scale through automation, by creating a crowdfunding website, that's essentially simply stated, that's why we build crowdfunding websites for sponsors. Two things happen. One, you have to then manually network. So you got, you still got to work. By the way, even with a with even with a crowdfunding platform, I've already described it, it's just more efficient work. But if you don't have proper platform, or a proper online presence and the right systems in place, you have to do it all manually, meaning you got to go to networking events, you got to join a country club, you got to go to conferences, you got to exchange email addresses, and you got to follow up, then you got to tell people your story. That same story again, and again. And again, because you're doing it individually for each person. So it's not an efficient use of your time. The second thing that's going to happen if you attempt to scale that way, or not just attempt to scale that way. But if you're attempting to scale is you will tap out your existing network very quickly. Right? I mean, if you want to go from you know, 10 million value and 50 million, you're looking at the difference between what 4 million of equity to 20. Your your $4 million equity network is just not going to have the capacity to invest up to 20 million. So you are you have to increase your network and you have to be communicating with more people at the same time essentially. But yeah, so that those are those are the that's those are the real advantages. of automating is the ability to scale effectively.

20:04

Yeah, we learned that lesson pretty, pretty well, a couple of years ago, we basically tapped out our investors were like, Okay, well, we got to kind of change the system, our systems up. And, you know, I started spending a lot more time getting out there networking and meeting people. And it's, you know, it's a pain. It's not nearly as scalable. But yeah, like, like the funnels that you're creating the way that you're directing these investors, because it makes it so much more scalable. And like you said, you're able to lead generate while you're sleeping. Talk to me a little bit about, you know, your the platforms that the proprietary platforms that you're creating for investors versus like a crowd street or a real crowd, why would somebody want their own platform versus using one that's out there?

20:43

Right. So actually, you know, what we build is the exact same systems that crowd street use the exact same systems, the realty mogul real crowd is no more either way. They were bought by a variety. But, but they are the same systems. I've known these guys, since the industry started, I wrote a book called leaders of the crowd. That was written right at the very, very beginning of the industry, where I, I spoke to all the founders and people in the White House and in Congress and lobbyists, how did this thing come about? What What drove it? And they are, they are marketplaces at all. It's the difference they you can list on their platform. And they will do the marketing for you. A lot of our clients start on the crowdfunding platforms, crowd street Realty mogul, and previously on, on, on real crowd and other platform equity multiple and other platforms, not that many of them. And they start on those platforms, they suddenly realize, Oh, my goodness, this very powerful, effective way of raising capital, and they decide that they want to do it in house, you know, it's like, you could think of it like a management company, or like the decision to hire an outside management company to do it for you. Right, so do your management for you, or to bring it in house, if you bring it in house, you have a lot more control, you probably end up spending a lot less money on it, right? It's effective cost effective, it's expensive to list the deal on one of the crowdfunding platforms. Plus, if you're a beginner, there's almost zero chance that you will be able to live on those platforms, right, they take 5% of the sponsors that come through the door, that means they are turning away 95%. And if you don't have a say, a season track record, typically multi cycle I don't, I wouldn't I wouldn't be. So I'm pretty sure that they've taken some non multi cycle sponsors on as well. But typically, you're going to have to have seasoned experienced, you got to have decent AUM assets under management, they're not going to take you so you don't have that option. If you go to a lesser platform, you're going to be paying the fees, they're going to be doing the raising for you, they're probably not going to raise the money that you need. It's better for you to build out the system yourself. Why? Because it becomes an asset to you. It's an investment. The way that I think of it is it's like you're a ground up guy. So you know that for a certain period of time, you are spending money on foundation work plumbers, electrician, framers concrete guys, you're spent, you are investing in building an infrastructure. And then there's a day comes when you complete your building. And tenants move in and you start getting checks. It's the same thing with a crowdfunding platform, you have to invest in building the platform in the same way as you would building an apartment building on industrial warehouse, you spend a period of time investing in building it, and then that's when you start seeing the results coming in. And those results never stop. They just keep on going right out into the future. You've still got to do upkeep and you've got to do maintenance, right? But and in terms of crowdfunding, that means you got to send out newsletters, you got to continually communicate. You might do some marketing, get on podcasts or do some Facebook ads or some Google ads or get on some webinars, et cetera. That's your ongoing maintenance, then now you're driving people to your platform, and it's there forever, just like a new apartment building is yielding rent for year in year out.

24:42

Yeah, I think that's a great analogy. Because you know, when you build it from the ground up, you understand how everything works, and you know, it's going to work properly for you and and also it's never gonna go anywhere. I mean, we've seen some issues here in the news recently around third party crowdfunding sites, right I mean, crowd was crowd fund, or crowd street just had a really big one with Nightingale, right? And you know, we're the the sponsor basically ended up pocketing a whole bunch of money and disappearing. I mean, where do you see the future of crowdfunding headed?

25:09

Yeah, so it's definitely hitting some hurdles at the moment. We are currently here at GAO crowd. It's a it's a period of flux of flux, I should say, period of flux at the moment. And we are hyper focused on educating sponsors, and investors in understanding what's going on at the moment. And the way we're doing that is focusing as at this point in time, we're like, we're recording end of August 2023, eight to date, stamp your car, your podcast, but I'm going to do it anyway. Because things change so much focus on capital cause. So helping sponsors to understand how to structure capital calls in a way that is creative to what they're doing. And that will be compelling to their investors, and at the same time educating investors in how to understand how to decide whether or not to make that additional investment, how to decide whether or not it's good money after bad. So that's our focus right now. It's a very, very difficult time. And I forgot your question. I've went off on a turn

26:15

or you answered it, you answered. I was just saying, what's the what's the future?

26:20

Yeah. So right now is the future right now, the future is right now I know that sounds, you've really got to be pivoting and understanding what's going on in the market. Right now, the way that the market is going to roll out is that over the next six to 12 months, you're going to see considerable, considerably more distress in the market, meaning you're going to see sponsors, stopping distributions, making capital calls for their existing investors and losing deals if they're unable to raise the money that they need. That is all driven by increased interest rate cost interest, increased insurance costs, which are through the roof, entry, increased expenses, and downward pressure on rent increases. So all of these factors are coming together at one time, banks are going to start taking deals back lenders are going to start taking deals back whether they're banks or not. They're going to start being disturbed or sold out into the market. So there will be a flushing out of sponsors who are unable to weather the storm. There will be a new generation of sponsors who will buy up all of that distress, probably people that have been through it before, who were who were who prepared for this kind of downturn. They didn't know it's going to come in this way. But they went through prior downturns and they understood. This is a long term game. And so they were prudent with their underwriting and they are now sitting on the sidelines watching what's going on, and waiting for the right opportunity. And the reason they're on the sidelines, is because there's very few hitting the market, very few opportunistic deals or distressed, discounted distressed deals coming onto the market yet. And we all know that it is going to come so we're everyone's waiting for that moment, and it will happen within the next six to 12 months, you're going to see that increased dramatically.

28:23

Dr. Gower this was a great conversation. If anybody in the audience wants to learn more about you or Gower crowd, how can they find you?

28:29

So best thing is to go to my website, Gower. crowd.com GOW. Er Gowa. That's my last name, Gower. crowd.com. And sign up for my newsletter. There is one going out in one minute. So if you're Hurry up, you can get on that list. But don't worry, they come out every Wednesday. And we cover all the latest news and updates on real estate syndication and crowdfunding with commentary. And we provide masses of educational materials. Almost all of it at no cost.

29:03

That's great. Dr. Gupta, thank you so much. And for the audience out there listening real quick, some house cleaning notes. For anybody that leaves a five star review on Apple podcasts. We are going to be throwing you into a raffle every month for a free 30 minute consultation call with me. So go ahead, leave a five star review the funnier the better, in my opinion, but we're going to randomize it so

29:27

be sure to go with that and we will see you guys next time. This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com