If you’ve ever flown first class, stayed at a luxury hotel, or dined at a world-class restaurant, you know the value of a premium customer experience. A unique, enjoyable, or captivating experience can create lifelong memories and build positive associations with a brand that are difficult to break.
Many real estate investors who invest in retail understand this on an almost cellular level (check out the “Investing in Retail Real Estate Chapter” of our Comprehensive Guide to Commercial Real Estate Investing for more), but it holds true for any asset class or property type. As much as practical and financial concerns motivate investors, the sensation one feels when browsing through a listing or touring a site—and imagining the experience of occupying or using the developed property—can secure or sink a deal.
With that in mind, I frequently encourage sponsors to turn their attention to detail inward, to their internal processes, and ask: “What kind of experience are we providing to our investors?”
A smart approach to investor relationship management reaches beyond reporting and regulatory compliance. It’s more than periodic email updates, a well-designed website, or interactive data visualizations. It means, as a sponsor, optimizing the experience of every one of your investors, so they trust you on an implicit level.
A better investor experience can boost business for all kinds of sponsors, but especially for firms who are looking to raise more capital from their existing investor bases. Investor Relationship Management is the key to achieving your virtuous cycle of growth and success, in which investors continually reinvest their returns in your portfolio—not necessarily because you offer the highest internal rate of return, but because you’re a known quantity and a pleasure to do business with.
Based on what we’ve learned from the community of over 30,000 registered investors in the CrowdStreet marketplace, here are some of the factors that keep investors coming back:
What Investors Want: Personalized Communication
In a recent survey of CrowdStreet investors, the overwhelming majority of respondents said “communication” was the number one characteristic of a good sponsor. Just as sponsors want to get to know the people writing their checks, investors are looking for transparency from firms.
That said, every investor’s communication needs and preferences are unique. Some want to receive weekly or biweekly updates; others are comfortable with quarterly reports, and consider over-communication a sign of an ill-equipped or inexperienced sponsor. Some investors prefer to access their investments and track performance on their own—for instance, through our self-service Investment Hub—while others expect the old-school IRM experience: in-person meetings, one-on-one phone calls, and all.
When shopping around between IRM platforms, sponsors should consider the levels of flexibility and transparency each platform offers. CrowdStreet’s investors, in particular, prefer the direct-to-investor model because it facilitates honest, timely communication and transparency.
What Investors Want: Education
What perceived risks stand in the way of earning your investors’ trust? From the asset’s geographic location to market instability, a number of factors can affect a listing’s risk profile. Don’t make assumptions about what constitutes “acceptable” risk for your investors. Keep in mind that for each individual, risk assessment is a subjective process. As CrowdStreet’s Ian Formigle writes in an recent investor blog:
“Two different investors may have entirely different views of the risks that can translate into different perceived risk-adjusted returns. For example, in the category of tenant risk, one investor may argue in favor of the certainty associated with a single tenant while another investor may argue in favor of a multi-tenant property, citing the huge risk of absolute vacancy if the single tenant vacates—they are both correct.”
How can a sponsor address both of those investors’ perspectives and earn trust? The answer is simple: knowledge is power. Never miss an opportunity to educate your investor base. Depending on an investor’s background, this could mean walking through the characteristics of your market and offering insights about recent news; alternatively, for veteran investors, you may want to explain your firm’s distinct strategy and outlook: What makes your current offering too good to pass up. What’s your business plan for the next 5 or 10 years?
Take the lead with educational content, and offer opportunities for investors to dig in. Videos, podcasts, and webinars are great channels for your firm to provide thought leadership—and make your investors look and sound smarter to their colleagues and friends.
What Investors Want: Consistency, Professionalism, and Security
Finally, your IRM system should support rather than impede communication with your investor base. A patchwork of ad-hoc tools not only consumes your precious time and resources, but punches holes in your communication efforts: fonts, colors, and branding may differ from platform to platform, making your firm look amateurish in the eyes of investors.
Moreover, disparate systems cause gaps: critical information about investors gets stuck in silos, important documents go missing, and investor communication suffers as a result.
This why we engineered CrowdStreet’s investment management tools to simplify the ways sponsors communicate with their investors. Our platform can help your investor relations team scale, provide better customer experience, lower overhead, and supercharge your growth. In addition, our technology has institutional-grade security and procedures to ensure SEC compliance.
A great customer experience, communication and transparency are the pillars of trust, and ultimately lead to more investor satisfaction, and more reinvestment. And—as is the case with a first class seat or a 5-star hotel stay—once you’ve tried it, it’s hard to go back. Learn more about our investment management software.