Businesses, promoters of commercial real estate property transactions and commercial real estate developers all have one thing in common – the never-ending quest for obtaining the capital financing that is fundamental to their hopes of future growth. Many believe – and some rightly – that chasing the dragon that is venture capital (or angel investors) provides the pathway to success, yet the probability of success odds of obtaining capital from these sources are quite long indeed.
Venture Capital is an Expensive Proposition
Venture capital comes at a cost. Like any other middleman that exists between the company and the investing-public, the venture capital fund has to make a profit – and a handsome one at that. The venture capital fund has to satisfy both the appetite of the institutional investors who back the venture capital fund, as well as delivering revenues for its principals and costs of operations. Under the old capital market regulatory construct, venture capital funds ruled all, but the changes in the capital market regulations now relegate venture capital funds to becoming an anachronism of a bygone era.
Don’t Expect Angels When Angel Investors Engage
Angel investors are the seed round investors in many cases, yet they serve to absorb a considerable amount of the future profit-taking opportunity as the price of doing business. The new market regulatory construct leaves the future role of angel investing intact, but the price of leaving angel investors in the game may be the realization that profits aren’t what they used to be because now businesses and entrepreneurs have alternatives that offer better opportunities combined with lower costs that threaten to force angel investor returns come back down to earth.
Where Are You Going to Go for Capital Financing
The new path forward for capital financing was created by virtue of the new regulatory construct that is now in place for 2021. Under the new rules, the structure and execution of the capital raise campaign has been fundamentally changed to provide a path to financing that makes venture capital and angel investors a potential luxury that is no longer viable. Savvy developers and entrepreneurs will undoubtedly be first out of the chute, but eventually, the masses will learn of the new path across the Rubicon.