Funding The Future: Long-Term Capital For GrowthMay 09, 2018 | By Wayne O'Neill
There’s an elephant in the room that no one is talking about: long-term sources of capital.
No one is talking about this because no one really understands it.
This dawned on us when our clients and other people we interact with began commenting about how much time we spend talking to private equity firms. We put a lot of effort into getting these firms’ understanding of the current market, and getting our arms around what’s going on right now with different funds. People took notice — and they started asking why.
We know that understanding and tapping into long-term sources of equity is critical to shaping deals — but we’ve learned this isn’t common knowledge. Even many top CEOs and talented salespeople don’t understand what long-term capital funding is, how they can get it, or why it’s so important to developing work.
So in today’s blog post, I’m going to break it down for you. This information will apply to you no matter if you’re an owner or a service provider — and no matter what kind of firm you are: design, construction, engineering, you name it. If you want to close deals faster, get more capital improvement projects done, or create better relationships with your clients, this post is for you.
Some Definitions Around Capital Funding
“Capital funding” is money a business or organization receives from lenders for the specific purpose of building things or buying fixed assets.
Since most owners focus on bond financing or bank financing, understanding how to leverage long-term investments like the following can give you a real edge:
- Sovereign wealth funds / bonds / stocks: State-owned investment funds that invest in global real and financial assets.
- Private equity funds: A partnership formed by private investors who want to invest directly in companies. They focus on investing in companies with long-term potential (i.e. companies that have the potential to turn around, improve and grow).
- Venture capital funds: Investment funds that manage the money of investors who seek private equity stakes in high- risk/high-return opportunities, such as startups.
- Pension funds: A fund that employees and their employers invest in, with the ultimate purpose of providing retirement income to the employees. Pension funds typically have large amounts of money to invest in private companies.
- Hedge funds: Privately owned investment funds that invest primarily in highly liquid assets. Focused on the highest return possible in a short a time as possible.
Capital Funding Helps You Move from Reacting to Facilitating
Understanding the long-term view of how money moves puts you in a unique position when you’re trying to move scope along or help your client figure out how to get their project done.
It positions you to shape the discussion right from the start.
Project owners are often focused only on standard, traditional financing methods to meet immediate needs — like bond financing or bank financing. When you bring long-term investment options to the table, when you connect money to the institutional mission, you’re no longer a service provider. You’re a facilitator.
And as a facilitator, you can participate in the shaping of the deals. It puts you in control of the scope and takes you out of the mass RFP process.
Check off the Emotional Wish-List
Capital improvement programs are interesting, and there’s always an emotional element to them. Unfortunately, most of those programs aren’t funded well enough — or long enough— to include the emotional wish-list in the scope.
As the discussion evolves and you’re trying to grow the relationship with the account, you can make a deeper connection if you understand long-term money and you understand what is emotionally important to the client.
You’re now a facilitator of scope — and that’s power that you’ll never lose with the client.
The Bottom Line
Whether you’re a service provider or an owner, connecting to diverse capital funding sources outside of bank financing can help you develop and complete capital improvement projects with far-reaching, meaningful impact.
At RESET, we believe that understanding and leveraging these funds is a win for all sides.
We’re also in a unique position to facilitate this process.
In our practice, we hear about projects long before they’re announced to the public, and we hear from investors who are looking for the next big win. We’ve created the Capital Concierge service to bridge the gap and connect investment dollars to owners and institutions in need of capital.