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The Future of Fundraising is Digital

May 20, 2022
money

The term “fundraising” often conjures up images of a rattling charity collection box being thrust under our noses while strolling through town. But fundraising is much more than just collecting donations for non-profit organisations and associations.

For example, fundraising has also become an established and popular tool in the real estate sector for raising capital to attract suitable investors for proprietary project development, a new proptech or a real estate fund.

In this context, the year 2021 will be remembered fondly by the industry. Fundraising for private real estate investments alone reached a volume of $175.7 Billion last year. This makes 2021 the third most successful year since fundraising records began, according to trade magazine PERE. Europe’s proptech scene – traditionally relying on raising venture capital – also made it through the Corona period well, according to the European PropTech Association. Consequently, fundraising is booming and despite the various crises, be it Corona or the Ukraine war, there is no end in sight to the boom.

Even if there are currently signs of a turnaround in the money market policies of many countries, it is precisely asset classes such as venture capital and private equity, which rely on fundraising, that are getting investors’ hearts racing.

According to the German Private Equity and Venture Capital Association (BdK), the reasons for the attractive valuations are the continuing low interest rate period despite the jump in interest rates and the volatility on the stock market.

Successful Fundraising Needs to be Well Planned and Organised

But how can potential backers at home and abroad be reached, how can trust be established, and how can different regulatory standards be met?

In the main, the fundraising process follows a structured pattern: this begins with strategic and operational planning for the growth and fundraising process, followed by the identification of potential funders, and finally by establishing contact and building relationships. The contact work can be done by ‘phone, online or through a face-to-face meeting. Subsequently, it is important to consolidate and expand the relationships in order to attract investors for follow-up projects in the future. Finally, as part of the control process, an analysis and evaluation of the current and past fundraising measures must be implemented.

In terms of international fundraising, a good internal infrastructure and practical digital organisation tools for data processing are  hugely beneficial. In order to establish relationships with international backers, it pays to have a team on the ground and close to the investor, which is familiar with local regulations and customs and can therefore attract new investors more quickly and in a more targeted manner.

Strong Data Privacy Requirements

It must be kept in mind that each country has different laws and regulations when it comes to fundraising. It is important to obtain detailed information on individual regulations and, if necessary, to consult with third party experts and advisors. The topic of foreign currencies and exchange rate exposure should also not be ignored in the fundraising process.

Vitally, the data for the respective fundraising project and pan-European transactions must be stored securely in accordance with the General Data Protection Regulation (GDPR). In addition, investors should be informed about what data is collected about them, what it is used for, and where it is stored. All processes should be transparent and easily accessible to the investor. Violations of data protection regulations of third countries or the EU can quickly result in severe penalties. The EU in particular has made a name for itself in the past with regard to having any violations vigorously prosecuted.

Consistent Consideration of ESG Criteria

The topic of ESG is also becoming increasingly important in the fundraising sector, and transparency and disclosure play a crucial role in this context as well. ESG criteria should already be considered when defining the strategy for new funds. This increases fundraising prospects, as more and more investors are asking about sustainability standards and now have stricter requirements in this area. Fund managers are sometimes required to complete annual ESG reports and questionnaires as part of investor due diligence. It can be beneficial to anticipate potential questions and answers in advance and to design appropriate processes for collecting and processing this data.

Cleverly Structure and Securely Manage Data

The pandemic has shown how important digital solutions have become for fundraising. Fundraising managers should therefore invest in professional tools and a web-based infrastructure. Even though many investors still value in personal contact, it is increasingly preferred to manage most fundraising processes digitally.

The data rooms from Drooms allow documents to be managed, stored and shared centrally. This allows fundraising to be performed faster and more securely than ever before. Drooms offers an intelligent work platform that provides more flexibility, allows individual workflows and simplifies collaboration between investor, fundraiser and all stakeholders in the process. At the same time, all data is protected adhering to the highest security standards – Drooms is DSGVO compliant for extra data security.

This is especially important for communication with investors, both on a domestic and an international level. Drooms also offers legally compliant documentation of the work steps in each individual document. In particular when several partners are involved, this is crucial. Since all files and folders are centrally located in one place, access to company data is easier than ever and all project stakeholders can be certain of always working in the latest version of the fundraising documents without file clutter or paper warfare. All data is securely stored on servers in Germany and Switzerland. Controlled workflows allow each action to be tracked, information to be stored safely, edited and retrieved at any time. Finally, with helpful features such as “Index Allocation”, a data room structure can be quickly established for all fundraising documents.

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