What 44 Accredited Investors Check First, and What Comes Next

Most investors start in the same place, the return target. In a 2022 survey of 44 accredited investors, 26 said it is the first thing they consider. That is 59% of the group naming the same starting point.

The survey counted only that first step. The four stages after it are what Altinvest sees across the 3,600+ investor meetings it has facilitated. They are our observation of how the questions arrive once an investor is talking to a sponsor, and each stage answers a different question.

What do accredited investors check first?

The return target. It works as a threshold, and an offering below an investor's threshold is set aside before anything else is read. How to lay the target and terms out for that reader is the subject of our offering page article.

One investor in the survey reduced the whole decision to two questions.

"How much money am I going to make and when am I going to make it?"

The second half matters as much as the first, because timing is part of the opening screen. Hold period, the date of the first distribution and the cadence after it are read beside the target. An investor sizing an allocation is matching it to a time horizon and a need for income.

Which number comes first depends on experience. Investors newer to private offerings leaned on cash-on-cash return and equity multiple, which describe the near term plainly. Investors with several offerings behind them went to IRR, because they wanted to see how earlier investments performed over their full life.

So the same page gets read two ways, with each reader applying a threshold set by a different metric. That is why a strong offering can draw little response from one audience and a good one from another. The target clears one reader's bar and misses the other's.

Why does the return target need a track record behind it?

Because in the meetings Altinvest sets, the second question is whether the target is credible. The only evidence that answers it is what the sponsor has already returned. A target describes intent, and realized results describe capability.

An investor who clears the first screen turns to history. What did earlier offerings target, what did they distribute, and how many reached a full cycle?

A target IRR beside three completed exits reads as the continuation of a record. The same target from a sponsor with no realized results reads as an assumption. The investor discounts it in sizing, in timing, or both.

The headline figure also carries more weight when it arrives with its reason. The reason might be the basis on the asset, contracted income or the exit assumption. An investor who can see it spends less of the meeting testing the number and more on the questions that lead to a subscription.

When do investors get to structure and fees?

Third, once the target is credible. In the meetings Altinvest facilitates, this is where the conversation turns to terms. At this stage the investor is reconciling the gross figure in the materials with the net figure that reaches them.

Several terms decide how much of the target reaches the limited partner. They include the preferred return and whether it is cumulative, and the point where the sponsor's promote begins. The total fee load across acquisition, asset management and disposition sits beside them.

Liquidity belongs to the same reading. Lock-up, redemption provisions and the expected hold show whether the allocation fits the rest of the portfolio. An experienced allocator weighs them against the income timing checked at the first stage.

Sponsors hear these questions in investor meetings with some regularity. They tend to come after the target and the record are accepted, which is a signal in itself. An investor asking about the waterfall is working out how large a commitment to make.

How much does the sponsor team weigh in the decision?

Heavily, and more with each offering an investor has seen. In the meetings Altinvest facilitates, the team is the fourth stage, and much of it is judged across the table. It was also the second theme in the 2022 survey, after returns. One investor put the decision in two parts.

"I focused on the quality of the project and the quality of the sponsor team. If those two check out, I want to invest."

Another started out treating IRR as the deciding figure, and over time learned that the sponsor is very important, that "there's more to it than that."

That shift marks a maturing allocator. Early on, the investor underwrites the asset. Later, the investor underwrites the people who will run the asset for the length of the hold.

What investors read in a team covers three areas. They look at the principals' qualifications and operating history. They look for specialization, a known position in a market or asset class. And they weigh communication, meaning how often the sponsor reports and how candidly they discuss setbacks.

Communication is judged largely in conversation, which is why it so often decides a first meeting.

What turns diligence into a commitment?

Conviction, and across the 3,600+ investor meetings Altinvest has facilitated, it forms in the conversation with the sponsor. Once the numbers, the record, the terms and the team hold up, the last question is personal. It was also the third theme in the 2022 survey.

Investors weighed whether the location fit their view of where growth is headed, and whether they believed in the asset class. A multifamily offering in a market an investor has watched for a decade reads differently from an equally strong one in a market they know only from the materials.

A sponsor builds that conviction with specifics an investor can test:

• A submarket defended with numbers. The sponsor names the submarket, then shows its own rent, occupancy and supply figures for it, and explains why the offering sits there and nowhere nearby.
• A realized loss explained plainly. What went wrong, what the sponsor did about it, and what changed in how they underwrite afterward. Candor about a past offering makes the current target easier to believe.
• The thesis in the sponsor's own words. The typical check in these meetings runs from $50,000 to over $1 million, and at that size an investor wants to hear the reasoning from the person who will run the asset.

Conviction also carries forward. Investors who see one offering run as described return for the next, often add to their position, and introduce others. For them the order compresses. They already know the record and the team from the inside, so the conversation moves quickly from the target to conviction.

If you are raising $2M to $10M+ and want to meet accredited investors who have already cleared the first screen, apply to list your offering on Altinvest.