These days, if you want to drum up some cash to support your new arts project or raise some money to help cover the cost of a friend’s surgery, you take your case to Kickstarter. The fundraising website, launched in 2009, helped to popularize the entire “crowdfunding” movement on the web — something that’s become even more ingrained in users’ minds in the five years since. But what do real estate companies do when they want to raise money from investors?
Now, thanks to RealCrowd, they can turn to crowdfunding, too.
RealCrowd is an equity-crowdfunding startup based in San Francisco, and according to a recent report from the Wall Street Journal‘s blog, it’s already raised $1.6 million in its seed funding round. Some of that money has come from investors like Data Collective (a venture capital company), Garry Tan (a partner for the seed accelerator Y Combinator) and Alexis Ohanian (the co-founder of Reddit). Plenty of real estate and wealth managers have also lent their financial support.
So, how does RealCrowd work? Real estate operating companies rely on funding from investors, so it’s beneficial for them to post information about their projects in order to attract that incoming capital. RealCrowd allows them that posting space as well as connections to accredited investors who are seriously interested in getting involved with their projects. And RealCrowd gets paid for these hookups, too. Every real estate company is required to pay a fee to use it, though investors are not. That means RealCrowd gets a little bit from each transaction that occurs through its site.
The idea of an equity-crowdfunding site isn’t particularly new. RealCrowd appears to be enjoying quite a bit of its success, but that’s because it’s found a niche in linking real estate companies, not traditional entrepreneurs, with investors. For more traditional equity crowdfunding, there’s Portfolia, which also benefits accredited investors, though it’s mostly geared toward women entrepreneurs. For now, Portfolia has nothing to do with the real estate market. Still, it’s a way for investors and companies to join up and begin their mutually beneficial partnership.
“There’s always phases coming in and out with fundraising,” says David McChesney, Real Estate Agent and GRI withKeyes Company. “It’s good that people are doing inventive ideas like that. Not a lot of people take the time to do so. Maybe this will end up reaching higher-end investors.”
Spring always promises to be the real estate market’s most active season, which means RealCrowd could begin to see quite a bit more success as the flowers finally begin to bloom. Several studies have suggested that 2014 could be the year the housing market finally makes a full recovery from its catastrophic plummet over five years ago, but it still might be too early to tell. Nonetheless, the spring holds promise — and what’s promising for real estate companies is also promising for their investors.
RealCrowd isn’t alone in their niche field. They face competition from sites like RealtyMogul, PatchofLand and The Prodigy Network, all of which allow accredited investors to partner with real estate companies. For now, though, RealCrowd shows promise. We’ll see if that continues into the spring housing boom.