![]() Traditional Fundraising Model (Simplified) Idea –> Pitch Banks or Investors –> Funding –> Execute Idea Non-traditional Crowdfunding Model (Also Simplified) Idea –> Set Up Crowdfunding Initiative –> Funding Goal Reached –> Funding –> Execute Idea This “democratizing” of fundraising allows people outside the traditional investor groups and lenders to join in on the process. Kickstarter is still leading the way when it comes to creative consumer products with over $900 million pledged to over 125,000 unique projects. So far, crowdfunding has had the most success with tangible consumer products. For example, there might be an engineer who is building a more efficient bike seat and needs $10,000 to get it to market. He can post the project on a crowdfunding website and immediately have access to thousands (if not millions) of people and customers who would like to support bringing the project to market. Once the funding goal is reached, the money is transferred and the project can start.crowdfunding marketing For investors, crowdfunding means less risky, smaller dollar investments in projects they care about. For entrepreneurs, crowdfunding is a better alternative to traditional investment capital that improves the likelihood of securing the capital required to stay in business.
Nav, how does traditional real estate investing work? Real Estate is inherently fragmented and inefficient. Accordingly, although investors have a variety of options to choose from when investing in stocks and bonds, they have very few ways in which to access private real estate. Under the traditional “country-club” model to real estate investing, investors must solely rely on their own networks to access quality real estate investments. And to participate, you typically need to invest a minimum of at least $50,000-100,000. The problem is, most investors just don’t have that level of access or don’t want to put such a large sum of money into a single property, which obviously hinders diversification. And although REIT’s solve part of the problem, with REIT’s investors are investing in a pool of properties rather than a specific property. This in turn reduces transparency and control.crowdfunding advertising How do you apply a crowdfunding model to real estate at RealtyShares?
Crowdfunding eliminates most of the barriers or difficulties involved with traditional real estate investing. Real estate is time consuming, expensive and requires skill and local knowledge. Accordingly, unless you’re willing to invest $100K into a single asset and can afford the time and effort to actively manage and operate the property, it isn’t a viable investment option. Crowdfunding through platforms like RealtyShares not only provides a level of access and transparency that has never before been possible for real estate but also greatly reduces the time and capital requirements needed to invest. That is because each investment is passive and investors don’t have to worry about the usual headaches that come with property management and the investment minimums are much lower. This allows investors to invest more quickly and also to allocate the same $50-100K they may otherwise put into a single property across multiple properties in different geographies thereby achieving greater diversification.Imagine sitting on your couch in New York and browsing apartment buildings or single-family home investments in Los Angeles or Seattle from your laptop or tablet. Crowdfunding is making that possible.indiegogo marketing
Also, due to the nature of securities laws, most investment crowdfunding platforms to date have only been open to accredited or high net worth investors. But with the passage of the JOBS Act and the Crowdfunding Rules only 6-9 months away, we’ll also see retail investors participating in this burgeoning industry in the not too distant future. This is a monumental change since these investors have historically been excluded from investments in alternative asset classes like real estate.kickstarter marketing Thanks for the interview, Nav! It is difficult to innovate within the financial services world. Changing the underlying incumbent methods – in this case, how traditional real estate fundraising and investments work – is the right way to make headway on a larger scale.kickstarter project Posted from: http://www.forbes.com/sites/rodebrahimi/2013/12/12/how-crowdfunding-will-impact-real-estate-investing-an-interview-with-realtyshares/ |