RealtyMogul Sells Machine Learning & Artificial Intelligence Loan Underwriting Tool to Hunt Real Estate Capital

Real estate crowdfunding platform RealtyMogul announced on Monday it has sold a machine learning and artificial intelligence loan underwriting tool to Hunt Real Estate Capital. According to RealtyMogul, Hunt Real Estate Capital plans to deploy the tool across its commercial real estate lending business.

While sharing details about the underwriting tool sale, Jilliene Helman, RealtyMogul’s CEO, stated:

“We have always prided ourselves on building cutting-edge technology at RealtyMogul. We believe machine learning and artificial intelligence is changing the way we invest by removing human bias. We learn an incredible amount about what markets and specific properties to invest in because of our technology. We are thrilled Hunt is going to deploy it to an even larger piece of the commercial real estate market.”

Founded in 2012, RealtyMogul reported that it has invested in more than $2 billion of real estate and has returned over $100 million to investors. The platform explained that it provides investors exclusive access to thoroughly better opportunities, rigorous underwriting, and “high-touch” customer service through licensed investment professionals.

Financial terms of the sale have not been disclosed.

Realty Mogul’s Most Recent Reg A+ Filing Provides Insight into Platform Operations

RealtyMogul has filed an updated form 1-A for their MogulREIT I offering which was launched more than two years ago. A non traded REIT, MogulREIT I has an investment objective of generating passive income for investors. As the offering is issued using Reg A+ both accredited and non-accredited investors may participate at a minimum amount of $1000.

RealtyMogul the platform was one of the earliest real estate crowdfunding sites and continues to list single properties for investment. The online investment platform is well known within the industry. As Reg A+ offerings, which can raise up to $50 million in a given year, mandate a high degree of disclosure it is interesting to review to garner perspective on overall platform performance. Of course, any investor in a MogulREIT should review the entire document before they commit their capital.

RealtyMogul’s form 1-A, which states that MogulREIT I is seeking up to $32,452,393 in common shares, provides perspective on the site’s operations:

“Our parent company is a real estate investment marketplace leader.  Since Realty Mogul, Co. launched the Realty Mogul Platform in 2013, it has originated, underwritten, and financed over $2 billion in real estate value through debt and equity investments in approximately $400 million in real estate properties across approximately 289 debt and equity transactions.  Over the past six years, Realty Mogul, Co. has raised capital for debt and equity commercial real estate offerings and invested that capital in multifamily, retail, office, self-storage, and industrial real estate opportunities.”

Regarding MogulREIT I:

“As of June 30, 2018, there were 15 assets in MogulREIT I, we had approximately $34.5 million in capital investments, and had approximately $3.1 million in cash.  We anticipate that proceeds from our Offering will provide sufficient liquidity to meet future funding commitments as well as our operational costs.”

And regarding performance:

“As of January 1, 2019, our Manager has declared and paid 27 months of consecutive 8% annualized distributions based on the current NAV.”

RealtyMogul offers as second REIT – MogulREIT II which seeks income and capital gain. Qualified by the Securities and Exchange Commission in September 2017, this REIT intends to:

“… make preferred equity and joint venture equity investments in multifamily properties that have demonstrated consistently high occupancy and income levels across market cycles as well as multifamily properties that offer value-added opportunities with appropriate risk-adjusted returns and opportunity for value appreciation.”

As of December 2017, MogulREIT II had issued approximately 371,106 shares of common stock in its offering for gross offering proceeds of $3,711,057. 

Today, there are a good number of non-traded REITs using Reg A+. Issuers promote the offerings as providing access to various real estate assets – minus the high expenses affiliated with publicly traded REITs.

 

 

RealtyMogul Files New Reg A+ for Blind Pool REIT

It appears that RealtyMogul, an online real estate investment platform, is preparing a new fund for investors.

According to a filing with the Securities and Exchange Commission, RealtyMogul is looking to offer a new “blind pool” REIT under Reg A+. The offering is seeking up to $50 million from both accredited and non-accredited investors. A minimum amount of $1000, or 100 shares at $10 each, is needed to participate in the fund. The REIT expects to make regular distributions to investors.

According to the document;

“… the Company is set up as a “blind pool” REIT, which means that we are not committed to acquiring any particular investments with the net proceeds of this offering.  Investing in the Company can lead to greater diversification because the Company intends to invest its assets in multiple real estate opportunities.  However, unlike other investment opportunities on the Realty Mogul Platform, a purchaser of our common shares may not know what investments the Company will make with its assets at the time the investor purchases our common shares. Although our Manager currently manages another REIT with similar investment objectives, MogulREIT II, Inc., MogulREIT II, Inc.’s portfolio primarily consists of preferred equity and joint venture equity investments in multifamily properties, and its investment strategy differs significantly from the Company’s investment strategy.”

As noted in the filing, this new REIT is set up differently than RealtyMogul’s other Reg A+ REITs.

As of March 2018, excluding loan originations secured by residential real estate, the RM Originators had originated 116 investment opportunities with a total of $301 million.  Of those 116 investment opportunities, 25 were senior or mezzanine loans secured by commercial real estate properties with an aggregate loan value of $146 million and 91 were common and preferred equity investments in entities controlling commercial real estate with a total investment value of $155 million.

The blind pool REIT may also use leverage, up to 70%. The REIT expects to hold a minimum of 55% in commercial mortgage related instruments. Other possible assets include a more diverse range of real estate related securities including CMBSs and CDOs..

Interestingly, the filing staters “we expect to seek a liquidity transaction in the future,” noting that this event could come in many different forms, if at all.

 

RealtyMogul Boosts REIT Cred with Hire of Industry Veteran Aaron Halfacre as President

RealtyMogul, a leading real estate crowdfunding platform offering Reg D (accredited) and Reg A+ (both accreds and non-accreds) investment opportunities in commercial and residential property, has hired a new President to help lead the firm. Aaron Halfacre, a 20 year real estate executive, has joined RealtyMogul bringing in institutional expertise including in the hot REIT sector.

“We are very pleased to have Aaron join the team; he has a stellar track record and incredible depth of real estate and capital markets industry expertise that will prove invaluable to the company,” said Jilliene Helman, CEO of RealtyMogul. “We will benefit immensely from his experience, and I am confident he will help the company reach new heights.”

As RealtyMogul’s President and a member of the executive team, Halfacre will be crafting company-wide strategy, driving execution and augmenting business growth. Halfacre will also be a voting member of the firm’s investment committee, which has invested in over $1.4 billion of real estate since 2013.

RealtyMogul adds that with his direct oversight of capital markets activity, Halfacre will be particularly focused on further growing assets under management and real estate transaction volume.

Halfacre most recently served as President and Chief Investment Officer at Campus Crest, a publicly traded student housing REIT, where he shepherded the successful $1.9 billion take-private transaction of the company. Before Campus Crest, Halfacre was an executive of Cole Real Estate Investments, a publicly traded net lease REIT, where he acted as a key member working on transactions in excess of $10 billion total market capitalization. Halfacre also spent time at BlackRock, the world’s largest investment manager, serving as the Chief of Staff and Head of Product Development for BlackRock’s Global Real Estate Group, where he led the development of over $3 billion of private real estate product. During his time at BlackRock, he also served as the Chief Operating Officer of a $14 billion global equities investment team. Halfacre said he was excited to join the RealtyMogul team;

“I believe my industry experience across real estate and alternatives, debt and equity, retail and institutional, and both public and private markets is a perfect fit for RealtyMogul’s future.”

The hiring of Halfacre may forshadow additional options with RealtyMogul’s REIT or MogulREIT offerings.

 

Former Rockwood Capital Partner Joins RealtyMogul as Chief Investment Officer

Real estate crowdfunding platform RealtyMogul has announced the appointment of Chris Fraley as Chief Investment Officer.

RealtyMogul says that Fraley has served as their interim Chief Investment Officer since June 2017, and has now joined full-time to continue overseeing credit and asset management for RealtyMogul’s debt and equity investments.

Fraley has over 20 years of experience in commercial real estate and is a former Partner at Rockwood Capital, a privately held real estate investment and advisory firm with more than $8 billion in assets under management. Fraley was a member of the Investment, Management, Research and Strategy Committees at Rockwood Capital and holds an M.B.A. from Yale University.

Jilliene Helman, CEO & Co-Founder of RealtyMogul, says Fraley has a stellar track record of sourcing transactions and negotiating complex joint ventures;

“His extensive knowledge and institutional experience in commercial real estate has been a tremendous asset to the team. We’re excited to have him join us full-time.”

This strategic hire comes during a time when RealtyMogul is reporting “great momentum.” The company says it has now closed transactions with over $1.4 billion in total capitalization. Additionally, RealtyMogul recently launched its second real estate investment trust, or “REIT,” MogulREIT II, focused on investing equity in multifamily apartment buildings, and was awarded a Gold medal for Consumer Services Company of the Year in the 2017 Stevie Women in Business Awards.

Fraley says he expects RealtyMogul to expand the size of its investment transactions in 2018.

“I believe RealtyMogul is entering its third phase of growth as a business, evidenced by its recent acquisition of Serendipity Apartments this past September. Due to the ability to invest larger amounts of equity, we were able to maintain a majority, controlling interest in a $24M apartment community. While providing opportunities in preferred equity, mezzanine debt and smaller, passive limited partner interests will still be a critical aspect of our business, I’m hopeful that our real estate team’s substantial institutional background will help us acquire and successfully manage properties with larger transaction values.”

Fraley adds that he sees RealtyMogul impacting the traditional institutional model of investing in real estate as the “typical closed end fund model is broken, inefficient and fraught with possibility of misalignment of interests.”

“I originally joined RealtyMogul to serve as the interim Chief Investment Officer, but once I saw the advanced technology and processes in place, I knew that I wanted to join the team in a greater capacity,” says Fraley. “RealtyMogul closed transactions with over $566 million in total capitalization in 2017. It is remarkable to see how fast the organization has grown, and I believe it is poised to scale further in 2018.”

 

RealtyMogul Adds New “Chief People Officer” to Executive Staff

RealtyMogul has hired a new “Chief People Officer” to incorporate “progressive human resource strategies.” Soley Van Lokeren has been added to the real estate investment platform’s executive team to handle the new responsibilities.

Van Lokeren will join is responsible for overseeing the Human Resources department, which includes shaping the full employee life-cycle and designing advanced recruiting metrics. Van Lokeren has over 20 years of experience in human resources. She is a former Executive Director of Business Operations at CPEhr, a human resources consulting firm, where she served in a multi-faceted roll managing daily operations for both the payroll and staffing divisions for over 400 clients nationwide.

RealtyMogul is proud to be led by an executive team that is 50 percent women and counts more than 80 employees spread across its offices in Atlanta, Los Angeles, Newport Beach, New York, Salt Lake City, San Diego and San Francisco. The crowdfunding platform continues to expand and hire new staff across its Commercial Real Estate, Marketing and Tech teams.

Jilliene Helman, CEO & co-founder of RealtyMogul, said that Van Lokeren holds a tremendous amount of experience that goes beyond traditional HR management.“She will play a key role in shaping the RealtyMogul experience as the company continues to grow,” said Helman.

“I’m thrilled to join the RealtyMogul team at such an exciting time,” commented Van Lokeren. “As the company continues to grow, I want to make sure we are creating new, innovative processes and systems to promote a leading workplace.”

 

RealtyMogul Tops $300 Million in Real Estate Funding, Wins 2017 Stevie Award for Women in Business

RealtyMogul, an online investment marketplace for real estate opportunities, has been awarded the Gold Stevie Award in the Consumer Services category during the 14th annual Stevie Awards for Women in Business.  Simultaneously, RealtyMogul, one of the most prominent real estate crowdfunding platforms in the US, has topped $300 million in total deal flow.

Jilliene Helman, CEO and co-founder of RealtyMogul, commented on the accomplishments of her company;

“Reaching over $300 million in capital invested on the RealtyMogul platform is a milestone we are proud to achieve. It is a testament to the team’s hard work and dedication underwriting investment opportunities across the country. We are thankful for our investors, both new and repeat, and look forward to hitting new milestones.”

The 2017 Stevie Awards received entries from 25 nations and territories. Helman said that receiving a Stevie Award for Women in Business was one of the world’s top honors for female entrepreneurs.

“We are excited and humbled to win a Gold Stevie Award for Company of The Year in the Consumer Services category,” said Helman. “We work very hard to underwrite distinctive investment opportunities for a wide variety of investors with different strategies, and receiving this award is a testament to our accomplishments. We look forward to continued success.”

Led Hellman, RealtyMogul has garnered over 140,000 investors, received over $300 million invested into deals presented on its platform and returned $65 million to its investors since its inception in 2012. RealtyMogul recently launched its second real estate investment trust or “REIT,” MogulREIT II. Using Reg A+, the REIT aims to invest in multifamily apartment communities around the United States and is available for both accredited and non-accredited investors alike. MogulREIT I was described as “filling up fast” now topping $25 million in investment. The minimum investment was recently increased as a necessary step to serve its investors with white glove service.

Additionally, RealtyMogul launched the industry’s first ever sidecar investment opportunity between a public non-traded REIT and a private placement for accredited investors. All investors are able to get exposure to the investment opportunity via the company’s REIT and accredited investors are able to invest in the specific transaction via the sidecar. RealtyMogul says it decided to offer the sidecar to meet the needs of a variety of different investors who have diverse investment strategies and preferences.

If an individual wants to invest in one market or deal, as an accredited investor, you can choose that specific investment. If you prefer to invest in a diversified portfolio, you can do that as well via one of the public-non-traded REITs that are currently being offered.

“We are excited to be the first online real estate investment company to offer an online sidecar investment between a public non-traded REIT and a private placement for accredited investors,” added Hellman. “Our investors have diverse strategies, and we are constantly thinking of innovative ways to bring them distinctive investment opportunities.”

 

RealtyMogul.com Launches MogulREIT II: Targets Multifamily Apartment Buildings

RealtyMogul.com, a leading online marketplace for commercial real estate investing, has launched the company’s second real estate investment trust or “REIT,” labeled MogulREIT II. The newest REIT was revealed in an SEC filing earlier this year. The first MogulREIT was launched in August of 2016.

MogulREIT II aims to invest in multifamily apartments across the United States that have demonstrated consistently high occupancy and income levels across market cycles. MogulREIT II also plans to invest in multifamily properties that offer value add opportunities with appropriate risk-adjusted returns and potential for appreciation objectives.

The company points to data from the US Census Bureau’s Housing and Vacancy Homeownership Report that indicates the U.S. apartment market has experienced a strong recovery in recent years.

RealtyMogul.com says that MogulREIT II is able to operate with lower fees than some of the other REIT offerings available in the market since it is able to connect with investors through RealtyMogul’s platform, thereby avoiding paying broker dealers selling commissions, which may average 7-8% of invested dollars.

Jilliene Helman, CEO of RealtyMogul, told Crowdfund Insider;

“We’re already seeing a very strong response from our investors for MogulREIT II and are certainly open to launching new MogulREITs in the future. Our goal at RealtyMogul is to provide investment opportunities for all types of investors, whether they’re looking for potential stable income, aggressive growth, or exclusive private placement deals, and if there is interest for another MogulREIT, we’ll happily explore it.”

Helman said that multifamily continues to be a great sector for investment, as people of all ages are choosing to rent rather than buy a home.

“The massive millennial generation is the largest share of the American workforce and highly values rentals, which satisfy their desire to maintain a flexible lifestyle. We’re even seeing an emerging demand among baby boomers, who are moving back into city centers from their home in the suburbs.”

MogulREIT II says its “rigorous zero-based underwriting process”, which analyzes each potential deal from scratch through is a key component for success of the REITs. RealtyMogul says it spends over $1 million annually for the use of third-party data and technology to vet each deal. The process means that fewer than 1% of the requests reviewed by RealtyMogul pass its underwriting standards.

“The response to MogulREIT I overwhelmingly reinforced our view that retail investors are looking for a better way to invest in real estate,” said Hrach Simonian, General Partner at Canaan. “Multifamily is one of the most requested products by our customers and we have tailored this fund to that category.”

 

Why Online Investing Makes It Easy to Diversify Your Real Estate Portfolio

Modern Portfolio Theory is based on the idea that certain types of investment risk can be mitigated through a strategic pattern of diversification and asset allocation.

Diversification is important because it spreads risk across multiple types of investments within a single portfolio. By diversifying into different investments, the overall portfolio’s  risk is reduced so that the investor isn’t as exposed to a loss from a single investment

Asset allocation is important because it reduces the risk of an outsized impact on an investor’s portfolio from a market moving change in one asset class. In addition, asset allocation takes into account each individual investor’s risk tolerance, time horizon and investment goals.

Bull markets don’t last indefinitely. Markets and asset classes will have good and bad years. For these reasons, it is important for investors to choose a variety of asset classes and allocate their investment selections within each class strategically.

Real estate is an important part of a well-diversified portfolio, and the advent of online real estate investing makes it easy, convenient, and transparent for all investors to add real estate to their investment strategy.

The Many Faces of Online Real Estate Investing

Online real estate investing can be categorized into two distinct types of investments.

Equity-based real estate investments offer private investors a means of buying shares in a deal or a real estate project. These investments reward investors with a return on investment on the back end when the property is sold in the form of value appreciation and may also include quarterly or annual dividends based on cash-flow from rents.

Debt-based investments allow investors to pool their money on projects that pay back monthly dividends as interest on a loan and are usually short-term – as short as 6-months in the case of bridge loans. Charles Clinton at MarketWatch identifies three types of online real estate investing by dividing debt-based structures into two separate platform types.

Despite the short history of online real estate investing, the ecosystem continues to grow and expand, offering private investors more and better opportunities than ever before.

Here are 8 ways to invest in real estate online and easily build a diversified portfolio within this alternative asset class:

  • Equity Investing – There are many examples of equity real estate investing platforms. Each platform is different. Some platforms do their own underwriting. Some have low minimums while others specialize in particular types of real estate or structure their equity arrangements in a unique way. RealtyMogul and RealtyShares are examples of equity-based real estate platforms that underwrite their own deals. RealCrowd and CrowdStreet both specialize in offering commercial real estate from professional developers, but they don’t underwrite the deals.
  • Debt Investing – Just as equity-based real estate investing has splintered into specialization, so too has debt-based investing. A bridge loan is a type of short-term debt-based instrument that allows developers to fund projects, usually while they are adding value to a property, before the property is then financed with a bank. Lending Home is a platform that specializes in bridge lending, sometimes also called hard money lending. You’ll also find firms that specialize geographically, such as East Coast-based Fund That Flip. Sharestates started in New York City but has since expanded into other states. Patch of Land and PeerStreet are national platforms in the debt-based category. Platforms may also specialize in certain types of properties, i.e. residential, multifamily or commercial, like Money360.
  • Rental Property Investing– Real estate platforms that offer rental properties are taking advantage of a big ‘Mom & Pop’ market that owns around 90% of single family rentals in the U.S.  According to a recent report on the single-family rental market, at least 56% of all rental houses are owned by individuals or small entities that own fewer than five units. Roofstock and HomeUnion now allow investors to purchase single-family rental units across the country.
  • Lease Investing – Commercial leasing is another subclass that can offer long-term benefits for real estate investors. Rich Uncles has carved a niche for itself in the triple-net category (NNN). VTS is another platform with a focus on commercial leasing management.
  • Digital REITsFundrise introduced the first online real estate investment trust (REIT). Called eREITs, Fundrise pairs modern technology and recent legislation with a nearly 60-year-old income-producing real estate investment vehicle. RealtyMogul’s MogulREIT is open to any investor ready to start with a $1,000 minimum investment.
  • Real Estate Funds – AlphaFlow changed real estate crowdfunding by becoming the first aggregator to offer a variety of investments across platforms in a professionally managed fund, then took the concept one step further and developed portfolios with automated diversification. Blackstone manages the largest alternative investment portfolio in the world. While the company hasn’t fully embraced proprietary technology, it has invested in Fintechs, showing that legacy financial management firms are taking notice of the opportunities in online real estate investing and automation.
  • 1031 Exchanges – 1031 exchanges are popular tax deferment tools with serious real estate investors. Investors can exchange a like-kind property within a certain time period to increase earnings and lower the current year’s tax burden. While other platforms offer 1031 exchange programs, ‘1031 Crowdfunding’ is a marketplace designed specifically for 1031 exchanges.
  • Self-Directed IRAs – There are a lot of rules associated with self-directed IRAs. In a nutshell, real estate investing through an IRA allows investors to grow their income while minimizing taxes associated with capital gains. There are multiple tax considerations when using SDIRAs for real estate. Most platforms allow investors to buy and sell real estate through their IRAs and partner with various SDIRA custodians who are well versed in working with this alternative asset class, and with online providers.   

How Private Investors Can Diversify Their Real Estate Portfolios Seamlessly

Online real estate investing opportunities continue to grow. A few years ago, investors had limited choices, and could only find them through private networks and publicly traded REITs. Today, opportunities exist in fix-and-flips, commercial and residential properties, ground-up developments, REITs, funds, and more. These investments are easily available, accessible and provided by companies that place importance on transparency, track record and trust. This allows investors to diversify their portfolios into real estate, and to diversify their investments within real estate asset class.


 

AdaPia d’Errico is COO at AlphaFlow, a registered investment advisor and the first platform to offer automatic portfolio diversification for real estate investments. She is an entrepreneur, business coach, and brand strategist. Prior to AlphaFlow, she was Chief Marketing Officer at real estate crowdfunding platform Patch of Land, she created and runs the Real Estate Crowdfunding Education and Networking Group, and co-founded two woman-owned businesses in the new media industry. Her career began in banking and finance, including Investor Relations for a Swiss hedge fund. She is an active real estate investor and is currently doing a complete renovation of her home.

RealtyMogul Update: Over $290 Million has Been Invested via the Real Estate Crowdfunding Platform


RealtyMogul was one of the first investment platforms to enter the real estate crowdfunding space. Starting as an Accredited Investor service that paired debt and equity real estate deals to a broad base group of investors, RealtyMogul has since empowered non-accredited investors to to participate in this popular asset class.

Real estate has traditionally been a more conservative investment in comparison to other riskier asset classes. Tied to physical property and a long history of consistent growth, real estate investing has long been an important portfolio element of HNW individuals and family offices. The advent of crowdfunding has brought access to real estate investing to a far wider group of individuals. Today RealtyMogul offers single property investments and as well as a bespoke MogulREIT that leverages Reg A+, a crowdfunding exemption that was created by the JOBS Act of 2012. RealtyMogul’s MogulREIT is open to both accredited and non-accredited investors.

RealtyMogul was co-founded by Jilliene Helman at the cusp of the transition in finance to becoming almost completely digital. RealtyMogul has now raised over $290 million online from over 135,000 investors.  RealtyMogul has returned more than $65 million to investors with zero principle lost, according to management. RealtyMogul also operates a 1031 exchange that allows current investors in real estate to defer capital gains tax on the sale of a property if they reinvest the proceeds in another qualifying property.

Helman was recognized by LendIt this past Spring as the Fintech Woman of the Year, a pretty cool honor for this entrepreneur. Crowdfund Insider recently reached to Helman for an update on her platform. Our discussion is below.


A year into your first MogulREIT, what has been your experience?

Jilliene Helman: Launching MogulREIT I was a great experience, and we’ve continued to learn along the way. The online real estate investing industry is still relatively young, and we’re constantly finding new ways to better serve our investors. We’ve found there is tremendous appetite for income which is exactly the focus for MogulREIT 1.

How many properties are in the REIT? What has been the return to investors during this time?

Jilliene Helman: The are currently 11 investments in MogulREIT I, which recently declared its twelfth consecutive month of 8% annualized returns on investment.

Do you expect to migrate to a MogulREIT only structure? What changes have you made in the past 12 months?

Jilliene Helman: While MogulREIT I has been very successful, we do not expect to migrate to a MogulREIT only structure. Realty Mogul strives to meet the needs of different investors and we plan to continue to offer private placements to accredited investors who want to pick and choose individual properties.  In addition, we plan to continue to offer 1031 eligible and retirement eligible investment opportunities.

MogulREIT has changed significantly over the past 12 months since it was qualified by the SEC in August 2016. We are constantly working to improve the product based on investor feedback, and changed the distribution frequency target from quarterly to monthly, added the ability to invest with retirement funds (with an initial minimum investment of 10,000), as well as allowing automatic reinvestment through a distribution reinvestment program.

Will you be launching any new MogulREITs?

Jilliene Helman: We’re always looking for new ways to provide attractive investment opportunities to our investors, and think MogulREIT I is a great product for people who want the potential to generate passive income. We’re exploring new MogulREITs that will cater to investors with different goals and risk profiles, so stay tuned for more.

Which sectors & geographies of the real estate market do you see opportunity?

Jilliene Helman: With increasing demand for housing across the country, we see a huge opportunity in the multifamily marketplace. As millennials and Gen Z enter the workforce, they are of prime age and income for renting, and their preference to maintain a flexible lifestyle supports renting instead of buying a home.

Opportunities exist in many geographies around the country, and while the underwriting process is very complicated, some factors we look for are favorable business climates, an upward trending influx of young people and strong job growth in key industries. Markets that meet these criteria include Atlanta, Dallas, Nashville, Raleigh and Salt Lake City.

What is on the RealtyMogul roadmap over the next year?

Jilliene Helman: Our roadmap over the next year is full of new products and updates. We’re committed to improving our current offerings while creating new ones to truly provide diversified investment opportunities. We’re also working to continue creating game-changing technology that will transform how the real estate investing space functions, and look forward to sharing more details in the future.

Will RealtyMogul be expanding into other markets (international)?

Jilliene Helman: While we are constantly looking at new and better ways to provide attractive investment opportunities, there are no current plans to expand into international markets.

RealtyMogul Preps for MogulREIT II, MogulREIT I Has Raised $15.5 Million

RealtyMogul.com has filed a new Form 1-A indicating its intent to launch a second MogulREIT using the Reg A+ securities exemption. MogulREIT II intends on raising up to $50 million to invest in multi-family residences targeting a Millennial consumer, according to the current Offering Circular.

RealtyMogul said management intended to make preferred equity and joint venture equity investments in multifamily properties, including independent senior-living communities, located in target markets throughout the United States.  The real estate platform said it would invest in apartment communities that have demonstrated consistently strong occupancy rates and income levels across market cycles as well as multifamily properties.

RealtyMogul said they believe that the near and intermediate-term market for investment in multifamily communities is compelling from a risk-return perspective. The company said that Millennials and Baby Boomers, are increasingly choosing to live in rental housing.

As part of the filing, RealtyMogul updated on its first foray into the REIT space.  RealtyMogul said that as of June 8,  2017, MogulREIT I had raised approximately $15.5 million. MogulREIT I is different in its investment approach than MogulREIT II as it intends to hold:

  • At least 55% of the total value of its assets in commercial mortgage-related instruments that are closely tied to one or more underlying commercial real estate projects, such as senior mortgage loans, subordinated mortgage loans, mezzanine debt and participations (also referred to as B-Notes) that meet certain criteria outlined by the staff of the SEC; and
  • At least 80% of the total value of its assets in the types of assets described above, plus “real estate-related assets” that are related to one or more underlying commercial real estate projects.

MogulREIT I, as of June 8, had acquired nine assets, consisting of four mezzanine financings, two preferred equity investments, one bridge financing and two junior participation loans, with an aggregate acquisition cost of approximately $18.8 million.  The properties that are the subject of such investments are commercial properties (one self-storage, three office, one office/warehouse,  two retail, one medical office and one mixed-use) located in California, Colorado, Florida, Georgia, New York and Texas.

MogulREIT I does not own or manage these properties.    As of June 28, 2017, one of the mezzanine loans was repaid in full by the borrower and approximately $12.1 million remained outstanding on the remaining investments.

There are a growing number of real estate investment funds that are using Reg A+ to raise capital and invest in real estate. The lower disclosure hurdle and $50 million cap appears to be appealing to certain real estate investment platforms. Real estate is one of the largest, if not the largest, asset class using Reg A+.

The Fem-preneurs Of Crowdfunding: Did the JOBS Act Change the Venture Landscape for Female Entrepreneurs Forever? Let’s Hope So!

 


“Them that’s got shall get / Them that’s not shall lose / So the Bible said”… and is it still news?

Raising significant amounts of capital has never been easy for anyone. For some, it has been a higher hurdle than for others. The American female entrepreneur has overwhelmingly struggled to raise venture capital. Companies with only female founders account for just 3% of the total dollars raised by startups in 2016, according to the WSJ. The article further reports, perhaps unsurprisingly, that women hold just 6.3% of board seats at U.S. venture-capital firms. Alas, people invest in people that remind them of themselves, no?

With the advent of equity crowdfunding, this historical norm may be starting to change. The crowdfunding project page – a gender neutral forum where a synergy of politics, technology, and human aspiration are all in one space – may be the catalyst. 

Trends are only beginning to be uncovered in the virtual capital raising arena. Equity crowdfunding under the revised Regulation A went into effect not even 2 years ago. Equity crowdfunding under Title III (Regulation Crowdfunding) is only 10 months old. Thus, we are only just beginning to evaluate the influence that the new securities law framework will have on entrepreneurship, job creation, female and minority opportunity, social impact, and the American economy.

This article will explore this striking potential. A paradigm shift in the venture ecosystem from the viewpoint of female entrepreneurs. As capital raising goes online, platform owners, and investors, may seek to help women succeed. More importantly, women may well be enabled to compete more equitably in funding their ventures and nurturing them to success. For as we all know, God Blesses The Child Who’s Got Her Own.

Female Entrepreneurs Seeking Equity Crowdfunding

Title III of the JOBS Act aka “Regulation Crowdfunding” provides businesses with the opportunity to crowdfund up to $1M per year from accredited and non-accredited investors. We are currently seeing an emergence of early stage companies with female founders and leadership teams actively raising capital under the new Regulation Crowdfunding exemption.  These include Pearachute and Flipworld on Republic.co, LGBT Weddings on the Hong Kong-based Mr. Crowd platform, and Cogent Education on GrowthFountain.

Identifying female-led companies utilizing crowdfunding is made possible by search engines such as Investibule, whose mission is to connect small businesses with interested investors in their communities.

Investibule.co helps you find investments you care about through tags such as “Women-Owned” – “Tech” – or “Health & Wellness”

Pearachute is a mobile app business founded by its CEO Desiree Vargas Wrigley. Prior to launching Pearachute, Desiree founded one of the world’s first crowdfunding platforms, GiveForward. The mobile app works with over 250 partners in Dallas/Fort Worth, Kansas City, and Chicago. Its mission is to help parents to discover activities to do with their children, reserve space in their selected activities, “drop in”and enjoy. From 130 investors, Pearachute raised 252% of its $50,000 goal on Republic.co here.

Cogent Education, an education software company, provides educators and schools with interactive case studies for students to get hands-on experience with difficult science concepts. Cogent’s President and CMO, Tyler Gerhart Wood, previously worked at Apple as a product manager. Ms. Wood was discovered by Cogent’s founder team in 2009.  Her background in early childhood education and at Apple in product made her a prime fit. From her experiences, she understands the skills needed to develop educational technologies and how to bring them to market.  After consulting with Cogent for six years, Tyler was brought in-house to lead in an executive role. The company has won $5 million in grant funding to date to fund its technologies. Today, Cogent is seeking to raise up to $1 million through its equity crowdfunding campaign on GrowthFountain here by offering a revenue sharing opportunity to prospective investors.


Female Owned or Targeted Platforms

Female-founded or targeted platforms first emerged in the rewards crowdfunding segment. We now see a variety of players on both the rewards and equity crowdfunding sides providing donation and investment opportunities across industries. A few highlights on the equity side include Fundanna, Small Change, and Indie Crowd Funder.

Currently, these companies are uniquely situated as the only three Reg CF platforms with female founders (of 23 total). RealtyMogul, the Reg D real estate investment platform co-founded by Jilliene Helman, has been a market leader. Cheryl Clements founded PieShell, a rewards based platform catering to the food and beverage industry, that has distinguished itself. Other noteworthy individuals include Jen Wang as CFO at NextSeed, Karen Nihill as CCO at Razitall, and Alexandra Tynion – Principal at SeedInvest.

Reg CF Funding Portals

“Them that’s got, shall get”

Republic.co was founded and built by a team of AngelList alumni who believe angel investors are the catalysts to change in the world. The team includes 3 female advisors, including Shaherose Charania, Katherine Krug, and Shiza Sahid – each a rockstar fem-preneur in her own right.

Since the launch of Republic.co, over 60%, and soon to be 80%, of fundraises on the portal have included female founders.

Recently, in honor of International Women’s Day, Republic announced a Women @Republic event series. The series will provide a forum for female founders to discuss their fundraising experiences and successes on the Republic platform. 

On Republic.co, investors can sort investment opportunities by key words, including “Women Founders”. This tag currently has 956 investors and 1002 followers. Check out more information on the upcoming series here.

Some of the female entrepreneurs are not newbies.

Claudia Ecobici, Co-Founder and CMO of TruCrowd and FundAnna

Claudia earned an MBA/MS at Sorbonne University. She has ten years marketing and startup experience, with three dedicated to equity crowdfunding. Her COO at FundAnna, Florence Hardy, holds a JD/MBA with 10 years of business consulting experience. FundAnna’s CTO, Magda Alexe, has 20 years experience as a frontend/backend architect. According to her bio, she designed/built the first licensed & operational intrastate equity crowdfunding portal in the U.S. FundAnna is America’s first Reg CF portal targeting cannabis businesses. Fundanna’s goal is to support the industry’s growth by giving investors access to early stage cannabis investments and entrepreneurs the opportunity to raise to up to $1 million per year under the Reg CF exemption.

Eve Picker, President and Founder of Small Change

Eve Picker launched – and leads – Small Change, a real estate equity crowdfunding portal to help fund transformational real estate projects. Small Change packages offerings for developers to help them build projects that make cities better, and provides investment opportunities for everyone to see positive change and development in their city. With a background as an architect, city planner, urban designer, real estate developer, community development strategist, publisher, and instigator, Eve has a rich understanding of how cities and urban neighborhoods work – and how they can be revitalized.

Denise Smith, Co-Founder and CCO of Indie Crowd Funder

Co-founder and CCO of Indie Crowd Funder Denise Smith has worked for multiple Fortune 100 and 500 companies, providing business guidance and quality assurance for numerous enterprise-wide systems for companies such as Twentieth Century Fox Studios, Disney Worldwide, Paramount Pictures, CNN, Marriott Vacation Club and AT&T. Denise has also worked on numerous features, award-winning shorts, television series, as well as new media productions in various capacities. She has had a stellar career assisting in the production of music videos and peaked while working with “Korn”, and famed Director Darren Lynn Bousman of Saw II, III, IV. Indie Crowd Funder’s mission is to provide equity-based crowdfunding services to Hollywood professionals

Reg D – Real Estate Investment Platform

In the real estate crowdfunding segment, Realty Mogul, an early entrant and forerunner among its competition, was co-founded by Jilliene Helman and Justin Hughes. The company’s investment platform was formally launched in 2013. Jilliene, who sits on RealtyMogul.com’s board, has underwritten over $5 billion of real estate and was previously a Vice President at Union Bank, where she spent time in Wealth Management, Finance and Risk Management. Jilliene is a Certified Wealth Strategist®, holds Series 7, Series 63, and Series 24 licenses and has a degree in Business from Georgetown University.

RealtyMogul offers passive investment opportunities to accredited investors through private placements conducted on its web platform. The company is predominantly venture backed and completed its first major capital raise for $9 million, which was led by Canaan Partners. In July 2015, RealtyMogul raised an additional $35 million in Series B financing form from Sorenson Capital, Canaan Partners, and additional strategic partners.

Angel and Venture Groups Targeting Fem-preneurs

Among angel and venture networks promoting and supporting female entrepreneurs, groups such as 37 Angels, Women’s Venture Fund, Merger Lane, Pipeline Angels, BELLE Capital USA and Plum Alley provide offline investment opportunities to the fem-preneur marketplace. Beyond angel investing, TrueWealth, Golden Seeds, Female Founders Fund, BBG Ventures, Forerunner, Women’s Venture Capital Fund, and Founders First Capital Partners are notable firms investing in women led businesses.

NYC-based firms Plum Alley and Female Founders Fund are highlighted below for their outstanding and innovative approach to helping women led companies grow and succeed.

Plum Alley is a membership group of investors and entrepreneurs dedicated to supporting female entrepreneurs and investors. The group provides an innovative approach to investing and showcasing promising private investment opportunities. The Plum Alley website explains that its group of members have invested nearly $1.5MM in the first 10 months, alongside Ignition Partners, Lowercase Capital, Omidyar Network, Slow Ventures, Breakout Labs and Partnership Fund of NYC among others. The company was founded in 2015 by Deborah Jackson and Andrea Turner Moffitt. Their extensive resumes demonstrate their passion for tech, entrepreneurship and empowering women to be successful as entrepreneurs and investors.

Female Founders Fund is an early-stage fund investing in the exponential power of exceptional female talent. According to the F3 website;

“Women experience greater successes – and fewer failures – than their male counterparts. Yet traditional venture capital does not reflect this. Female Founders Fund was founded to change that. Our portfolio companies all share something in common – each is led by talented female founders with disruptive and innovative ideas that better serve their consumer.”

The fund invests in areas it believes women-led startups have incredible impact: e-commerce, web-enabled products and services, marketplaces, and platforms. The fund has a growing portfolio and taps its founders into its network of experts in their respective industries. A list of F3’s portfolio companies can be found here.

It’s clear that women have made strides in the world of investment and commerce. It’s also clear that competitive advantages are still disproportionately retained by men. Women entrepreneurs can climb the mountain. They are no longer forced to wait and watch others succeed. But it’s a steeper mountain.

Is equity crowdfunding a hidden opportunity for female entrepreneurs? Perhaps the fledgling industry can lead the way in rectifying an ancient inequality. Women entrepreneurs will need to change the world by changing themselves. To follow the counsel of the wise old song.

Them that’s got, shall get
Them that’s not, shall lose
Ev’ry child’s, got to have 
her own!


Robin Sosnow, Esq., principal of the Law Office of Robin Sosnow, PLLC is a solo practitioner in New York City. The firm offers legal services in the areas of corporate, securities, and real estate law, as well as compliance and risk management services. In her practice, Ms. Sosnow’s core focus is to service issuers, platforms, and broker-dealers in the equity crowdfunding industry. Ms. Sosnow previously acted as General Counsel to one of the first real estate crowdfunding platforms in NYC. She is also the founder of the National Alcoholic Beverage Licensing Lawyers Group (NABLLG), a community of alcoholic beverage licensing professionals across the USA. Ms. Sosnow is licensed to practice law in Massachusetts and New York. She holds a JD/MBA from Suffolk University and is an active member of the New York City Bar Association. She can be reached via email, Twitter @RobinSosnowEsq, and www.robinsosnow.com.

Real Estate as an Alternative Investment for Non-Accredited Investors

real-estate-los-angeles


Real estate crowdfunding has experienced rapid growth in the US.  Yet most opportunities have been made available only to accredited investors. As securities laws are updated to accommodate the emerging innovation of internet finance traditional methods of funding real estate projects are being disrupted. At times this has created an opportunity for smaller investors to participate in asset classes previously denied.

Under current rules, an accredited investor is defined as an individual who earns $200,000+ a year or, alternatively, has a net worth of more than $1 million (not counting ones primary residence).  If you are married, the threshold jumps higher to $300,000+ in combined annual income. While most people recognize these rules do not take into account an individual’s professional experience or knowledge of securities – and thus are pretty much non-sensical- it remains the rule of the land.  Fortunately, there are a growing number of options for smaller investors to be able to take advantage of one of the most popular asset classes without having to buy the property directly.

amy-wan-2Amy Wan, a securities attorney and former General Counsel of Patch of Land (a real estate crowdfunding platform), told Crowdfund Insider;

“I’m not an investment advisor, but I personally love real estate as an alternative investment. It’s a tangible, more concrete investment. And while the real estate industry will always fluctuate, it’s a very tried and true asset class.”

Regarding opportunities for non-accredited investors, Wan states;

“I think the crowd will see a good number of Reg A+ REIT products coming out, which will give them more access to real estate investment opportunity. As with every real estate investment, they should make sure they understand what they’re investing in–especially given the stage of the real estate cycle we’re in.”

As with any investment, there is intrinsic risk. But unlike early stage investing (startups) the risk associated with real estate is can be considerably less.  Investors still must fully comprehend that occasionally deals go bad but if you diversify and have a good understanding of real estate, investing online can deliver very reasonable returns.

So what are some of the options for both non-accredited, as well as accredited, investors today. Below we have highlighted several opportunities to invest in real estate assets online.

Fundrise

Fundrise was doing crowdfunding before crowdfunding was cool.  Using a little-known securities exemption (old Reg A+) founders Ben and Dan Miller started rehabbing properties in and around Washington, DC. Today Fundrise has moved away from single property crowdfunding having trailblazed a new fund structure labeled the eREIT. Similar to traditional REITs, the unlisted security allows both accredited and non-accredited investors to participate in a portfolio of real estate properties. Using Title IV of the JOBS Act which updated old Reg to a more flexible security exemption called Reg A+, their eREITs have grown from one to now five (2 of them are sold out).  So far, Fundrise has differentiated between income and capital gains, as well as geographical options.

Small Change

stylish-offices-for-rent-uk-london-real-estateSmall Change is on a mission to become the first real estate funding portal to utilize Reg CF. Created by Title III of the JOBS Act, Reg CF allows issuers the ability to raise up to $1 million online from both accredited and non-accredited investors. While most Reg CF platforms are focusing on SME funding, Small Change envisions a platform where smaller real estate projects are funded with the support of community members alongside a national audience of investors. The founders created Small Change to allow everyday people to invest in real estate projects that change cities and neighborhoods for the better. While several accredited offers are live on their site today, Small Change expects the first Reg CF offer to be listed soon.

RealtyMogul.com

One of the largest real estate crowdfunding platforms in the US, RealtyMogul.com has pursued a highly diversified approach for both debt and equity real estate investment opportunities from across the country. Originally only for accredited investors, this changed when RealtyMogul.com created their MogulREIT (using Reg A+) to offer non-accredited investors the chance to join in on the real estate offers listed on their platform. Minimum investments used to be $2500 but have since been lowered to $1000 to facilitated a wider audience.

American Home Preservation

American Home Preservation or AHP purchases distressed mortgages at a discount. The platform reports the discount can be up to 50%. They then try to work out a sustainable solution for the home-owners in a win-win scenario.  The people keep their home and investors earn some income. AHP strives to pay a return 12% per year on invested capital in the fund (Reg A+). AHP not only has a unique approach to real estate investing but also has probably the lowest investment minimum at just $100.

Rich Uncles

Real Estate InvestingThis platform offers a non-traded REIT that some non-accredited investors may access. This depends on the state of residence of the investor.  An article in WSJ.com from last year explained, “You’ve heard of Uber and you’ve heard of Airbnb. And you understand how these businesses have disrupted old school ways of operating …Rich Uncles is doing the same thing.” They claim to be reducing fees and thus boosting returns for investors. Minimum investments start at $500.

There are many more non-traditional real estate opportunities in the queue. The internet is disrupting many aspects of finance and investing in real estate is near the top of the list. As always do your own homework and understand the risks.

Equity Crowdfunding is Here … And it’s Total BS

Wall Street Bull Backside


“The more cashless our society becomes, the more our moral compass slips.”
― 
Dan Ariely

Happy New Era, my fellow entrepreneurs, and next generation financiers!

dictionary-book-glasses-study-defineIn a world of dramatically accelerating technological, social and economic changes, it is clear we are heading into a time where you might want to design your own everyday business education. And quite possibly also follow your very own moral compass. For those who wonder, that is a “natural feeling that makes people know what is right and wrong and how they should behave,” as defined by the Cambridge dictionary  (we still can trust dictionaries, right?).

Why am I bringing up the moral question in this piece? Because I am realizing that too many of us, equity crowdfunding evangelists or “pioneers” have lost our way romanticizing this financing tool as if it were the fifth element which would save humanity.

No, it won’t – but a moral compass will.

moral-compass-good-badSo, I’ve decided to bridge the gap between over-hype and reality by reminding you that equity crowdfunding is a highly complex process which is based first and foremost on BS (Behavioral Science) as when it comes to launching and financing new ventures, we all have social, cognitive, and emotional biases. One might think – this is where excitement prevails and valuations and investment risks are traded for acquiring a sense of purpose and belonging. Well, hold this thought.

My key points and sources to help educate yourself further are below.

Equity crowdfunding 2017 comes in all shapes and sizes

Fundamentally, as of now, we have four types of equity crowdfunding:

1)Accredited equity crowdfunding

This type of crowdfunding is featured by online platforms that allow into the investing game institutional investors and accredited investors only (=traditional Angel investors). 

Such investors used to follow traditional securities laws (Regulation D) that eventually were readjusted in 2013 for the online world based on the Title II of the Jumpstart Our Business Startups (“JOBS”) Act. 

To put it simply, accredited crowdfunding is Angel investing gone online where the new ventures are still carefully vetted and scrutinized just as they were in the old days.

Jon MedvedAnglelList is the world largest marketplace for startup investing and, as I learned from Parker Thompson, one of the AngelList’s partners who spoke at our Global Alternative Funding Forum last November, the platform has 200 syndicate leads and totals on average 800 investments/$200 million of investment per year. Other players include fundraising platforms such as CircleUp, OurCrowd, and FundersClub to name just a few.

If you are a first-time entrepreneur with a pre-revenue startup, the odds of getting financing via accredited crowdfunding are quite low. Based on my conversations with platforms’ owners, typically out of 1,000 examined deals per year, less than 2% are approved for investment – a number which is similar to the one I hear from my VC friends.

The beauty is – this path does not have to be exclusive and to be featured on AngelList is becoming a must for anyone who is confident about their business model and looking for sophisticated financing partners. From a behavioral science point – you have nothing to lose but you will still get a chance, so don’t mind the low probability.

2) Crowdfunding under Regulation A+ (“Mini-IPO”)

This type of crowdfunding allows companies to raise up to $20 million per year (Tier 1) or up to $50 million per year (Tier 2) from the general public (investment limits apply) in a “mini-IPO” style offering.  Important caution: Regulation A+ is not suitable for startups or early stage companies. Why?

First of all – costs. The budget for legal fees might easily go over $200K but what might be even more “destructive” are the marketing expenses.

My mantra that I keep repeating – the low hanging fruit for conducting equity crowdfunding is the entrepreneur’s capacity for turning the existing customers into shareholders – who, via the network effect, will help to attract more shareholders, more customers or both. This is where magic begins.

Paul ElioWith no customers, marketing expenses might kill you much faster than legal expenses. Elio Motors that has been featured as a Reg A+ poster-child reported $925K in marketing expense in March 2015 and $1.6M a year later on March 2016. How did it get money in the first place – with no revenues? Good question – fair question. If you want to dig deeper, check out its Offering Circular HERE.

Finally, the issuer should have a certain level of financial proficiency, feeling comfortable with the disclosure and understand the liability bargain. As I am researching companies that have gone through Reg A+, it is clear to me that “mini-IPOs” are  IPOs of the future. Only 105 companies went public in 2016, raising $19B in a traditional IPO route, down 37% from 2015; the majority of would-be-public companies are staying away from going public. And the abundance of relatively cheap private capital is not the only reason – the way how the markets are currently operating is not “user-friendly” for small business. Let me explain briefly…

Keep in mind that while an ownership of a large public company (over $1 billion in market capitalization) typically consists of over 80% of institutional investors; a small company (less than $100 million in market capitalization) traditionally has very few institutional investors and relies almost entirely on retail investors. So, the Holy Grail here is to be able to communicate your story directly to potential shareholders since fewer broker-dealer firms (or “market-makers”) operate in this space. In behavioral science words, you would need to break up pleasure and combine pain.

Here are a few leading platforms you might want to check out further: StartEngine (with its blockbuster Elio Motors),  SeedInvest, Crowdfunder, Manhattan Street Capital and RealtyMogul (for real-estate).

OTC Markets Group is currently taking a leadership role in providing liquidity for crowdfunded ventures blurring the line between equity crowdfunding and public markets (you can educate yourself on this one HERE).

3) Regulation Crowdfunding (Retail Crowdfunding, Crowdinvesting)

This is the one that we want to call “traditional” or “real” equity crowdfunding brought you by the JOBS ACT’s Title III which became effective on May 16th last year.

That evening a few of us were gathered in a small LA bar and soon the bartender was amused to hear complaints about his limited inventory. After years of waiting, we had a legitimate reason to celebrate big – from that day forward, entrepreneurs can raise up to $1 million per year from the general public – aka their friends, fans, followers, and – yes –  customers, while still remaining in a privately held mode (See my article: Raise Funds from the Public Without Going Public).

I have no doubts Regulation Crowdfunding is set to become the most popular financing tool among small business owners within the industries that have been overlooked by VCs (retail, restaurants, art, etc.)  just like Facebook is becoming popular among talented bloggers who were overlooked by the journalism industry. 

On the day of my writing there are 22 funding portals that can assist you – see the list that is being continuously updated by the SEC here. To get a better idea about the compliance burden funding portals are experiencing, read this excellent piece by Scott Anderson HERE.

As of now, the leading Reg Crowdfunding platform is Wefunder.com which quite possibly will continue to grow rapidly and will drive the industry growth overall. Recently it has launched its “franchising model” where everyone can start an “investment club” plus it has the lowest in the market fundraising fee charging the companies 4% of the round with zero up-front fees. For a full disclosure – WeFunder is a platform I used myself as a CF investor. As a side note – hello equity crowdfunding evangelists, put your money where your mouth is!

What about the compliance costs? Per the SEC’s estimation itself, such costs depend on the offering range:

  • <$100k offerings: $7k – $12k
  • $100k – $500k: $21k – $56k
  • >$500k: $48k – $120k

While the costs overall might be looking rather reasonable  – not more than 15% from the capital raised (NOT counting marketing), the long-anticipating financing tool had a slow start, bringing to the founders a bit over $15 Million in investor commitments  in 2016 (May -Dec 2016 data). And this is when backers of Kickstarter, the leading non-monetary rewards-based platform, contributed more than thirty times: over $520 million (Jan-Oct 2016 data). Why?

Again, behavioral science: since crowdfunding has matured from being primarily about passion and excitement – now it is becoming an investing tool enlarged by a complex set of regulatory compliance for intermediaries and issuers on the one hand, and investors looking for the most promising deal on the other, beyond a pure passion. In other words, (crowd)investing capital goes to where it gets returns.

Dan ArielyOne of the most prominent behavioral scientists of our time, Dan Ariely, whom I was fortunate to meet in person a few years ago, has an interesting case in his new edition of “Predictably Irrational” which illustrates perfectly my statement above.  At one point, the American Association of Retired Persons (AARP) asked some lawyers if they would offer less expensive services to needy retirees, at something like $30 an hour. The lawyers said no. But some time later, when the same lawyers were asked if they would offer FREE services to needy retirees, the overwhelming majority said yes. How could zero dollars be more attractive than $30? As Dan explains:

“When money was mentioned, the lawyers used market norms and found the offer lacking, relative to their market salary. When no money was mentioned they used social norms and were willing to volunteer their time. Why didn’t they just accept the $30, thinking of themselves as volunteers who received $30? Because once market norms enter our considerations, the social norms depart.” 

If you are trying to get on the Retail Crowdfunding patch, keep this story in mind and ask yourself honestly if you are capable to deliver the return on investment to your shareholders you are pledging to.

I believe this route has merit as a supplementary fundraising tool and it will be especially viable for ventures:

a) with a large social media following;

b) early stage companies focusing on local/niche markets with an established loyal fan base;

c) pre-revenue companies that would collect pre-sale orders in exchange of equity.

Investigation Search Money InquiryJust as I predicted in my previous article, there is a high level of scrutiny coming from the funding portals so the champions are those with an existing pipeline of (paying) customers which are a predominating force in building a shareholders’ base.

This financing tool is still very new and the most recent data shows the following:

  • The largest sectors for investment included wine and spirits, technology-hardware, entertainment and media, food and beverage, and real estate.
  • The first deal to reach $1M was Beta Bionics, maker of a wearable medical device that manages blood sugar levels in people with diabetes, from 780 investors.
  • The average commitment is $810 per investor – this is more than 10 times the average donation on Kickstarter ($79 per backer)

So the simple math based on the current data & my assumptions would be:

The number of crowd-investors you would need to have in order to raise $1M = $1M/$810 = 1,235

Assuming that at least 10% of your followers would back you, to get to a level of $1M you would need an active fan base of over 12,000. And while of course there is no simple formula, one thing is very clear – behavioral science and your ability to trigger the excitement and then turn it into purchases is a key. Your best investor is your paying customer.

4) Intrastate crowdfunding: to date, the majority of US states have passed intrastate securities exemptions which permit equity crowdfunding offerings to be featured on funding platforms and offered to the general public so long as the companies and securities are sold within the state. If you would like to educate yourself further on this, make sure to check out the NASAA intrastate directory.

Concluding points

When I was working on this piece, I found the most fascinating numbers that confirm: whether we want it or not, we are clearly becoming a country of a gig economy. According to IRS,  there were over 91 million 1099 forms issued last year, the highest number on record – which also translates to the fact that almost 60% of the labor force are now freelancers.

Money Eyes Benjamin Look SeeWhat does it mean? Fundamentally, everyone in the freelancing mode is an entrepreneur creating a job for him or herself and/or others. Knowledge of equity crowdfunding in the hands of the masses is changing business as we know it.

The “me” time is over, building the community is a must and as we are all interconnected and interchanging our aspirations, products, and – yes – money, it is important to realize: treating people with integrity and launching companies with a sense of purpose (instead of financing the lifestyle, wink-wink-you-know-who) is not only right from a moral point of view but is critical for a successful business too.

To put it simply: Raise. Your. Standards.

To put it even more simply: Know BS.


victoria-silchenkoVictoria Silchenko, Ph.D. is an alternative funding expert, Founder & CEO of business consultancy Metropole Capital Group , Creator, and Producer of the Global Alternative Funding Forum and an Adjunct Professor on “Entrepreneurial Finance”. Dr. Silchenko currently serves on the Board of the Los Angeles Venture Association (LAVA), California Stock Xchange & TradeUpFund.comLinkedIn Twitter

RealtyMogul.com MogulREIT Lowers Minimum Investment to $1000

RealtyMogul.com has lowered the minimum necessary to invest in their first REIT or MogulREIT I to $1,000. Previously, the minimum investment was $2,500. RealtyMogul.com CEO Jilliene Helman said their goal was to give more investors the opportunity to invest in unique real estate investments on their platform.

jilliene-helmanRealtyMogul.com‘s MogulREIT uses updated securities exemption Reg A+ to allow both accredited and non-accredited investors participate in real estate crowdfunding offers.

“Our goal in launching MogulREIT I in August was to give more investors the opportunity to invest in real estate,” said Helman. “The new, lower $1,000 minimum investment makes it even easier for just about everyone to participate.”

Last month, MogulREIT I declared its first dividend that is on track for an 8% annualized return. RealtyMogul.com said this was a premium over many other non-traded REITs which average 5.4%, according to the Stranger Report.

“The new, lower minimum for MogulREIT I also gives our single property investors the opportunity to try something new and innovative,” added Helman. “At the new minimum, investors can now test the product through a small investment, gain exposure to the fast-growing online REIT asset class and subsequently add the potential for additional cash flow to their portfolios.”

MogulREIT I seeks to provide consistent income for investors with a diversified portfolio of real estate assets.

RealtyMogul.com continues to offer single property investments for accredited investors.

Since platform launch, RealtyMogul.com has raised over $230 million for real estate assets returning more than $50 million to investors in both principle and realized returns.

 

RealtyMogul.com Has Returned over $50 Million to Investors

New York City Construction Real EstateIn a brief update, real estate crowdfunding platform RealtyMogul.com reported the platform has now returned over $50 million in principle and interest to investors. RealtyMogul.com called the accomplishment a “significant milestone for the company and the category. Investors have had zero principle loss since the company’s inception.”

RealtyMogul.com has facilitated over $220 million in both debt and equity for over 200 transactions. This places the real estate marketplace as the largest of its kind in the US.

RealtyMogul.com has recently entered the REIT sector by launching its first “MogulREIT I” – a non-traded fund that is available to non-accredited investors via its platform.  The MogulREIT seeks to generate income for investors and, according to the company, is currently distributing an 8% annualized dividend.

jilliene-helmanRealtyMogul.com CEO and founder Jilliene Helman commented on the launch of the REIT in August;

“Until now, RealtyMogul.com was only open to accredited investors. To date, over 80,000 people have expressed interest in what we do by joining our investor network, but only the 25,000 accredited investors within that group could invest through our platform. We felt that if our core purpose hinged upon providing access, we needed to create a way to provide more people with greater access to real estate investing through our platform.”

MogulREIT: RealtyMogul.com to Use Reg A+ to Allow Non-Accreds to Invest in Real Estate

MogulREIT i RealtyMogulRealtyMogul.com has launched their first REIT (real estate investment trust) labeled the MogulReit I.  The new investment vehicle will allow non-accredited investors access to commercial real estate investment opportunities. MogulReit will be using Reg A+ and thus may raise up to $50 million.  RealtyMogul.com described the new offer as democratizing real estate investing.  Previously only accredited investors (individuals earning $200,000 a year or more or with a net worth of $1 million) could invest in real estate online. RealtyMogul has now opened their platform up to millions of more potential investors.

Investors may participate in the MogulREIT with a minimum $2500 investment (@$10 per share) gaining access to a diversified portfolio of real estate in a single purchase.  Property assets will include multifamily, retail, self-storage and office. The offering circular for the MogulREIT may be accessed here.

RealtyMogul.com explained that the MogulREIT is designed to have low fees;

Traditional non-traded REITs employ a highly manpower-intensive sales method, resulting in upfront sales commissions of 7 percent, on average, and total expenses of up to 15%. By offering MogulREIT I exclusively on RealtyMogul.com, it affords investors direct online access to the product with no sales commission and offering expenses capped at 3 percent.

RealtyMogul.com CEO Jilliene Helman said the MogulREIT would allow them to leverage the “hundreds of inbound inquiries” to finance commercial real estate and to curate the very best for financing. RealtyMogul.com’s approach to real estate investment is described as conservative when selecting transactions to offer for investment. The platform states it only invests in cash-flowing properties and will not invest in land or ground up development transactions.  This approach will carry through to MogulREIT I.

Jilliene Helman HeadshotHelman told Crowdfund Insider;

“[This is] important to let non-accreds in.  Our core mission is “Access through Innovation” and we wanted to provide broader access to investors.  We also wanted to launch a diversified commercial real estate fund open to as many investors as possible.”

Helman said that both debt and equity opportunities will be incorporated in the “flexible investment strategy.”

“We’re looking forward to executing against our twofold objective for the fund: providing investors with both consistent cash distributions and the opportunity to benefit from potential appreciation in property values,” added Helman.

Helman said RealtyMogul.com would continue to offer stand alone property investments under Reg D. When asked if the MogulREIT concept would be expanded into other targeted sectors of real estate, Helman stated;

“Right now we’re focused on making MogulREIT 1 a success and the intent with this offering is to diversify across geographies and property types.”

ReatlyMogul First to $200 MillionRealtyMogul.com is not the first real estate crowdfunding platform to launch a REIT using Reg  A+, as created by the JOBS Act of 2012. Fundrise launched the concept last year and has since driven the bulk of success under Reg A+ offers having publicly announced $72 million in transactions. RealtyMogul.com is the largest real estate crowdfunding platform in the US having surpassed $200 million in transactions.

 

 

At the Intersection of Fintech: Canaan Partners

Canaan Partners Fintech Portfolio


Canaan Partners is a Silicon Valley VC firm that has over $4.0 billion under management with a good portion of their investments going into seed / early stage companies. They have also set up offices in Israel to be closer to the StartUp Nation phenomena – an incredible innovation ecosystem. Over the years, Canaan has tallied 58 IPOs and 122 mergers and acquisitions for their investors. They typically invest in tech and healthcare, but a good amount of attention has been directed towards Fintech. In fact, 18 different Fintech companies have received funding from Canaan, and there are some well-known names in their portfolio including Lending Club, Orchard, Realty Mogul, CircleUp, Borro and more.

lending club Canaan PartnersDan Ciporin, a Canaan General Partner, is a member of the Lending Club board of directors. Hrach Simonian holds a board seat on RealtyMogul. That is just a few of the Canaan Board positions. Canaan explains they like to invest in people with visionary ideas. They pride themselves on forging meaningful relationships with the entrepreneurs they back. For Canaan, it is about the collaboration – not just the money. But driving successful returns for investors is definitely part of the journey.

rich-boyleSeveral weeks back, Crowdfund Insider spoke with Rich Boyle – the newest addition to the Canaan team. Boyle will be one of the Venture Partners targeting Fintech investments. Before joining Canaan, Boyle was Chairman and CEO of LoopNet, a leading online marketplace for commercial real estate. Boyle also spent some time at Khosla Ventures – another high-profile VC firm. Boyle has either invested in, or worked with, dozens of different tech companies.

We asked Boyle for some insight as to what Canaan has on their radar these days.  Boyle explained they were looking deeper into real estate Fintech. He also mentioned interest in the insurance industry – currently a hot sector of Fintech (or InsurTech).

Boyle shared his opinion that the Peer to Peer / Marketplace sector for the Insurance industry is a huge opportunity;

“It has not seen as much innovation as other sectors have.  There are some non-trivial reasons while that is the case. Balance sheet. Regulatory challenges. Fundamentally a lot of insurance is a very data driven industry… I think this is going to affect how insurance companies are going to be driven going forward.”

Big data will play an ongoing role. There will be substantial innovation in the InsurTech sector if regulatory constraints are solved.

Coming from a strong real estate background, Boyle also believes the real estate space will see further innovation.

“Look at how you finance a real estate deal today. There has been a lack of innovation here… [There is] lots of room for innovation.  By and large real estate operates the same way it has for many many years.”

RealtyMogulBoyle believes RealtyMogul, one of the largest real estate crowdfunding platforms in the world, is a very interesting platform with profound future potential.

“I get excited about this [real estate] because there are so many areas that need to be solved. Everything from just getting good information can be challenging. There is still a lot of friction and a lot of expense. Real estate has not made that leap yet.  On the equity side or debt side – the JOBS Act opened the door to non QIs or QIs – without having to go through traditional channels.  RealtyMogul is paving the way.”

Boyle also mentioned Fundrise as an interesting platform – even though the platform is not currently a Canaan portfolio company

Boyle pointed to the fact that the commercial real estate industry globally is a $10 trillion asset class. That’s significant.

“One of my favorite themes  is  looking at relatively large dollar consequence decisions that should be data driven and are not. They are driven by gut instinct. We need more AI. Efficiently and effectively. I want to look for opportunities to exploit that.”

Other areas of interest include the artificial intelligence space. This is something he was engaged with while at Khosla Ventures.

“Predictive risk analysis is interesting along with AI machine learning applications. Not just broad horizontal tools, stated Boyle. “An example would be better algorithms for accounts receivable lending.  You can do things – account receivable lending in real time with pricing. Better faster business decisions. This is a theme I will be looking across a number of sectors.”

RGB_CanaanID_900pxAsked about the current regulatory environment in the US and the potential for greater regulatory scrutiny, Boyle said he did not have a great answer for that. It is what it is.

“It can be a barrier for startups in gaining traction.  Startups can be more flexible in comparison to large banks. If you look at insurance in general. There are a patchwork of regulations in  every state. It is just one of those hurdles if you want to be in the space.”

He believes there is little chance that policy makers will reduce the regulatory burden in the near term. Regulatory creep is just part of doing business in the US.

“You have to just get passed it. You have to play by the rules.  You need to run your startup the right way for the long-term.”

Rich Boyle Wake SurfingBoyle said he has already done one investment. A real estate data company that is still in stealth mode. The reality is there remains lots of opportunity in the Fintech sector.  There are many early stage platforms struggling to make a name for themselves and to catch the eye of an established investor like Canaan Partners. While Canaan makes it easy to reach out making that final cut is a different matter.

“We look at a lot of companies. We look at a lot of different businesses and it is relatively rare you get to the finish line.”

RealtyMogul Tops $200 Million in Real Estate Finance. “Barely Scratches the Surface” for Asset Class

ReatlyMogul First to $200 Million


 

RealtyMogul.com has topped $200 million in debt and equity in funded real estate crowdfunding. The platform is now the first site to surpass the $200 million milestone for US-based real estate finance.  The company also revealed it has now returned $40 million, in both principle and interest, to its investors.Jilliene Helman Headshot

“We currently lead the market in originations with $200mm — but that barely scratches the surface of potential with technology in this massive asset class,” stated Jilliene Helman, RealtyMogul.com CEO. “As the regulatory landscape continues to evolve, allowing more investors to join the market, technology will become an even more important tool for companies to leverage. I really think it will massively disrupt everything we know about real estate investing, and it’ll be interesting to see how other companies use it.”

RealtyMogul.com is one of the largest real platforms of its kind – in the world. Since 2013, RealtyMogul.com has grown to over 80,000 members in all 50 US states. Over 350 different properties have been financed.

According to Helman, their objective has always been to democratize commercial real estate investing.  Their platform empowers smaller investors to gain access into an asset class that has historically been difficult to access.

“Reaching the $200 million mark at this stage shows we’re continually following through on this goal and growing as a company,” said Helman. “Real estate investing can potentially generate cash flow, provide an array of tax benefits, hedge against inflation, and be used as an effective diversification tool.  Investors appreciate investing in a tangible asset, something they can touch and feel, and I’m happy we can provide them the opportunity to do so easily online.”

RealtyMogul Full Capital StackThe company offers a diversified array of properties and investment types across the United States. Typically RealtyMogul.com will focus on “small balance commercial real estate opportunities
ranging from $1 to $5 million. Recent transactions include a $2.2 million first mortgage loan on an industrial property in Alabama, a $1.5 million preferred equity contribution to a multi-tenant office building in Illinois, a $1 million joint venture equity investment in a shopping center in Florida, and a $1.25 million mezzanine loan on an office complex in California.hrach-simonian

Hrach Simonian, General Partner at Canaan Partners and a RealtyMogul.com board member, stated;

” Through its crowdfunding platform, RealtyMogul.com has unlocked a traditionally opaque and proprietary asset class to the investing masses.”

Robert Rueckert, a Partner at Sorenson Capital and a RealtyMogul.com board member, said the platform was “poised to continue disrupting the real estate investment landscape.”  Rueckert said RealtyMogul.com was guided by a principle of “access through innovation.”

Chicago City SkyscraperHelman pointed to the $40 million in returned funds to investors – perhaps the best measure of platform success;

“Creating value for our investors is what we thrive on. At the end of the day, it’s all about them,” said Helman.

 

 

 

Propel(x) Says Title III Retail Crowdfunding is Not for Them

Reg CF Title IIIPropel(x), an online investment crowdfunding marketplace for accredited investors, has decided to pass on Title III retail crowdfunding.  The decision to do so lines up with the other Title II platforms that have already said “no thanks.”

In an email to Crowdfund Insider, Propel(x) CEO and co-founder Swati Chaturvedi explained the current maximum raises allowed under Title III don’t meet their needs, so for now they have not pursued becoming a funding portal under Title III.

The challenge of the funding cap is an issue that may be addressed in the “Fix Crowdfunding Act” that is circulating around Congressional offices now. While the $1 million funding limit was ironically viewed as an act of investor protection it may end up doing more harm than good.  The median level seed stage funding is around $2 million today – so Title III pushes many potential issuing companies away. This is not to mention the cost associated with Title III funding – something that may be more expensive than a Reg D offer.  The funding cap also eliminates investor choice for many real estate crowdfunding platforms. Jilliene Helman, CEO and co-founder of RealtyMogul, echoed the concerns of Chaturvedi stating, “A $5 million cap would have been more viable for this space.”

swati chaturvedi propelAll of this being said Chaturvedi believes Title III going into effect is a “significant event.”  She believes that Title III crowdfunding will mainstream angel investing like never before.

“It will open the door to allow ordinary people to participate directly in financing innovation and economic growth. These are all great things!”

A recent study by Propel(x) uncovered that many Angel investors are not driven simply by financial gain.  According to their research, 75% of Angel investors said management team was their number one reason for investing. Propel(x) study results also indicated that 41% of non-angels are interested in investing in early stage companies.

Propel(x) is working to make angel investing in science and technology companies as easy and accessible as possible.  Chaturvedi states they plan on evolving to give greater access to their innovative startups without providing additional details. They have already reduced the minimum investment for their current platform investors to just $3000. She states that if they see strong demand, they will “look at other innovative ways to accommodate non-accredited investors.”  Or perhaps our Congressional leaders will step up to the plate and approve the Fix Crowdfunding Act – first.