Update: Realty Shares going under – [a sign of more consolidation to come]
They were one of the biggest Crowdfunding sites however they went under because they “can’t afford to secure additional capital to fund additional investor acquisition. In other words, the marketing to get people to sign up is coming from outside sources (venture capital) and not from their business. This is typical of a tech startup.
YouTube Link: https://youtu.be/gaPmkHukwiM
I’m doing some research on Crowdfunding sites (although I always prefer working directly with the operator as opposed to using these middlemen platforms). A lot of Hui Deal Pipeline Club members have been collaborating on this and been using Equity Multiple.
Here is a podcast I did with RealityShare – https://simplepassivecashflow.com/podcast-97-investing-via-crowdfunding-sites-open-country-club-chat-reality-shares/
As a syndicator I don’t like using these sites to raise funds because 1) I don’t have access to the investor contacts which totally kills the referral marketing for future deals and 2) we tried it on a previous deal where the Crowdfunding site committed to raising a small portion of our total raise and they fell on their face.. Not saying that the Crowdfunding sites will never be effective but at this time it is not a useful means for experienced syndicators who already have investors of their own.. So beware as an investor… its like trying to find a mate on Tinder (this is a controversial subject I know) but for many there is a reason they are on the “open market” and cannot attract “capital” on their own from their own personal network.. Just saying…
“In the end, you want to buy direct as possible. Buying REITS is the same thing as buying mutual funds with a bunch of middlemen. Crowdfunding sites remove a few layers but as a syndication working with a Crowdfunding site is very expensive way of acquiring capital. Sometimes I wonder who are the people using this high cost of private equity… Perhaps they are “desperate syndicators? In this current time, online crowdfunding websites are sort of the “online dating of the 1990’s” where 20-30 years later most people use online dating to find a mate.. we are not there with Crowdfunding websites…. Note we have tried to used these websites but they charge so much to raise money that it does not make sense to use them”
Fundrise & Realty Mogul have launched “eREITs” which tries to tackle investment vehicles other platforms are not capitalizing on.. It’s interesting to watch how they trademarked “eREITs”.. Definitely a sign where investing is going.. Again institutions controlling and taking a cut away from the little guy.. 🙁
Blackhat tactic 😉 – Some deals are put out to private networks (like the Hui Deal Pipeline Club) and these crowdfunding sites simultaneously.. Many times the crowdfunding site offers a 7% preferred rate where the direct source offering gives a 8% preferred rate… tricky tricky if you ask me.. Now one could backwards engineer this all and go around the crowdfunding site but still like I always say YOU DON’T KNOW THESE GUYS.. Syndicator’s are running around out there without any operator experience or portfolio of their own and doing deals with people just off referral.. A recipe for disaster if you ask me..
Here are comments from Hui Members:
“I’ve invested in 10 you have listed and am familiar with quite a few others. The best on your list are yieldstreet.com, groundfloor.us and streetshares.com. I have had 12-14 % returns with all three. Hedgable.com is also a good site for investing in the stock market.”
“Some of the companies have questionable backgrounds make sure you google ‘company name + sec infraction;'”
“Chicago company that was recently shut down for allegedly running a Ponzi scheme.
They promised investors returns of 15% to 20% on Chicago real estate. This is a huge red flag in my opinion. Those returns are extremely tough to achieve in Chicago, even in “high yield” areas.
“Just too much default rate”
“You are right! If you can find private placements skip these sites altogether”
“Sometimes you can use these CF sites to find the deals and google the operator. Often times if the CF site has it as a say 8% pref, going to direct to the operator will give a 9% pref”
“Groundfloor – I have not invested money in them but I have taken 2 loans on the borrower side and the experience has been mixed. They are fairly young start up and have many of the issues associated with that – high staff turn over and regular process change which has made the process a little frustrating. The sales person who managed the start of the process moved on half way through the loan being set up which resulted in the amount of the loan being incorrect, the structure of one loan was correct and the other wasn’t (interest paid monthly not accrued until the end) and the timelines were off. The good: the interest rates are low in the space so they offer good value (6.5%), the points paid are reasonable (I paid 2) and the loan is not income dependent but based on credit score and the LTV and project itself which was helpful for my borrowing criteria. You have to provide a monthly update on the project and they hold you to this and so I get the impression they do a good job of protecting investors money. Would I use them again? I’m not sure! It has been a pain but I also appreciate that they are committed to doing better. I now have a good private lender which is easier for me to use so would probably go that route and use groundfloor as a back up if needed.”
“Crowdfunding sites allow you to diversify amongst private offerings via the internet. The website operates as a Broker-Dealer role and the supposedly “vet” the deal and sponsor.. Supposedly… yea whatever in my opinion.”
“Here is my issue. I always prefer working directly with the operator as opposed to using these middlemen platforms.. A lot of Hui Deal Pipeline Club members have been collaborating on this”
“The returns started around 15% using my criteria but have leveled off to about 8% since then and I expect it to remain as this level.”
“Lending Club – This is UNSECURED debt. This is also known as peer to peer lending.. Like a guy needs to borrow 3k for a table saw for his business or someone has a broken car.. Good user experience and the information on the dashboard provided is much more readable than Prosper.com.. One user says “my net annualized return is 12.37 % and Adjusted net annualized return is 5.6%.. Both information is easily readable on the dashboard and it gives an easy to read view of the payments of how much principal, interest, late fees.. Also gives a good view of the notes itself like issued, in grace, fully paid, late by 16-30 days. It has automatic re-invest and liquidate quickly.”
“PeerStreet – Works like Lending Club but is Secured by real estate.. They also give you quite a bit of information on borrower as well as the property details (LTV, Stressed LTV, Improved LTV, borrower’s FICO, etc).”.
“Prosper – It does same as above Lending Club but not as good dashboard information interface.. It has automatic reinvest.”
“Yieldstreet – It’s for accredited investors only – So basically for people who are Rich already!”
“Some of the more established crowdfunding sites are starting to lower their returns because they have achieved a good sized crowd.. It’s still a wild wild west space with many platforms/website jockeying for position.. Many are offering high rates of return and under-collateralizing themselves in my opinion for market share.. Beware some have fraud in their past so make sure you do a little Google-stalking to dig up the dirt.. When I evaluate deals for the Hui Deal Pipeline Club, I realize there are so many deals out there that if someone has a questionable past, I just move on.. Too many good people doing good deals to not be choosy.. This is a newbie mistake I see a lot in private placement investors that they marry the first deal they get pitched at a local REI meeting.. It happened to my partner who lost $45K and myself who lost $40K.”
“Overall what I hear from you folks trying this method of investing is that the default rate is higher than what is expected and the middle man (crowdfunding site) is getting rich here.. But hey if you are not good at networking these are the table scraps you get.”
Here is the list I am working with:
Note: There is a lot of consolidation in this new space. Think of the many competitors there was before there was the Ebay or the Amazon. I get website alerts of the below sites going offline all the time.
AlphaFlow helps investors build diversified real estate portfolios across the crowdfunding industry. Make informed decisions, faster.
AgFunder is the premier marketplace for the most promising Ag and AgTech startups seeking to raise investment capital from accredited investors.
Build your own venture portfolio, free of management fees or carried interest.
Private single-deal VC funds led by top angels.
YieldStreet connects investors to originators with deep expertise in alternative lending.
Invest in businesses you understand and believe in.
CircleUp lists companies for you to review across a spectrum of consumer product and retail categories. Browse or search our portfolio to find opportunities that interest you.
Venture Capital: Crowdsourced. Invest in many deals at the same terms as leading VCs
CrowdStreet provides superior technology solutions that enable all investors to directly connect, invest, and create wealth through real estate.
Gain exclusive access to high-yield commercial real estate deals
Use EquityNet‚Äôs patented technology to efficiently screen and analyze thousands of investment opportunities in minutes.
Where Private Investors Access Proven Startups
FarmFundr offers an affordable way to own and invest in high quality farmland.
Invest in Companies You Believe In
Fundable is a powerful fundraising platform that enables Startups to quickly engage a large network of Backers to raise capital.
Invest in the world’s most promising startups. Diversify your investment portfolio with insider access to highly vetted startups from Silicon Valley and beyond in just minutes.
Invest in successful small businesses.
Real estate meets technology, with one simple goal: Earn better returns.
Earn 10+% annual yield by investing in qualified real estate loans.
Private lending, now public. Earn average returns of 10%.
We are the only digital wealth manager to offer curated investing in venture capital.
Build a diversified residential real estate portfolio using HomeUnion’s end-to-end services of property selection, acquisition, management and sale to match your financial goals
Revolutionizing Real Estate Investing. Individuals invest as little as $5,000 in institutional quality real estate.
Find Your Next Single-Family Investment Property Now
Build a diversified portfolio that can offers solid returns, low volatility, and monthly cash flow
Automated management of your existing Lending Club, Prosper, or Funding Circle accounts.
Build your own diversified, institutional-quality real estate portfolio in minutes. LendingHome offers high returns and durations of just 12 months or less.
Earn returns by investing in lawsuits
Connecting businesses & local investors
We work with investment specialists who have vetted billions of dollars in real estate developments. These industry giants provide us with exclusive investment opportunities for our platform‚Äôs investors.
Get access to highly curated early and late stage investment opportunities
Invest in exclusive, pre-vetted deals that used to be available only to the wealthy and well-connected.
Invest alongside trusted venture capital and angel investors
Earn up to 12% on your real estate investment in one year.
PeerRealty is the premier real estate crowdfunding platform. Gain insider access to high quality opportunities with top developers.
PeerStreet is a marketplace that provides unprecedented access to high quality real estate loan investments.
Investors can earn solid returns by investing in personal loans listed on Prosper
Commercial Real Estate Investing for All
Institutional quality real estate. Simplified investing
Invest as little as $10 in the private companies shaping our future. Pick the companies you believe in and support their mission.
Own an income producing house with as little as $20K down. No hassle.
Invest in highly vetted startups.
Connecting Investors with Technology Startups
Selequity connects accredited investors with the sponsors of commercial real estate (CRE) investment offerings. Our national network of accomplished real estate professionals assures you‚Äôll have unique access to investment opportunities.
Invest in real estate with as little as $1,000. Faster access to capital for real estate developers.
Invest in companies you believe in
We make access to the lucrative legal funding industry possible
We go beyond FICO scores to finance people based on signals of their potential, including schools attended, area of study, academic performance, and work history.
Back founders solving the things you care about. Grok the risks, then join 93,004 investors who funded 155 startups with $35.5 million.
Invest in solar projects. Do well and do good.
Where entrepreneurs and investors source the wisdom of the crowd.
The New Way for Everyone to Invest in Real Estate
We seek to help Software and IOT companies raise capital online and build shareholder value.
Invest in loans that help small businesses grow
GridShare enables everyday people to invest in renewable energy projects and cleantech companies.
Invest in local businesses and entrepreneurs you believe in, starting at $100
Equity-based Entertainment Crowdfunding
Jumpstart Micro brings together investors,
entrepreneurs and innovation in one place.
Mr. Crowd is a SEC-registered equity crowdfunding platform
You Can Invest in Real Estate. Start Small, Dream Big
An open market that brings together entrepreneurs and investors
We Bring You Projects That Make Cities Better. You Invest In Them.
Razitall. An innovative equity crowdfunding platform. You pitch, you bid, and everyone wins.
A new way to diversify your investment portfolio
The simplest way to invest in real estate. Higher returns, lower fees and start with as low as $5000.
Invest Alongside Experts in Real Estate
Acquire Real Estate identifies, underwrites and pre-funds high quality commercial real estate properties. We then offer the opportunity for accredited investors to invest alongside us.
Wealth Migrate is the leading global real estate investment marketplace, giving investors direct access to exclusive real estate investment opportunities in premier markets around the world.
Invest in the places you live, work and play. Neighborly is modern public finance.
Invest in Exit-Oriented Real Estate for as little as $ 25,000
We are an online marketplace for 1031 Exchange investments.
Invest in healthcare’s transformation. Private investing at the intersection of financial returns and impact.
Invest in loans secured by income-producing properties
A curated marketplace for alternative asset investments
Invest online in senior debt real estate opportunities and earn monthly distributions
Build relationships with commercial real estate companies and invest directly in their investment opportunities.
Diversify how you invest with access to new private companies in exciting industries raising funding with offerings open to both accredited and every day investors.
A new way to invest in real estate designed to be rewarding and accessible for everyone, stREITwise cuts out the middlemen and passes the savings on to you, the investor.
Invest in a portfolio of properties we already own.
Your online marketplace for buying and selling royalties
Hotel Investment Banking – One Innvestor at a Time
Direct Energy Investing Made Easy
iSelect works with accredited investors to assemble a diversified portfolio of the Midwest‚Äôs most promising emerging growth companies through their own financial advisors.
RealtyeVest is an online marketplace that connects investors and sponsors (real estate owner-operators) tocrowdfund exclusive real estate investments.
Become an owner or lender in branded hotels for as little as $15,000 per share.
ArborCrowd is an online commercial real estate company. By allowing people to co-invest with successful real estate deal-makers, ArborCrowd enables millions of investors to maximize their financial returns.
The funding portal for all Cannabis and Hemp enthusiasts.
Join the largest network of cannabis investors and entrepreneurs in North America
Revenue sharing deals accessible to Everyone
Legal Cannabis Investments
Financial Solutions for America‚Äôs Heroes and Their Communities
Using Crudefunder’s innovative online investment marketplace, we provide sophisticated and beginner investors with the opportunity to invest in Oil & Gas Projects.
CityVest is an online marketplace where accredited investors can pool their capital to buy shares in institutional real estate investments.
Rabble is an impact investing platform that connects people with projects that strengthen communities.
First RealFund‚Äôs Mission is to identify, offer, co-invest, & manage superior commercial real estate investments with capable owners and quality assets.
The Direct Public Offering marketplace connecting investors with social enterprises.
Honeycomb allows local businesses to borrow loans of up to $50,000 directly from their own loyal customers for business expansion projects.
Online equity crowd-funding portal connecting Vermont’s “Main St.” investors with Vermont entrepreneurs.
Invest in Big Ideas Near You
A publisher where you can get a share of revenue from game sales ‚Äì we bring together developers and communities from all over the world to publish great games.
Buy The Block online investing in real estate with your peers. Pool funds, share knowledge, vote on a property to invest, efficiently manage accounts online.
Pardon the grammar – I’m an Engeneer, Enginere, Engenere… I’m good with math! Here are the Show Notes:
Investor, advisor, writer, father. Founder at @yieldtalk. Ex @oreillymedia, @safari. Occasional consultant & speaker. Chronic reader.
1) Your background and your Real Estate investing track record?
My own journey through crowdfunding, especially real estate
Importance of new crowdfunding choices in helping fuel entrepreneurism (and overall economic growth), especially serving traditionally underserved categories (eg non-males and non-tech companies outside of Silicon Valley, NYC, and Boston)
Importance of understanding “convex” vs. “concave” risk, and the implications for risk/reward profile of your portfolio
The surprising number of choices out there for non-accredited investors
You should also ask me about the time I had to pick between the Google IPO and a new couch (I picked wrong!)
criteria in your site, insights from looking at all though sites, and your recommendation for people to invest in rentals, crowd funding, or direct syndication.
2) Something that you have recently or thought about “burning your cash” on for time savings or an improvement in quality of life.
[Andrew] After leaving my last job (CEO of an ed-tech company for 5 years) right after my second child was born, deliberately moved to a lower-cost-of-living place and dialed down work commitments to have more time with my kids while they’re young. Definitely worth it! But I’ll never forget the night I was putting my son to sleep soon after my daughter was born and contemplating the return to a very demanding job that was only going to get more so, and imagining myself 5 years in the future wishing I could trade the money I’d made for more time with the kids while they were growing up.
3) Something that you changed your mind on? Our ego often gets in the way of greatness.
[Andrew] Having kids definitely changed my perspective about the opportunity cost of my career trajectory. Has helped me see the benefits of a more balanced portfolio approach compared with driving 1000% down one path.
Also, what it means to have a “balanced” or “diversified” portfolio. Was profoundly influenced by Nassim Taleb’s “Anti-fragile” and the concepts of convex and concave risk (and the notion of a “barbell” portfolio).
4) Anything we missed and contact info if you would like anyone to get a hold of you. URL?
[Andrew] I’m a voracious reader, and as a side project I started posting lengthy reviews of books that have shaped my thinking about leadership, strategy, business, and more. I’m also super into meditation and mindfulness, and have written about 10 books that helped me apply mindfulness to my life in general, and doing better work in particular.
And speaking of books, 13 years ago I wrote a book about Microsoft Word of all things.