Earlier this week, the Atlas team met with Ben Miller(ise), the co-founder of Fundrise and Popularise. Although I’ve known this for a while, meeting Ben in person showed me first-hand that he’s a real estate thought-leader. He continues to innovate through his crowdfunding and crowdsourcing platforms.
Crowdfunding for real estate is set to explode now that the SEC finally lifted the General Solicitation Ban as they were asked to do by Congress in Title II of the JOBS Act. What this means for real estate is that groups raising capital can now advertise the fact that they’re doing so. Although it still doesn’t open up the business to non-accredited investors.
So companies such as Ben’s Westmill Capital, can now raise money online (they’re doing just that now on Fundrise) and tell his network about it. Some of them will likely invest because they’ve built a strong local brand.
What I just did there, promoting Westmill’s raise, would have been a violation of SEC rules until last week.
However, the impact on the real estate business will be far greater than changing the dynamics of how deals are capitalized. In our conversation with Ben, we discussed two aspects of the business which will be transformed by crowdfunding.
Raising Money is About Story Telling
High-net investors, above all else, invest in the guys behind the deal. Their due diligence is the trust and relationship they’ve developed with the sponsors over many years. The deal-by-deal analysis however, is not about the numbers, market analysis, or even the relationship, it’s about the story. Raising money through syndication is about story-telling.
Crowdfunding platforms, which move the transaction online, allow sponsors to share the deal story in ways beyond the traditional PPM. For example, check out the video from a current Fundrise offering.
This beats a lengthy document filled with economic data and deal analysis.
Real Estate Companies need to be Brands beyond the Real Estate Business
Crowdfunding opens up investment opportunities beyond your network of close family and friends. If we add a deal to Fundrise, it’s open to anyone who wants to invest. But why would someone who’s never heard of ‘Atlas Real Estate Partners’ invest in one of our deals? Simple answer, they wouldn’t.
It’s going to become increasingly important for real estate companies to develop a brand that exists beyond the business. Companies that can figure this out will thrive on crowdfunding platforms.
At the end of the day real estate is what I do and what I love to do. I don’t believe it should be relegated to rich people. Now, slowly but surely, it won’t be.
I’d love to hear what you think.