Raising Equity Through Crowdfunding: The Players and What to Expect
Although in its infant stages, crowdfunding in the commercial real estate space has made leaps and bounds in just a few short years. Here is an analysis of the prominent players and what you should expect during the process.
Exposure: Dramatically increase the exposure of your equity opportunities to a wide international audience looking to invest in top 50 MSA locations.
Centralize: Centralize the offering by narrowing in on ONE platform to host the crowdfund, directing all interested parties to that platform.​
Innovate: Begin taking the steps to move toward the future of capital raising.​
Debt or Equity: First, decide whether you intend to pursue debt or equity funding.​
Choose a Platform: Decide on a platform. All platforms differ in how they approach the underwriting process, how they structure deals for investors, and the requirements in place for borrowers and fundraising companies.​
Proven Track Record: Depending on the platform, applicants need to prove that they have adequate history of involvement in successful projects. For example, Fundrise requires $100M worth of projects​.
Apply: Submit your application. Be thorough in answering each question on the marketplace platform you choose. Some requirements include tax returns and deeds showing ownership of properties.​
What Is The Expected Raise Timeline?
Every platform has different timelines, although you should expect the same as a traditional raise​.
The only additional time required is the submission process, which could take up to 7 business days depending on the platform​.
Equity partners who we do not meet on the platform can still place their equity using the platform we choose to use, which can speed up the raise​.
Breakdown of the Best CRE Crowdfunding Platforms
- RealCrowd​
- Open marketplace where sponsors and investors make connections, grow networks, carry out transactions, and do deals without all the institutional intermediaries and encumbrances that existed in the pre-JOBS Act era
- 20,000 accredited investors​
- Facilitated over 130 different deals—18 of which are funds, with the rest being individual assets—in over 30 states and over 80 different cities.
- Fundrise​
- $10M – 100M in Top 50 MSA​
- Sponsor must have $100M in real estate experience through sales or acquisitions​
- Both Equity and Debt solutions​
- Deals reviewed within 48 hours and underwriting within 4 weeks to close​
- No prepayment penalty​
- Crowdstreet​
- Over $1B raised​
- Company assists with the marketing plan to attract the best investors​
- Some deals have been financed within 24 hours of posting on the website​
- EquityDoor​
- Based in Austin TX, this platform requires the sponsor to have an already-existing pool of investors​
- The website is a bit outdated and there are no success stories or stats on how many deals have been done through the platform​
- RealtyShares​
- Over $870M deployed to date, 1,160 transactions across 41 states with values over $2.7B​
- Provides Common Equity, Preferred Equity, and Mezzanine Debt​
- Up to 90% LTV​
Are There Any Success Stories?​
- CrowdStreet raised $25M in 3 hours for an Opportunity Zone project in Atlanta (September 2019)​
- The World Bank predicts that in a few years the crowdfunding industry as a whole will be worth an estimated $93 billion. In the US alone, crowdfunding has grown by nearly 145%, with real estate making up a significant amount of that number. ​
- Crowdfunding: One of the Decade’s Success Stories​
Article sources:
- MarketWatch​
- Real Estate Crowdfunding Market Growth Analysis By Revenue, Size, Share, Scenario on Latest Trends, Types and Applications Forecast 2026​
- Forbes​
- How a Downturn Can Affect Crowdfunding​