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Why 15 Venture Capital firms are playing the Real Estate Crowdfunding game

Why 15 Venture Capital firms are playing the Real Estate Crowdfunding game

by David Drake

Three years since  crowdfunding for real estate started, the market has grown to more than a billion dollar industry. By 2025, the global real estate market could be worth $90 billion or more. This is getting the attention of VCs.

VC activity in the space can be measured by their investments on real estate crowdfunding platforms. VC’s investment in  Fundrise raised $31 million.

The investors were led by Chinese social networking company Renren and executives from New York-based Silverstein Properties Inc., which owns the World Trade Center. This Series A funding round had  additional new investors – Guggenheim Partners and the president of Rockrose Justin Elghanayan – have taken the total to $38 million.

World Trade Center | Pixabay.com

World Trade Center | Pixabay.com

Renren liked Fundrise’s focus on community and believes that real estate is the next frontier of crowd-based financing. Silverstein executives  were impressed on Fundrise’s vision and execution, noting that it has cracked the code to do real estate crowdfunding well.

Early in 2014 Realty Mogul raised $10.1 million in a funding round led by Canaan Partners which contributed $9 million. Realty Mogul has already invested more than $70 million in 226 different properties located in 19 different states.

Hrach Simonian, partner at Canaan Partners, notes that VCs have invested in the platform  because the public is now participating in crowdfunding sites. Another reason for investing is the  data build up on these platforms,which can be used to predict assets’ performance.

Addressing the needs of an underserved market not met by banking solutions | Pixabay.com

Addressing the needs of an underserved market not met by banking solutions | Pixabay.com

A platform for borrowing and investing in commercial real estate, AssetAvenue  raised $3 million in 2014 from investors led by Matrix Partners and NetEase. Matrix backed powerhouses such as Apple and JustFab, while NetEase is one of the largest publicly traded companies in the internet and technology space in China.

Josh Hannah of Matrix Partners notes that real estate crowdfunding platforms are addressing the needs of an underserved market not met by banking solutions. In   2015,  the platform  raised an additional $11 million from DCM Ventures and from earlier investors, NetEase and Matrix Partners.

DCM Ventures’ General Partner, David Chao believes that AssetAvenue can change the commercial real estate landscape in terms of how lending is done.

Housing Market | Pixabay.com

Housing Market | Pixabay.com

Other notable  local and overseas fundraising participated by VCs include:

  • RealtyShares  raised $10 million in a Series A round led by Menlo Ventures, which also incorporates participation from the previous investor General Catalyst.
  • California-based platform Patch of Land raised $23.6 million in a Series A round, which SF Capital Group and Prosper participated.
  • UK-based Property Partner, which gives investors the opportunity to invest for as little as £50 in the flourishing UK buy-to-let housing market, raised £1.25 million in seed capital from Octopus Investments,  and VC Jon Moulton, founder of Seedcamp and Better Capital.

These successes  indicate that real estate crowdfunding is going to be a force to reckon with in the future.

About David Drake

David Drake, Contributing Journalist.Reach him directly at David@LDJCapital.com.

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