By Erika Morphy
Fundrise, a crowdfunding start-up that finances commercial real estateprojects for investors, will be debuting its latest offering on Wednesday morning on its site: a vacant commercial building on 1539 7th Street NW, inWashington, DC that the developer hopes to turn into a boutique retail site. The project is $2 million and $350,000 will be available to the general public.
This will be Fundrise’s 18th project and while in many respects it is similar to the ones that came before it, there is something new. Maryland residents can invest in the project–in as little as $100 increments—for the first time. Prior to this, these projects were only open to DC and Virginia residents.
It took about seven months of working with the state’s Bureau of Securities to get it to sign off, co-founder Ben Miller tells me. “They have been great to work with actually. Once they got comfortable with the concept they were very enthusiastic about letting Marylanders participate.”
And so Miller builds puts another piece of his businessplan into play. So far, he has had to go state by state, getting local regulatory approval to sell shares in these projects.
That will, if all goes well, eventually change when the Securities and Exchange Commission puts in place rules to build upon its so-called Regulation A, an existing exemption from registration for small offerings of securities up to $5 million within a 12-month period.
In December, the SEC voted to propose these rules, which would allow companies to offer and sell up to $50 million of securities within a 12-month period. They have been mandated by mandated by Title IV of the Jumpstart Our Business Startup (JOBS) Act.
Fundrise is at the vanguard of these funding campaigns, Miller says. “We have done three Regulation A offerings, more than anyone in the country–approximately 20% of all the Regulation A offerings cleared by the SEC nationally in the past three years. So it’s fairly safe to say we are both an expert on it and can showcase with our latest project on 1539 7th St how it works and why it’s an important story.”
Rule making at the SEC is not exactly a speedy process, though; Miller could well be making more rounds at the local regulatory offices for some time instead of talking up his Regulation A creds. But the trend is clear, if not the timeline: crowdfunding is well on its way to becoming a mainstream and significant form of finance for small and medium sized companies–along with another way to engage with customers.