Commercial real estate investment can be risky. So can crowdfunding. Combine the two and you have CrowdStreet. CEO Tore Steen says his startup is trying to take a little bit of the risk out of the process by focusing on high-quality deals.
Malia Spencer | Portland Business Journal | April 24, 2014 – The latest equity crowdfunding platform, launched this week out of Portland, has a twist.
Crowdfunding has become a hot topic for startups as a way to raise capital, either through equity or through rewards of product, but with CrowdStreet, the model is being brought to commercial real estate.
The platform, which has been under development for the last nine months, allows accredited investors to participate in commercial real estate deals nationwide. The company vets the deals to ensure that only high quality offerings are on the platform. Once a campaign is completed, CrowdStreet continues to be involved and acts as an investor relations portal for the project.
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There is one project up on the platform now, a senior housing project in Bloomington, Indiana, sponsored by Mainstreet Property Group. Mainstreet aims to raise $1.5 million on the platform. The project already has $10 million committed by a bank and $1.8 million from Mainstreet, according to the offering.
Since the platform launch on April 21, the project has raised $218,000.
Crowdfunding in any form is still new. CrowdStreet CEO Tore Steen knows it’s still seen as a risky space.
â€œItâ€™s a new frontier with equity crowdfunding,â€ he said. â€œBy focusing on high quality sponsors with nice returns, that is important to us.â€
Steen noted that the team is already rejecting about 70 percent of the deals that have sought to use the platform.
The team is also focused on bringing transparency to the whole process through the site.
â€œObviously, in the market there will be bad characters, as there are in the off-line world,” he said. “As much as we can self-police and do the best we can to bring great returns to the investment community and build a quality brand (we will).â€
Unlike rewards-based crowdfunding sites such as Kickstarter, CrowdStreet is only available to accredited investors. Also, unlike Kickstarter there is no time constraint on the campaigns. However, after 30 days the company would like to see campaigns in the closing process, Steen said.