EXCERPT: When people think of crowdfunding, the first word that jumps to mind is Kickstarter. But crowdfunding is not limited to supporting the next card game or independent film. Crowdfunding is becoming a viable way to be part of massive projects that would otherwise be out of reach for individual investors.
A prime example? Real estate.
The real estate crowdfunding industry is projected to be valued at more than $300 billion by 2025. One of the driving forces behind this growth has been the low barrier to entry, and the ability for investors to enter larger real estate deals with smaller capital amounts. Compare this to five years ago, where crowdfunding was still an early concept that raised eyebrows, and it’s clear the where the trajectory is headed. The global crowdfunding industry has gone from $880 million in 2010 to $34.4 billion.
That’s serious growth.
However, a Bloomberg article noted risks associated with crowdfunding in the real estate industry. It concluded that after evaluating over 100 different real estate crowdfunding platforms, only a handful were considered credible, trustworthy, or even effective.
This is all the result of Congress passing the Jumpstart Our Business Startups Act (JOBS Act) in 2012, allowing startups and small businesses to openly market private investments to the public.
In real estate, especially, this has allowed companies like Origin Investments, a private equity real estate company, to raise more than $130 million for a fund — its third fund, to be exact. To date, this is the largest fund raised by a single U.S. real estate crowdfunding platform, ranking it alongside the backing that tends to launch hot tech startups into the limelight.
Part of the reason why Origin, particularly, has succeeded in its fundraising efforts has been the performance of its two earlier funds. Both are ranked in the top quartile of Preqin-ranked funds and are projected to generate more than 25% annualized net returns.