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Advanced Investing

The New Norm: Real Estate Crowdfunding Platforms Turn to Wall Street

The New Norm:

Real Estate Crowdfunding Platforms Turn to Wall Street

We want to share what we’ve learned from attending recent real estate crowdfunding conferences. We are beginning to see a clear cut view of how crowdfunding in the real estate space is beginning to shy away from its original purpose. Funding through the “crowd” is a new reality. The trend is that Real Estate Crowdfunding (RECF) Platforms Turn to Wall Street.

Crowdfunding, by definition, “is the practice of funding a project or venture by raising monetary contributions from a larger number of people, typically via the internet” – emphasis on “people”. Companies such as KickStarter and GoFundMe are perfect examples of how companies have successfully accomplished this business objective by getting projects funded through the crowd for the purpose of people wanting to work towards a similar goal. This has been the same objective the real estate sector is trying to duplicate. In many situations, we have been seeing the opposite.

Additionally, RECF founders and C-level executives that have had the opportunity to be panelist speakers at Real Estate Conferences across the nation have touched briefly on their business objectives, and these objectives, with respect to raising funds for projects, have been directed towards institutional capital. In some cases, RECF’s are solely seeking funds through institutions.

What are the arguments?

Some argue that funding projects from institutional capital alone can be considered crowdfunding when funds come from multiple institutions. For example, a hedge fund, venture capital firm, and a private equity firm can pool their money together to fund a multi-million dollar project. You could also argue that to make a company profitable, the main objective is to drive down overhead costs. However, many would argue against this and say it isn’t true crowdfunding.

RECF’s that elicit true crowdfunding strive to drive the cultural shift in the way people invest. On another hand, their purpose is much larger than making big pay checks and pay outs. It’s a revolution that they want to take part in and is making history.

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