The Internet is a tool that has brought people together for a myriad of reasons. Recently, people around the U.S., and even around the world, have banded together and pooled funds as a means to help get projects off the ground. Crowdfunding websites like Kickstarter have funded movies, music albums and even educational institutes. Now crowdfunding has made it all the way to the world of real estate through the establishment of a website called Fundrise.
Fundrise is a website that aims to fund commercial real estate projects by inviting individuals to directly invest in projects with as little as $100. Projects such as the construction of hotels, apartment buildings and other developments, which are typically exclusive to the domain of wealthy investors and private equity firms, are funded through the combined efforts of individual and group backers. Since Fundrise connects investors directly to properties online, there is no hassle of dealing with multiple levels of middle men and funding institutions, which can whittle down an investment and its returns.
It may sound like a crazy idea, but the idea has really taken off as the group recently raised more than $31 million in its first round of funding from a group of various backers in the technology and real estate fields. A large part of that financing came all the way from China where a social networking company called Renren, but even individual investors like Scott Plank, a real estate developer and former Under Armour executive, and Richard Boyle, the former chief of an online commercial real estate listing service, were able to get in on the action as well.
Crowdfunding Makes Its Mark
A few years ago, websites like Fundrise were not possible due to various securities regulations. However, starting in 2011 Congress began reviewing and passing several bills that would reduce these regulations in order to stir economic revitalization in the country. On April 5, 2012 the JOBS (Jumpstart Our Business Startups) Act was signed into law, which made provisions for crowdfunding as a legitimate source of fundraising by increasing limits on numbers of shareholders and public offerings for companies.
Riding that high and beautiful wave, brothers Benjamin and Daniel Miller established Fundrise in August 2012. Based in Washington DC, the Millers spent years working as urban retail developers, which proved to be a strong education in real estate investments. In 2010, the brothers realized a need for a website like Fundrise and began working on their concept.
“When we started, no one had ever heard of real estate crowdfunding,” Ben Miller said to the New York Times. Now that the company has established itself as an rising force in commercial real estate things are coming together for the group.
“The concept is well understood and we’re now in a place where we can scale,” Daniel Miller added.
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