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Being an occasional investor on Lendingclub and Prosper, I've followed the proliferation of crowdfunding sites with interest.  In many ways these sites are the big brother to Lending club.  Many are for accredited investors only (they'll take your word that you meet the qualifications for accreditation, no one verifies this).  They enable you to invest in small companies already running, in need of expansion capital.  I've held off from investing in these (with one exception, see below) because I don't feel I have enough knowledge to tell what is a reasonable startup valuation and I'm not too familiar with all the legal documents one must review before investing.  Does anyone here have experience investing in startups using one of these platforms, or otherwise?

CircleUp  specializes in brick and mortar food, beverage, and natural product companies.  Most of the companies have some environmental or "all natural" angle.  Most of the companies are currently selling products which can be found at Whole Foods, Starbucks, or other places.   Mostly equity financing, but sometimes offer note as well. You can ask the founders questions through the site.  Investments usually begin at $5000 or $10,000.

Fundrise  is a platform for investing in urban real estate projects.  Due to the founders taking doing extensive research in the law, they have  offered certain investments to anyone, for as low as $100.  (These investments are for residents of Washington DC or Virginia only, see articles here  for how they worked the legalities of this or  here  for a more cautionary look from the Washington Post).  In several cases, they use the "crowdfunded by small local investors" angle to convince local governments to rezone an area or to redevelop a previously government-owned property.  This is a pretty cool end run around the NIMBY mentality and a lets people have a stake in a specific property in their neighborhood.

Ibankers  is a site for accredited investors to directly fund various companies.  I haven't investigated it much, but it seems similar to CircleUp although without the the environmental angle. 

I put a small amount into Fundrise.  I'm aware of the fees and risk; frankly, I like the concept and like investing in a specific property I'm personally familiar with, rather than, say, a REIT with many properties and high administrative costs.   Anyone else tried their hand at crowdfunding?

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Interesting, and thank you for the links. This is an area that I have been interested as of late (investing in small, preferably local companies). There aren't a lot of offerings/opportunities for an unaccredited investor, which is unfortunately, as some do have the desire and capacity (financial background) to do so. I know that there have been some of changes in the securities regulations to make this easier, but haven't seen much stick. The few sites I have seen (or found links to), seem to fold in short order or get folded into a VC fund, as most lack the ability to get their name out there and generate enough projects to make it worthwhile to continue to run them.

This looks really interesting. Thanks for sharing the links!

There are new SEC rules implemented in the JOBS Act that are a game changer for crowd funding. Smaller investors are now able to participate in investment opportunities like this without being an accredited investor.

Eh. I can only say this: the Fundrise "investment" that's available in my city (which I won't name) is, at best, weak. There's a very good reason banks wouldn't touch them with a ten foot pole. Their business model is dubious, their return time laughable, and a more established (and better thought through) entry into their market just flamed out spectacularly in the same city. Sure, they've gotten more than their goal in people who are "interested," but I'd be very surprised if that translated into actual funding. And if it does, I hope the investors have firm grips on their shirts.

Along the same lines there is also Mosaic, which allows you to invest in solar power projects. Currently only non-accredited investors in CA are allowed, or accredited investors anywhere in the US.

I'm curious about the legal structure of Fundrise projects. Is each project a separate LLC? Does everyone who invests become a partner? So if you put $100 into a $500,000 project you now have .02% equity in the partnership?

From my work on some small partnerships they can be a real pain and the reporting required to equity owners of partnerships (k-1s for every partner) sounds like it would be expensive. I have to think the fees to manage everything will make this type of investment worse than a REIT because of the lack of economies of scale, but maybe they've figured some things out to make it better.

Fundrise is a platform for local real estate investments from various developers. The Washington DC ones from West Mill Capital Partners are from the Fundrise owners, they figured out a way legally sell shares to local, non-accredited investors (prior to the JOBS Act).

The developer of each project has usually secured a financing for a large chunk of the project already and already purchased the land or building. Therefore, the amount they are seeking on Fundrise does NOT translate into 100% equity in the investment, but a much smaller share. You have to read the offering prospectus carefully. The deal I took the sponsors skim 3% of the rental income and 1% of assets as their fee.

I went in with a few hundred primarily because I like the concept. Remains to be seen if it will be a good investment. As they say, I'll either gain money for my efforts or gain "experience".

The big money in JOBS is issuing, not buying these securities.

As someone who studies economic development and is working on a PhD in that area, I have to say fundrise has hit a gold mine when it comes to finding a way for local governments to lift zoning and regulation restrictions. The whole idea of "investing in the community" with local investors is VERY hip and trendy in the development world at the moment, and most city governments would fall like butter to these types of projects.

magika said:   As someone who studies economic development and is working on a PhD in that area, I have to say fundrise has hit a gold mine when it comes to finding a way for local governments to lift zoning and regulation restrictions. The whole idea of "investing in the community" with local investors is VERY hip and trendy in the development world at the moment, and most city governments would fall like butter to these types of projects.
  
I think this is hits the nail on the head.  I wouldn't be surprised if other developers start offering some portion of their projects to small investors.  In a lot of areas the NIMBY or "not in my backyard"  syndrome basically precludes anything worthy from getting done.  Imagine instead you have dozens of people showing up at a planning committee meeting to speak IN FAVOR OF a big redevelopment project.  Giving a portion of the investment to local investors is also a better way to gain community support than the backroom deals or graft which sometimes happens now. 

Kanosh said:   
magika said:   As someone who studies economic development and is working on a PhD in that area, I have to say fundrise has hit a gold mine when it comes to finding a way for local governments to lift zoning and regulation restrictions. The whole idea of "investing in the community" with local investors is VERY hip and trendy in the development world at the moment, and most city governments would fall like butter to these types of projects.
  
I think this is hits the nail on the head.  I wouldn't be surprised if other developers start offering some portion of their projects to small investors.  In a lot of areas the NIMBY or "not in my backyard"  syndrome basically precludes anything worthy from getting done.  Imagine instead you have dozens of people showing up at a planning committee meeting to speak IN FAVOR OF a big redevelopment project.  Giving a portion of the investment to local investors is also a better way to gain community support than the backroom deals or graft which sometimes happens now. 

  Interesting idea.  This might be a good opportunity for mid-size and smaller real estate developers that I work with to get projects off the ground. Since the economic upheaval, only the largest developers have been able to attract institutional equity from money managers who have capital commitments from pension funds.  These money managers typically expect yield on their capital in the mid teens.  Some are underwriting their apartment building investments assuming that rents can be increased significantly over the next few years and will be sold at 4% cap rates in 2016.  I'm skeptical but perhaps their assumptions will turn out correct.  One word of caution to those who might be considering investment -- it is EXTREMELY important to perform your own due diligence.  Investigate the developer's background and the project to see if it makes sense.  There are a lot of flakes out there.

Kanosh said:   Being an occasional investor on Lendingclub and Prosper, I've followed the proliferation of crowdfunding sites with interest.  In many ways these sites are the big brother to Lending club.  Many are for accredited investors only (they'll take your word that you meet the qualifications for accreditation, no one verifies this).  They enable you to invest in small companies already running, in need of expansion capital.  I've held off from investing in these (with one exception, see below) because I don't feel I have enough knowledge to tell what is a reasonable startup valuation and I'm not too familiar with all the legal documents one must review before investing.  Does anyone here have experience investing in startups using one of these platforms, or otherwise?

CircleUp    specializes in brick and mortar food, beverage, and natural product companies.  Most of the companies have some environmental or "all natural" angle.  Most of the companies are currently selling products which can be found at Whole Foods, Starbucks, or other places.   Mostly equity financing, but sometimes offer note as well. You can ask the founders questions through the site.  Investments usually begin at $5000 or $10,000.

Fundrise    is a platform for investing in urban real estate projects.  Due to the founders taking doing extensive research in the law, they have  offered certain investments to anyone, for as low as $100.  (These investments are for residents of Washington DC or Virginia only, see articles here    for how they worked the legalities of this or  here    for a more cautionary look from the Washington Post).  In several cases, they use the "crowdfunded by small local investors" angle to convince local governments to rezone an area or to redevelop a previously government-owned property.  This is a pretty cool end run around the NIMBY mentality and a lets people have a stake in a specific property in their neighborhood.

Ibankers    is a site for accredited investors to directly fund various companies.  I haven't investigated it much, but it seems similar to CircleUp although without the the environmental angle. 

I put a small amount into Fundrise.  I'm aware of the fees and risk; frankly, I like the concept and like investing in a specific property I'm personally familiar with, rather than, say, a REIT with many properties and high administrative costs.   Anyone else tried their hand at crowdfunding?

  Another one to look into is www.ourcrowd.com
 

brettdoyle said:   There are new SEC rules implemented in the JOBS Act that are a game changer for crowd funding. Smaller investors are now able to participate in investment opportunities like this without being an accredited investor.
I've been looking into this, as I'm interested in making an investment with a company on CircleUp. From what I can tell, smaller investors are not now able to participate. There is a proposed rule, which is in the comments phase, which, if and when finalized, is expected to go into effect in the spring or summer. Please correct me if I'm wrong.

People in Georgia can check out www.sparkmarket.com as well.

@JMar - Correct, the Title 3 rules (which allow for non-accredited investors to participate in advertised equity offering) are still in the proposal stage (to my knowledge). There are still exceptions at the state level and certain states (I believe KS and GA) have implemented their own version of the title 3 rules for intra-state offerings.

Also, under the old rules, investors were allowed to self-certify that they were accredited. It sounds like under the job act rules, accredited status needs to be verified by a 3rd party. Though you could ask your circleup rep what that would entail (though it sounds like submitting various account statements showing the income or account balance to a 3rd party).



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