Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Equity Crowdfunding, Alternative Funding
Never mind the Brexit — crowdfunding platform Crowdcube is raising £5 million from its members
Business Insider UK | Oscar Williams-Grut | July 4, 2016
The UK's biggest crowdfunding site Crowdcube is planning to raise £5 million ($6.6 million) from its members on its own site, as its CEO claims equity crowdfunding is "vibrant post-Brexit."
Crowdcube, founded in 2011, lets ordinary people buy chunks of fast-growing, private startups from as little as £10. The platform has over 290,000 registered investors and over 400 companies have used its platform to raise over £170 million.
Notable brands that have raised money on the platform include the Eden Project and River Cottage. Investors have so far had two exits — where they get any profit or loss when a business is sold. They were from Camden Town Brewery and E-Car Club.
Crowdcube, which also operates in Spain, announced in an emailed release on Monday that it plans to raise £5 million in an equity crowdfunding on its own platform later this month. It will issue a full prospectus for the raise, meaning investors will be able to take a good look under the hood of Crowdcube's business to see profit and loss, business volumes, and other key metrics.
The latest accounts filed with Companies House show the business made a loss of £4.8 million on revenue of £2.7 million in the year to September 2015. That was up from a loss of £1.3 million in 2014 on revenue of £1 million.
See: The 5 secrets of Britain’s most successful crowdfunder
The UK's biggest crowdfunding site Crowdcube is planning to raise £5 million ($6.6 million) from its members on its own site, as its CEO claims equity crowdfunding is "vibrant post-Brexit."
Crowdcube, founded in 2011, lets ordinary people buy chunks of fast-growing, private startups from as little as £10. The platform has over 290,000 registered investors and over 400 companies have used its platform to raise over £170 million.
Notable brands that have raised money on the platform include the Eden Project and River Cottage. Investors have so far had two exits — where they get any profit or loss when a business is sold. They were from Camden Town Brewery and E-Car Club.
Crowdcube, which also operates in Spain, announced in an emailed release on Monday that it plans to raise £5 million in an equity crowdfunding on its own platform later this month. It will issue a full prospectus for the raise, meaning investors will be able to take a good look under the hood of Crowdcube's business to see profit and loss, business volumes, and other key metrics.
The latest accounts filed with Companies House show the business made a loss of £4.8 million on revenue of £2.7 million in the year to September 2015. That was up from a loss of £1.3 million in 2014 on revenue of £1 million.
Related: The backing of the crowd – What has crowdfunding done for great British businesses?
CEO and cofounder Darren Westlake says in an emailed statement announcing the new fundraising:
"The UK has a long and proud history as a hotbed of entrepreneurialism and innovation. In just five short years we have firmly established our position as a global fintech pioneer and the UK’s dominant equity crowdfunding platform but we’re not stopping there. We’ve got ambitious plans for the future and we’re excited to be able to give the crowd the opportunity to join us on our next exciting phase of growth."
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
The 5 secrets of Britain’s most successful crowdfunder
The Memo |By Oliver Smith | July 1, 2016
GoHenry raised nearly £4m in a record-breaking crowdfunding campaign, but how did they do it?
Alex Zivoder never expected that crowdfunding would be quite so successful for his business GoHenry, a digital pocket money card and app for kids.
But last month GoHenry’s crowdfunding campaign exploded. What was intended to be a £2m raise soared to nearly £4m on Crowdcube as people frantically poured money into the business which over 170,000 families use to manage their kid’s pocket money.
After 45 days Crowdcube was forced to put the brakes on Zivoder’s campaign as GoHenry had reached the EU’s legal limit on how much you’re allowed to raise through equity crowdfunding, a cool £3.99m.
But how did Zivoder do it?
Indeed, as he admitted to The Memo, GoHenry spent nothing on PR, marketing or any kind of big campaign. “We didn’t have the time or money to be honest,” he said.
1. Ask why?
The most important, Zivoder says, is making sure that you’re doing crowdfunding for the right reasons.
“Why do you want to raise funds, and why from the crowd? It’s not a decision you should take lightly, because it’s not easy, you will be consumed for three months.”
Indeed GoHenry’s actual campaign was supposed to run for a month, but ended up being extended to 45 days, then there were weeks of preparation beforehand (see No.5) as well as a huge amount of admin afterwards.
“There are many ways to raise funds, so why the crowd? If you have an answer to this question that is good for you, then go ahead.”
2. Run a three-phase campaign to build momentum
There are different ways you can run a crowdfunding campaign itself.
The ‘traditional’ method is to open on day 1 with £0 raised and start promoting your campaign on and offline in the hopes that it will gain traction and you’ll reach your target.
See: Crowdfunding: enabling global entrepreneurship, the future of Canada’s innovation economy
But, as we saw in the case of coffee group Pact which earlier this year had to pull the plug on its crowdfunding campaign, starting with £0 raised and a daunting £1m target is a huge mental barrier for early investors.
Instead Zivoder had a different strategy with GoHenry.
Tip: Get existing investors to commit to the crowdfunding campaign.
Zivoder went to the angel investors who had already funded the business and asked them to invest in the campaign.
“We told them it’s important you commit as early as possible, it’s so important because for the next stages you’ve got to convince people that you have traction.”
“Look at Pact, one of the reasons they flopped was because the big VCs [venture capital funds] didn’t follow-on, and that sends the wrong signal to the crowd.”
On day 1 GoHenry launched with £1.2m already pledged from existing investors.
Tip: Get your existing users involved.
“When we polled our existing customers 80% said they’d be willing to invest in the business, and that was before we told them how much we were raising or what we were planning to do.”
So GoHenry had a 48 hour exclusive window when only their existing users could invest, and 1,200 jumped at the opportunity.
“We had a huge success with those two rounds, so much so that when we opened the public campaign on Monday we were basically already funded, we had £2.1m.”
See: The Missing Piece That Could Hold Back Equity Crowdfunding
3. Have a funding plan B
Simply put, don’t count on crowdfunding.
“If you put all your eggs in the crowdfunding basket it’s very risky,” says Zivoder.
“Because until you open that door you don’t know whether there will be a crowd outside who are keen to invest.”
That’s the gamble for many entrepreneurs and businesses considering crowdfunding, they’re obviously excited and passionate about their business, but will anyone else be?
“So you should have [crowdfunding] as an element of the toolkit, but it cannot be the only thing.”
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
Progress Report: Data From 30 days of Title III Equity Crowdfunding
Crowdfund Insider | By
We’ve hit the one month mark since Title III became effective on May 16, 2016, and are just starting to see the first data points of this new industry. Here are some juicy statistics:
In the first 30 days of the filing’s becoming effective, 40 companies have become issuers using Title III (as of the writing of this article, that number has increased to 43 companies). Out of the gate, 27 companies were lined up and ready to launch their crowdfunding campaign.
As of June 13, 2016, over $2 million has been invested in Title III offerings, or nearly $65,000 per day.
One of the most interesting data points was the distribution of capital across the United States. Traditionally, venture capital funds have come from New York and California; crowdfunding presents the opportunity to disperse more capital to more areas of the country.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
SAFEs: The Investment Vehicle of Choice for Reg CF Issuers?
Crowdfund Insider | | June 6, 2016
Exploring the emerging role of SAFEs or Simple Agreement for Future Equity in Reg CF offerings.
Examining SAFEs pros and cons to founders and financiers investing in seed stage companies.
You’ve started a new business, established your team, and you’ve self-funded all of the startup expenses that you can afford. How do you take your business to the next level without breaking the bank? You’ve learned from fellow entrepreneurs that it takes money to raise money, but you are wondering just how much. What are your options?
Regulation Crowdfunding (“Reg CF”) came into effect May 16, 2016 and is providing entrepreneurs with a new way to raise capital. In the last few weeks, nearly 40 companies have launched offerings under Reg CF with more deals going live every day. Each is taking place on a web portal that has registered with the SEC and FINRA. Among the 10 registered portals, WeFunder, StartEngine, NextSeed, SeedInvest, FlashFunders, Venture.co, and TruCrowd are decorated with live offerings. The fundraising companies represent a mix of startups and seed stage companies that are offering convertible notes, common equity, preferred equity, profit sharing agreements, and SAFEs in exchange for cash.
See: Recent Regulatory Developments in Equity Crowdfunding in Canada
From a review of these offerings, provided by Stratifund, an interesting anecdote has emerged: Convertible debt, once the founder’s choice for seed funding, took the back seat to SAFE agreements among Reg CF deals.
Efficiently Structuring a Reg CF Offering
Under Reg CF, companies are only permitted to raise up to $1M per year. Offering costs, including legal fees, must therefore, be curtailed to maximize the net proceeds. Legal fees for seed financing can be deeply mitigated where issuers resourcefully look to standardized documents in the seed financing arena. For example, WeFunder offers a “library” of legal documents for issuers on its portal. Furthermore, investors and lawyers have come together to release, and update, Series Seed, the KISS (“Keep It Simple Security”) from 500 Startups, and SAFE (“Simple Agreement for Future Equity”), released by Y Combinator. Further, iDisclose, a web-based application, helps entrepreneurs streamline the disclosure document generation process for crowdfunding and private placement offerings. Still, it is recommended that all issuers consult with their own legal counsel before relying on any legal document, even when free templates are available from reputable sources.
Determining the optimal structuring for raising startup capital is highly fact specific to the issuer’s circumstances and objectives. Still, there are general pros and cons of all categories of vehicles that will be reviewed. The full gamut of legal instruments are represented among the live Reg CF offerings. Thus, a conversation about structuring Reg CF offerings is ripe for review.
Convertible Debt Features
Since the 2000s, convertible debt has been the security of choice for pre-seed and seed capital raises. Convertible debt offers investors a debt-like security that converts to stock upon the occurrence of a future “priced” financing, acquisition, or IPO. One of the central benefits to founders who choose to offer convertible debt is that it delays the determination of the company’s valuation. This allows founders to finance their ventures without having to make an early judgment call possibly before operations have begun and can be objectively evaluated. Nevertheless, where valuation caps are introduced, founders do, in a sense, value the company. Establishing a valuation cap in a convertible note, however, is not the equivalent of setting a valuation for tax purposes.
The value proposition of convertible notes is that the note identifies a term and interest rate, limiting investor’s exposure in the event of a future failed financing round. Further, the discount rate identified in the note, and often negotiable, rewards the investor taking on the early investment risk by converting the note to equity at a better price than investors in the new financing receive. The introduction of a valuation cap is exclusively for the benefit of the investor to provide protection in the event the next round is at a higher than anticipated valuation. Further, where valuation caps are included, the cap on the notes can ultimately provide investors with a multiple liquidation preference known as a “liquidation windfall.” This issue must be carefully managed by entrepreneurs at the outset.
MF Fire, found on SeedInvest, is was the first of two Reg CF convertible debt offerings to date. The company is raising $250,000 and up to $1M at an interest rate of 6% per annum, 12-month term. Upon a future financing the notes convert at a 15% discount rate or $7M valuation cap. The convertible notes in the MF fire offering are based on the Keep it Simple Security (“KISS”) documents developed by 500 Startups. The documents were modified for use by the issuer who is a Benefit LLC and are available here. The company is concurrently raising funds in a Reg D Rule 506(c) issuance. As of June 3, 2016, the issuer has raised $49,600 according to the SeedInvest fundraising page.
The Origin of the Simple Agreement for Future Equity (“SAFE”)
In 2013, Y Combinator released a streamlined set of fundraising documents called Simple Agreements for Future Equity (“SAFE”). Y Combinator is an American startup accelerator that finances early stage startups in batches twice per year. The incubator is now located in Mountain View, CA and was ranked by Forbes as #1 among its peers in the accelerator and incubator space. Dropbox and Airbnb are among its top names in its portfolio, with a total value since inception at $7.78B.
SAFEs, like warrants, create an option to buy equity in the future. Overall a founder-friendly instrument, the agreement offers no interest rate or term, thus significantly distinguishing the product from convertible notes. Founders are not faced with the ticking time bomb of a maturity date. Both convertible notes and SAFEs, however, defer valuation decision-making to a later date. Valuation caps and discounts are similarly elective.
See: The Missing Piece That Could Hold Back Equity Crowdfunding
Arguably, early investors who invest via SAFEs may see their upside limited despite taking on significant early risk. Even with the inclusion of valuation caps and/or discounts, there is no timeline to liquidity.
Combining SAFEs with perks may help to persuade prospective investors, accustomed to convertible notes, to participate in an offering. Some provide immediate gratification and may enhance the investor’s emotional connection to the business.
Companies raising capital under Reg CF have apparently dismissed the shortcomings of SAFEs from the investor’s perspective. SAFEs were the instrument of choice for 12 of 40 Reg CF issuers to date. All Reg CF SAFE issuers listed their offerings on the Wefunder portal. Investment minimums range from $20,000 to $400,000 and maximums range from $100,000 to $1,000,000. All companies are offering perks for investing.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
VestMunity Makes Fix & Flip Real Estate Investing Accessible for All
Crowdfund Insider | Bret Conkin | June 11, 2016
Banks have been criticized in the media for failing to provide lending to worthy people and businesses since the sub-prime lending crisis. Real estate investors and developers faced restricted access to the capital they sought for their property or project. Fortunately, new financial technologies have emerged to disrupt old ways of banking. The banks are noticing.
VestMunity’s innovative approach caught the eye of Citi, the fourth largest bank in the USA. Mason’s passion and plan to enable other Florida entrepreneurs to finance “fix and flips” won him a $10,000 prize at the Miami Fintech Forum, the first event in the Inclusive Enterprise Series, a new program backed by Citi Community Development and Village Capital. (For more, see VestMunity on the Citi blog here).
An accessible solution
Mason is actually trying to solve two problems related to accessibility. The first is that while regular Americans may own a residence, they lack a simple and secure way to build wealth by investing in other properties. Title III regulated crowdfunding was introduced last month providing new access for retail investors. By teaming up with other investors, each contributing small amounts, soon they can.
Mason commented, “Three of the top five metro areas in the country for distressed properties are in my home state of Florida, according to RealtyTrac. But while rehabilitating and reselling homes can result in a lift to neighborhood property values and provide local investors with wealth-building opportunities, the cost of doing so is often prohibitive even for experienced real estate developers.”
“The average person has very limited access to the information and resources they need to safely pursue these types of investments, which is why I started VestMunity – I wanted to create a platform that connects everyday people to accessible investment opportunities.”
So the second problem being solved is an innovative method to provide “crowd” financing to select real estate rehabbers since banks may not be an option, particularly if the borrowers are women or minorities.
As Georgia Quinn, CEO of iDisclose, stated recently in Crowdfund Insider, “Title III opens up financing opportunities for many types of businesses that have traditionally been denied other means of capital.” She explained that traditional funding sources have a race and gender profile that “looks like themselves” and their tendency to fund those “with similar backgrounds.”
Quinn believes that crowdfunding provides the platform to utilize assets like social networks, brand equity and other strengths that banks and other funders fail to incorporate into their criteria.
VestMunity is a platform then that offers a solution to both problems. VestMunity provides high yield real estate secured returns to investors for as little as a $1,000 investment. Second, VestMunity offers a better financing option for distressed properties that provides lower cost capital plus market exposure for renovators.
Is a refurbished Florida property a good investment?
In 2006, according to Zillow, the median Florida home value was $256,000. In 2012, the value dropped as low as $126,000. As of April 2016, the value has grown 48%, or roughly 12% per year, as values bounced back to a median Florida home value of $187,000. Could the values continue their climb back to 2006 peak levels and beyond?
See:
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Crowdsourcing expands world of corporate real estate investing
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Prodigy Network CEO Rodrigo Niño Updates on Real Estate Market & Future Plans
One indicator is comparing the annual performance of US Housing to other asset classes like gold, commodities, stocks, bonds and so on. For the period of 2011-2015, US Housing was the 3rd best performing asset class of nine measured at a 5.73% return nationally with only stocks and commercial real estate higher. For 2015, US Housing was the top performing asset class. (Source: BullionVault).
While the economy and other factors impact value, the renovation and repair of distressed properties in good neighborhoods is a proven method of achieving strong returns for investors. The cost of the refurbishment tends to have a relatively greater impact on the value, enabling the home to be sold at an attractive profit in a relatively short period.
Currently available deals include rehab loans in Miami, Plantation and Coral Gables with targets of $65,000-$300,000, 12-month terms and target returns of 18-20%. Prospective investors can view photos, details on the property and loan, comparable homes values post-rehab and even view the neighborhood and home on Google Street View and Google Maps.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Prodigy Network CEO Rodrigo Niño Updates on Real Estate Market & Future Plans
Crowdfund Insider | By | May 31, 2016
Prodigy Network is one of the largest entrants in the real estate crowdfunding sector within the US. To date, Prodigy has raised approximately $160 million for its portfolio of property located in New York City. What is unique about Prodigy is the fact it is the developer for each project – something no other real estate crowdfunding platform does. Prodigy also stakes a claim to perhaps the largest investment crowdfunding offer ever in the skyscraper development in Bogota named BD Bacata.
Founded by CEO Rodrigo Niño, Prodigy is determined to give investors access to what they believe is the best real estate in the world. Recently Prodigy has started to expand its message to a wider audience of international investors. Simultaneously the global economy is showing signs of slowing down. Crowdfund Insider recently caught up with Rodrigo to gain perspective as to what they are seeing in the market and what Prodigy’s plans are for the future.
Crowdfund Insider: How are things going at Prodigy? I understand you are still focusing solely on Manhattan real estate as it is viewed as a safe harbor.
Rodrigo Niño: Things are going really well! Since we began our crowdfunding model in the United States, we have grown exponentially and today we stand as the leading real estate crowdfunding platform in the country. Our current portfolio consists of 4 projects in Manhattan, valued at approximately US$650 million. This portfolio has been financed by USD $160 million of equity from thousands of investors, located in 23 different countries and 25 states within the US. Additionally, we have received traditional financing from global institutions such as CIBC, Deutsche Bank and Bank of America, for more than US$400 million.
See: Crowdsourcing expands world of corporate real estate investing
Another significant milestone that we are proud to share is the full completion of the first cycle of our project, AKA United Nations, which generated annualized pre-tax returns of approximately 30%.
Due to the fact that I’m a native Colombian, we consolidated a small portfolio of projects in Bogota. However, the crowdfunding for these projects is always done among Colombians only, given that the vehicles are structured in pesos, and we do not want to expose foreign investors to the currency risk. Asides from this, we are focusing solely on institutional quality commercial real estate located in Manhattan, since history has proven that during times of recession, these assets tend to protect the capital, and in times of growth they increase in value.
Crowdfund Insider: Do you see any signs of an economic slowdown? Or perhaps increasing concerns of slower economic growth?
Rodrigo Niño: I wouldn’t say that we see signs of economic slowdown, but rather signs of uncertainty and skepticism. This is evidenced by the high levels of volatility in nearly all liquid markets, which we see in the constantly fluctuating prices of oil and currencies of emerging markets.
In times of recession, investors tend to make a flight to quality, which is moving their capital from riskier investments to those that offer some level of protection, like Treasury bonds or gold. We have also seen that many investors seek safety by investing in hard assets in historically stable markets and currencies, like the assets we offer. Hence, even though there has been uncertainty in the last few months, we have seen increasing interest in our assets.
See: Part III: Is Culture Killing Equity Crowdfunding in Canada: Real Estate Spotlight
Crowdfund Insider: Earlier this year you reported a very solid exit for some of your investors. Can you share the specifics?
Rodrigo Niño: As mentioned, last January we provided returns to our crowd investors who participated in the AKA United Nations project. This building is located in Manhattan’s Midtown East neighborhood, less than two blocks away from the United Nations headquarters. The 20-story building is comprised of 95 spacious, contemporary designed, fully furnished one-bedroom apartments equipped with a kitchen, living room and dining room.
In the summer of 2014, we raised over USD $12 million in equity from investors from 11 countries, for the renovation of AKA United Nations. This equity, along with equity from the sponsors (Prodigy Network and Shorewood Real Estate Group) and traditional financing from Bank of America and Vanbarton Group (previously Emmes & Co.) were used for the acquisition and renovation of the 95 unit building. In October 2015, AKA United Nations opened its doors, becoming the first crowdfunded building in New York.
After four months of operation, we recapitalized the deal, liquidating the investment of our crowd investors providing annualized pre-tax returns of approximately 30%.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
Should I invest in crowdfunded real estate?
You eliminate the rent cheques, but that doesn’t mean it’s a hassle-free investment
Q: I’ve seen a lot of press lately on crowdfunded real estate investments. I’m wondering if this is a good way to invest in real estate if I don’t want to be a hands-on landlord?
— Curious about crowdfunding, Winnipeg, MB
Answer from Romana King, senior editor and real estate specialist at MoneySense: Want to invest in brick and mortar properties but don’t like the idea of being a hands-on landlord? Want investment returns on your real estate investment, but don’t like the almost-like-equities style of Real Estate Investment Trusts (REITS) and Mortgage Investment Corporations (MICs)? Consider real estate crowdfunding.
Over the last couple of years, real estate based crowdfunding sites—like RealtyMogul.com, Plentyofmoose.com, NexusCrowd.com, PatchofLand.com, DwellXchange.com and most recently Sharestates.com—have sprung up. All operate under the same basic premise: use technology to help individual and institutional investors to buy equity in various types of real estate holdings. On the flipside, these crowdfunding sites also help real estate owners (such as developers, property managers and even everyday homeowners) to raise equity for their property or projects.
It’s a model that’s really taken off. For example, in 2014, the Palm Springs Hard Rock Hotel used a real estate crowdfunding platform to raise US$1.5 million to refinance and renovate the property. The minimum investment was US$10,000, and this buy-in enabled individuals to become equity owners in the hotel with each investor receiving a package of VIP guest perks.
According to a Massolution report, crowdfunding investments in real estate is poised to grow. In 2014, the entire sector raised over US$1 billion in real estate financing. The invested funds in this space were expected to hit US$34.4 billion worldwide by the end of 2015.
See: Crowdsourcing expands world of corporate real estate investing
Up until now, most of these real estate crowdfunding platforms were open only to accredited investors—individuals or couples with at least $1 million in financial assets, or those with consistent incomes of $200,000 or more each year ($300,000, if a couple). Still, other sites were restricted only to American investors.
But there are options for Canadian investors. One platform for everyday, retail investors (like you and me) is American-based DwellXchange.com, a site that specializes in offering investors equity positions on individual, owner-occupied homes. In other words, you become a passive investor in somebody else’s home or real estate property, with the expectation that when the owner sells, your investment is returned to you, along with a percentage of the profit made from selling the home once it appreciated.
Yes. There are a lot of assumptions with this type of investment. There’s the assumption that the homeowner will sell, eventually. There’s also the assumption that the property will increase in value, eventually. Finally, there’s the assumption that other investors are only too happy to buy your equity portion in the property. As you can imagine these limitations can actually lock your money into this real estate investment, creating liquidity issues. This lack of liquidity is actually the reason why Dwellxchange launched its secondary selling market—an online portal that allows crowdfunding real estate investors to buy and sell their equity portions minus a 25 basis point fee.
Still, another couple of options for Canadians are NexusCrowd.com and Sharestates.com—but these are only open to accredited investors. (Technically, you can invest in Sharestates as a non-U.S. person that’s not an accredited investor but keep in mind that you will not get a prospectus so you are certainly taking on more risk.)
Now, NexusCrowd.com is one of the few Canadian-based real estate crowdfunding platforms. The crowdfunded real estate investment firm only takes on projects that are already 50% capitalized, or put another way, the developer and builder have already raised at least 50% of the funds required to build or remodel the proposed project. By structuring our investment model this way, explains Hitesh Rathod, CFA and co-founder of NexusCrowd.com, we avoid the riskiest part of a property development, which are the start-up soft costs.
Yet, you’ll need to prove you’re an accredited investor before you can proceed with any opportunities with Nexuscrowd.com—and that’s only after a comprehensive Know-Your-Client process the firm insists each investors much go through. “We want to make sure that these investments are suitable for the investor.”
See: NexusCrowd Closes Second Commercial Real Estate Investment Offering
Still, before you sign up and start buying make sure you read the fine print. Most of the current crowdfunding sites are not bound to the standardized financial reporting requirements that are mandatory by firms regulated by the SEC or Canada’s equivalent, OSFI. As a result, many crowdfunding platforms don’t offer a full prospectus—a formal legal document, required by and filed with a regulatory body, such as OSFI, that provides details about an investment offered for sale to the public. A prospectus should contain all the facts that an investor needs to make an informed investment decision. That said, investors can usually find some information, such as an investment plan, an appraisal report and a financial breakdown for each project, but it still pays to do your own due diligence with this type of investment. Just remember, you’re essentially getting into the private mortgage business and that can come with great reward, along with significant risk.
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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
