Some say it will be a cold day in hell before Wall Street embraces Crowdfunding. If so, we were very nearly there Thursday, February 19th at the offices of the Citrin Cooperman in Midtown. Braving temperatures in the single digits and a gale blowing pedestrians north on Fifth Avenue, a large group of brave souls turned out to learn about Crowdfunding.
Citrin Cooperman, to my knowledge the first accounting firm to specialize in Crowdfunding, co-sponsored the panel discussion with iFunding, one of the earliest and certainly one of the best real estate Crowdfunding portals. The panel was moderated by Harmen Bakker, a partner in Citrin Cooperman’s real estate practice, and included William Skelley, the founder and CEO of iFunding, and Mark Mascia, the President of Mascia Development. Mark actually wore two hats: one, as a developer who has used Crowdfunding successfully to raise equity for his own deals; and two, as an investor in Crowdfunding deals offered by other sponsors.
As much as I try to know about Crowdfunding, I’m always amazed how much I can learn from the guys in the trenches, i.e., portals and developers.
To my delight, Mr. Skelley revealed that iFunding is exploring two new products:
- A pooled-assets fund, where investors can invest in a category of real estate assets, rather than just a single project; and
- A product that allows an investor to choose where in the capital stock he wants to invest (e.g., mezzanine debt or preferred equity), depending on his risk/yield preferences.
Wearing his developer’s hat, Mr. Mascia talked about the two Crowdfunding investment models, the first where investors come directly into the developer’s cap table and the second where the platform creates a special purpose vehicle for the investors. Each has advantages and disadvantages; for example, the SPV is great because the platform takes care of investor relations, but the direct-investment model gives the developer more “ownership” of the investor pool.
The audience was smart but troublesome, typical of New York. For example, someone asked “What happens when a Crowdfunding deal goes sideways?” As if that could ever happen.
To my mind, the most revealing fact is that iFunding – like the other top platforms, I believe – is funding deals within hours after they appear on the platform. Does this mean Crowdfunding investors are speed-readers, able to digest information about complex real estate projects between the main course and dessert? No. It means that Crowdfunding investors are relying on the portals. Legally and otherwise, that’s a really big deal.
By the time we finished the temperature outside had climbed to 3. Thank you to Citrin Cooperman and iFunding for a great morning.
Questions? Let me know.