Lesson on Crowdfunding

Fueled by technology and lots of media hype, crowdfunding became very popular a few years ago. It seems to have performed well for socially minded campaigns and funding new tech gadgets. As the technology behind crowdfunding platforms has grown, at least a dozen services have popped up providing easy plug and play options for launching new crowdfunding portals. Those interested in real estate have seized on this to throw up a variety of real estate crowdfunding websites vying for dollars over the internet.

However, a recent pitch by a new real estate crowdfunding startup on the reality TV show Shark Tank saw the concept taking a beating from some of the world’s most respected and wealthy venture capitalists, savvy investors and real estate and technology experts. In fact, they not only refused to fund the project, but literally laughed the founder off screen.

So what’s not to like about crowdfunding?

The first and most notable issue which was repeated by the entire panel was that it lacked the credibility and trust that investors really need. The panel including Barbara Corcoran, Daymond John and Mark Cuban highlighted how individuals, including themselves look for and need to invest with other reputable individuals that have a proven track record.

The second criticism was that these systems were really designed to take advantage of elders and non-accredited investors, by marketers that were unproven in their ability to deliver results. In other words; under experienced developers and managers backed by less experienced investors putting their only meager savings into the pot was seen as a poor recipe.

So what do these sophisticated investors like investing in and how?

The ‘sharks’ and other legendary investors have proven time and again that in addition to technology they have done very well investing in real estate, and have retained and grow their wealth by pooling money and diversifying.

To emulate their success, and successful investments individual accredited investors will seek out real estate opportunities and diversify into multiple income producing properties. However, they will do it through smaller and tighter partnerships with other accredited and qualified investors, in projects organized and managed by those with proven track records of success.