Institutional Real Estate Crowdfunding: Big Players Join the Crowd
It’s Time to Rethink Your Stance
Current trends suggest that those who believe crowdfunding is a “minority capital” and that it excludes (to a large extent) the participation of high-profile investors should now reconsider. High-profile investors – institutions, angel investors, venture capitalists, and high net worth individuals – have begun co-investing alongside capital raised from “the crowd”.
In the real estate industry, in particular, this new trend has various implications for all involved, but especially for startups, small scale developers, and individual investors.
A New Form of Crowdfunding: Institutional Crowdfunding
Institutional crowdfunding is a new field in the crowdfunding sector. It involves big businesses or established organizations seeking funding for much larger projects from institutional and accredited investors via the internet. Instead of offering small projects to the crowd for funding, institutional crowdfunding offers bigger projects to target institutional investors or high net worth individuals.
In 2009 we saw a glimpse of this when Optimize Capital Markets, an investment banking firm in Toronto, was launched and later raised $5 million via crowdfunding to finance a company’s innovative project to produce paper from agricultural waste. We also saw them create ICO or initial crowdfunding offering and $2.5 million was raised to fund a Quebec-based multi-sports complex. Using the crowdfunding online model, the firm has created its own Institutional Crowdfunding Marketplace thus differentiating itself from typical investment banks.
Institutional Real Estate Crowdfunding
In a similar pioneering move, The Carlton Group, a global real estate investment banking firm, has launched its accredited investors equity crowdfunding platform in April 2014 which represents the first of its kind by an institutional investor. Carlton, which was founded in 1991, represents over $100 billion worth of commercial real estate transactions to date and has grown to become a major player in the global real estate industry. Presently, accredited investors are afforded the opportunity of investing in diverse portfolios of commercial real estate transactions worth $1 billion via its crowdfunding platform.
