Today the direct real estate investment platform Groundfloor launched an online public offering enabling any Groundfloor account holder to purchase stock directly from the company. The platform indicated that the online public offering aims to “level the cap table” so members of the public can own an increasing share — 20% — of the Fintech company.
Last year the platform experienced a successful public offering, during which its customers invested $4.2 million in stock to own 14 percent of the company.
The Atlanta-based platform touted a successful 2018. Groundfloor reportedly expanded its qualified offerings nationwide under Reg A+ and extended its lending business to 30 states, raised $4.2 million in equity ($13.8 million raised to date), surpassed $100 million in loans to real estate developers and, in December alone, sold more than $8 million in real estate investments to retail investors on the platform. In addition, Groundfloor increased its customer base to nearly 60,000 registered users.
Crowdfund Insider reached out to CEO Brian Dally to share what’s happening at Groundfloor and in the real estate crowdfunding sector. He also opined on disruptions, future partnerships and future plans. Our interview follows.
Crowdfund Insider: Could you please discuss what led to Groundfloor’s growth and tell us more about your process/ client pipeline?
Brian Dally: There were two key factors that drove our growth in 2018. First and most importantly, we prioritized our company culture. We revisited and expanded our core values, and we built them into our processes for hiring, career development, and rewarding people at every level. That turned out to be a smart investment of time and energy that we know will pay out over the long-term, especially because we doubled the number of employees last year. But it also paid off in the short term by helping us attract, retain, and engage the right people in the right positions–and to separate more quickly from people who self-selected out.
Secondly, we raised a good bit of growth capital via an online public offering under Regulation A. It enabled us to aggressively expand our sales, marketing, and engineering teams. The results of this were reflected during an incredible December, when we originated $8.1 million in loan volume–and growing retail investment volume to the same level. We also tested a few new products and go-to-market approaches on the lending side.
Today, our pipeline continues to expand very rapidly through new local sales and marketing initiatives that we’ve been testing in Atlanta and a few other markets. Watch this space!
CI: In which areas do you see potential in the sector?
Dally: In 2015-16, lenders like us hyper-scaled on quick flips of residential property. In this phase of the economic expansion, there’s much less of that out there. Instead, we see opportunities in extensive renovation projects and even certain subsets of new construction. Geographically, we target markets and sub-markets where housing supply at or below median price points remains constrained, but where macroeconomic factors like job growth indicate there will be a positive lending environment 12-18 months out. Overall, the markets we address are so large, and competitors’ ability to maintain liquidity so metastable, the aggregate potential far exceeds what any small set of companies could ever fully address.
CI: In which areas are disruptions just distractions?
Dally: This is an unpopular opinion in the “real estate crowdfunding” industry, but I think high net worth and institutional syndications will ultimately prove to have been distractions. People get excited because these concepts sounds disruptive, but they’re really just a 1-2x improvement over the status quo of how real estate is financed. By contrast, our financial product is available to all at a $10 minimum–that’s a game changer for capital formation, the real estate entrepreneurs who rely on it, and the individual investors who supply it (all of us).
CI: Is Groundfloor looking into partnerships?
Dally: Yes, we are always looking for partnerships that align with our company mission. We are particularly interested in partnerships that enable us to offer new products to our customers and can allow us to go-to-market more quickly than we could have on our own.
CI: Why go public now?
Dally: Even though we’re launching a “public offering,” Groundfloor will still remain a private company. Our mission has always been to open up capital markets directly to the public, knowing that people are smart enough to make investing decisions on their own instead of going through a fund advisor. So, rather than go the VC route, which is valuable but can also bring its own problems, we wanted to open up shares of the company for the public. When we did this last year, 2,300 people participated and took ownership of 14 percent of the company. We’d love to now get public ownership up to 20 percent.
CI: Who will manage the offering?
Dally: We are issuing the sale of our stock through our own platform. Since we already built state-of-the art crowdfunding technology, we thought we might as well adapt it to be able to offer the stock sale in a format that’s familiar to our investors.
To purchase Groundfloor stock, any account holder can simply log into their account and select the Groundfloor 2019 Stock Offering. For $15 per share, members of the public can own a portion of Groundfloor, joining more than 2,300 other public shareholders aiming to benefit from our success over the long term.
CI: Are you able to share who led the $1M pre-round?
Dally: This financing wasn’t “led” by anyone. Instead, it was issued through our own platform. It was a pre-sale to shareholders who participated in our 2018 stock offering.
CI: Where do you see Groundfloor in five years?
Dally: The best way to answer that question for me is to consider empirically where we were five years ago, in 2014. Back then, we had five employees and had just funded our first loan, a $40,000 house flip in southwest Atlanta, with capital chipped in by 39 investors. We were on the verge of funding another just like it. A lot can change in five years. We’re now 10 times the employees and in December 2018 sold more than 100 times the investment volume.
Five years from now, we’ll have expanded to provide more capital to thousands more independent real estate entrepreneurs, for a broader spectrum of projects. We have an ambitious roadmap to distribute our current investment product for retail investors more broadly than we do today, while also offering a more products across the spectrum of risk and reward. That said, we view ourselves as stewards of a platform for capital formation that can and should develop in many new potential directions we can’t even conceive of today. So it’s most important that we continue building a culture that sees ahead to those opportunities and can execute to build a long-term business around them.
CI: How do you see fintech morphing in the near and distant future?
Dally: Fintech is everywhere in how we consume and invest. People get hyped about the innovation of the half-decade, and with good reason. The impact and the stakes for individual consumers and savers are broad and palpable. I remember being a product manager for Excite Mail in Silicon Valley in the late 1990s and seeing Paypal for the first time as a potential bizdev deal. It sounded like hype to some at the time, but what’s happened with payments for individual consumers and small businesses during the ensuing 20 years has been amazing. Ten years later, you could say the same thing about crowdfunding and investing, and ten years further out again, about cryptocurrencies. There’s excitement and hype, a flurry of execution, and then real impact. As with any other field operating at the root of our humanity, I expect the pace of fintech to change and innovation will only continue compounding upon itself over time. And that’s an awesome thing.
CI: And for fun… I saw that you’re a Red Sox fan; how has your experience been as a Sox fan in the heart of Braves’ country?
Dally: Much easier than it would be living somewhere like Baltimore, Tampa Bay or, God forbid, New York. At least Atlanta has an awesome new ballpark to take in some games and is a National League team that’s going to be pretty fun to watch the next few years.
CI: Lastly, could you please share a book recommendation for readers?
Dally: Yes. For the entrepreneurs and change agents who read Crowdfund Insider, I recommend The Courage to Be Disliked by Ichiro Kishimi and Fumitake Koga.
Have a crowdfunding offering you'd like to share? Submit an offering for consideration using our Submit a Tip form and we may share it on our site!