By Guglielmo de Stefano on 10th November 2015
The first ever acquisition of a real estate crowdfunding platform is complete.
A consortium of five crowdfunding platforms – American Homeowner Preservation, Patch of Land, Peer Realty, CrowdFranchise, and EquityRoots – has announced the acquisition of the California-based platform Tycoon Real Estate. The platform gained attention in the US after its founder appeared on ABC's "Shark Tank" earlier this year.
While the sharks themselves were not interested in investing into the business, the five crowdfunding platforms do, and are stepping up to acquire 100% of Tycoon. The purchasers did not disclose the specific financial terms of the all-cash transaction and their idea is to transform the portal into an education platform to demonstrate that the ABC’s sharks were wrong about the industry.
Tycoon is a crowdfunding platform where people can fund real estate deals offered by those looking for capital and it seemed to provide a cheaper method of investing in real estate than traditional methods, which often charge high fees to investors.
The acquisition was agreed at the same time of the approval of the new Title III of the JOBS Act, which allows also unaccredited investors to access crowdfunding. The regulation allows individuals to invest in securities-based crowdfunding transactions, over a 12-month period, depending on their annual income or net worth.
The purchasers are feeling optimistic about the acquisition. Mandy Calara, CEO of CrowdFranchise, commented:
"We are excited about the acquisition of Tycoon. With the recent approval of Title III, the timing is ideal. Now, almost anyone will be able to invest."
Similarly, Jason Fritton, CEO of Patch of Land, added:
"There is a larger awareness of real estate crowdfunding thanks to the Shark Tank episode featuring Tycoon. Although it didn't turn out well, we have an opportunity to set the record straight about the regulatory environment that allows for crowdfunding and how successful companies are leveraging the JOBS Act and SEC regulations to crowdfund hundreds of millions of dollars in real estate.”
The acquisition is the evidence of two distinct trends within the US alternative finance industry: cooperation between platforms and consolidation.
Bhavik Dani, dealflow organizer at EquityRoots.com, said:
"We are excited to join four other platforms that share a common vision: online capital formation is efficient, effective and a great way to involve the community."
After the burst of the 2008 housing bubble, real estate crowdfunding seemed to represent a potential method of reinvigorating the real estate investment market. Turning Tycoon into an educational portal – one which is powered by 5 individual platforms – seems like a potentially effective method of raising awareness about the space.
Bhavik Dani, dealflow organizer at EquityRoots.com, concluded:
"There's an instinctive sense of progress in letting people go online and find local investments in hotels, real estate or other franchised businesses. We are excited to join four other platforms that share a common vision: online capital formation is efficient, effective and a great way to involve the community."
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.