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Fundrise
IndustryEquity Crowdfunding, Financial Technology, FinTech
Founded2012
FoundersDan Miller & Ben Miller
Headquarters
Washington, D.C.
,
U.S.A.
Key people
Ben Miller, Co-Founder & CEO[1]
ParentRise Companies Corp.[2]
Websitefundrise.com

Fundrise is an online investment platform[3] that provides individual investors with alternatives to the public stock market. According to the company's website, "Unlike the existing financial industry, Fundrise is focused on using technology to reduce costs and fees, helping investors target better, more stable returns".[4] Fundrise facilitates transactions from individuals, allowing the public to invest in private assets with initial investments through an online investment platform. Fundrise has been labeled as the first company to successfully crowdfund investment into the real estate market.[5]

History

Fundrise was founded in 2012 by brothers Ben and Dan Miller. They began working on the project in 2010 and launched before the passing of the JOBS Act which enacted securities regulation to streamline the process of equity crowdfunding in the United States.[3] Their father, Herb Miller of Western Development Corp., developed 20 million square feet of real estate based in Washington, D.C. The brothers began the company with the idea to allow residents in the D.C. area to invest in real estate development projects they were building.[2] Fundrise's first project, in the H Street NE Corridor in Washington D.C. raised $325,000 from 175 investors, where any resident of D.C. or Virginia could invest for as little as $100, making it the first crowdfunded real estate project in the United States.[2][5]

After the initial project, Fundrise was contacted by real estate companies looking to use the Fundrise platform to raise capital.[2] Soon thereafter, the company expanded its platform to allow conventional real estate investments from commercial developers across the United States.[2]

By May 2014 the company reported to have facilitated $15 million in investments involving 1,000+ investors[3] and by June of that same year had signed up more than 300 real estate companies looking to raise capital.[6][unreliable source?] One of Fundrise's most publicized investments came in January 2015 when it began offering bonds for the construction of 3 World Trade Center, the location of the third tallest tower at the site of the World Trade Center in lower Manhattan.[7] The initial offering was for $2 million of the $5 million worth of bonds purchased by Fundrise for the financing of the $1 billion project. Bonds were offered for $5,000 each with a 5% tax-free gross annual return for five years.[7][8]

Fundrise also raised more capital in its first-round of Series A investment than any other crowdfunding company, totaling $38 million.[5] Funding was led by Chinese social networking company Renren who invested $31 million of the total $38 million.[9] Additional Series A investors include Guggenheim Partners, Justin Elghanayan of Rockrose Development Corporation, and James Ratner of Forest City Enterprises.[2] By February 2015, Fundrise had commitments from six institutional investors for an additional $100 million in investment into the company's real estate offerings.[10] In October 2015, co-founder and president Daniel Miller left the company.

In February 2016, Fundrise terminated its senior accountant for allegedly attempting to extort over $1 million from the enterprise over a claim that "the company acted inappropriately concerning two real estate deals." The accountant denied the allegations of extortion and claimed that the termination was retaliation for reporting "serious fraudulant behavior." [11] The company denied the claims and hired an outside audit firm to conduct an investigation into the allegations, which ultimately concluded there was no reasonable basis to the allegations.[12][13][14][15]

On December 3, 2015, Fundrise launched the Fundrise Real Estate Investment Trust, the world's first "eREIT" or online real estate investment trust with an initial offering of $50 million pursuant to Regulation A+.[16]

The Fundrise eREIT offering provides prospective investors with the opportunity to invest in an intended portfolio of properties across the United States for a minimum of $1000. The aim of the eREIT is to use new technology to give both accredited and unaccredited investors the option to invest in US real estate. This financial offering, the first of its kind, was made possible by the expansion of Regulation A under the JOBS Act.[citation needed][17]

The company subsequently opened a second eREIT™, the Fundrise Equity REIT™, in February 2016.[12]

In October 2016, Fundrise simultaneously opened three more eREITs, the Fundrise East Coast Opportunistic REIT™, the Fundrise West Coast Opportunistic REIT™, and the Fundrise Midland Opportunistic REIT™.[18][19][20]

In December 2016, the Fundrise Income eREIT was the first company to raise $50 million, the maximum amount allowed under Regulation A. Later in December 2016, the Fundrise Growth eREIT became the second ever issuer to raise $50 million pursuant to Regulation A.[21]

In February 2017, Fundrise launched an internet public offering, an alternative to selling shares on an exchange. Rise Companies Corp., the owner of Fundrise, gave its members the chance to invest directly in the company. More than 2,300 Fundrise members -- including investors across all 50 states -- participated in the internet public offering, according to the company. Investment orders reached $14.6 million.[22]

Platform

Fundrise invests in real estate projects using funds from its own balance sheet.[23] It then allows individual investors to fund that investment through the sale of "project payment dependent notes" tied to the company's investment in a project. Individuals gain or lose based on the performance of the notes.[23] Fundrise is the entity issuing the securities as opposed to the individual project developers, requiring Fundrise to be responsible for all reporting requirements including investor disclosures.[23] Investments have ranged from $100 per share up to $10 million with reported annual returns of 12 to 16% as of September 2014.[5]

Awards

In 2015, Fundrise was named to Forbes' annual Fintech 50 list,[24] which recognizes 50 of the most promising companies in the financial technology space. Fundrise was named to the list again in late 2016.[25]

Fundrise was selected by National Real Estate Investor as the winner for two categories of the 2016 NREI/IMN 2016 Commercial Real Estate Awards. The company received top honors in the categories of crowdfunding innovation and REIT investing.[26] [27]

In June 2017, Fundrise selected as one of the 2017 Red Herring Top 100 North America. [28]

See also

References

  1. ^ Clabaugh, Jeff (1 October 2014). "Fundrise gets $650K for apartment development near H Street". Washington Business Journals. Retrieved 24 February 2015.
  2. ^ a b c d e f Gage, Deborah (26 September 2015). "Renren-Backed Fundrise Bulks Up In Real Estate Crowdfunding Sector". The Wall Street Journal. Retrieved 23 February 2015.
  3. ^ a b c Cortese, Amy (27 May 2014). "Fundrise, a Crowdfunding Website, Raises $31 Million". The New York Times. Retrieved 23 February 2015.
  4. ^ "Fundrise". {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  5. ^ a b c d Alois, JD (26 September 2014). "Fundrise Adds Big Name Investors Including Ratner, Elghanayan & Guggenheim: Funding Now at $38 Million". Crowdfund Insider. Retrieved 23 February 2015.
  6. ^ Drake, David (10 June 2014). "Real Estate Crowdfunding: Post-Valuations Of $100M For Series A?". Forbes. Retrieved 24 February 2015.
  7. ^ a b Clarke, Katherine (27 January 2015). "Investors can snag a stake in 3 World Trade Center for just $5,000 with new crowd funding initiative". New York Daily News. Retrieved 24 February 2015.
  8. ^ "Crowdfunder Fundrise marketing 3 WTC bonds". The Real Deal. 27 January 2015. Retrieved 24 February 2015.
  9. ^ Schwartz, Eric Hal (28 May 2014). "Chinese Firm Leads $31 Million Investment in Fundrise". Streetwise. Retrieved 23 February 2015.
  10. ^ Alois, JD (6 February 2015). "Six Institutional Funds Commit Over $100 Million to Fundrise". Crowdfund Insider. Retrieved 24 February 2015.
  11. ^ O'Connell, Jonathan (7 Mar 2016). "Fundrise CFO says he was ousted after alerting crowdfunding company of 'serious fraudulent behavior'". Washington Post. Retrieved 2016-08-03.
  12. ^ a b "FUNDRISE REAL ESTATE INVESTMENT TRUST, LLC - FORM 1-K". UNITED STATES SECURITIES AND EXCHANGE COMMISSION. April 26, 2016. {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  13. ^ Sernovitz, Daniel. "Fundrise chief financial officer terminated". Washington Business Journal. American City Business Journals. Retrieved 2016-02-19.
  14. ^ "United States Securities and Exchange Commission Pursuant Regulation A of the Securities Act of 1933". SEC.gov. Securities and Exchange Commission. February 9, 2016. Retrieved 23 February 2016.
  15. ^ "Fundrise Equity REIT Offering Circular" (PDF). {{cite web}}: |archive-date= requires |archive-url= (help); Cite has empty unknown parameter: |dead-url= (help)
  16. ^ Ho, Ky Trang. "How To Play Billion-Dollar Real Estate Deals With Just $1,000". Forbes. Retrieved 2017-06-09.
  17. ^ "Fundrise Lets Common Folk Invest In Posh Real Estate Ventures". Wired. {{cite news}}: Cite has empty unknown parameter: |dead-url= (help)
  18. ^ "Offering Circular".
  19. ^ "Offering Circular".
  20. ^ "Offering Circular".
  21. ^ "Rise Companies Offering Circular". {{cite web}}: Cite has empty unknown parameter: |dead-url= (help)
  22. ^ "How one startup is trying to redefine the IPO". Retrieved 2017-06-21.
  23. ^ a b c Anglebrandt, Gary (11 January 2015). "Fundrise to bring real estate crowdfunding to Detroit". Crains Detroit. Retrieved 23 February 2015.
  24. ^ "Fintech 50: The Future Of Your Money". Forbes. Retrieved 2016-11-07.
  25. ^ "Fintech 50: The Future Of Your Money". Forbes. Retrieved 2017-02-07.
  26. ^ "NREI/IMN 2016 Commercial Real Estate Awards Finalists". NREI/IMN. Retrieved 2017-03-07.
  27. ^ "Announcing the NREI/IMN 2016 Commercial Real Estate Award Winners". National Real Estate Investor. Retrieved 2017-03-07.
  28. ^ "2017 Red Herring Top 100 North America". Red Herring. Retrieved 2017-06-20.

Further reading

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