Realty Shares Ends the Real Estate Crowdfunding VC Drought in a Huge Way
$28 million is first successful, major raise since at least early 2016. In the first few years of the Real Estate Crowdfunding industry, it seemed like VCs and angels were throwing more money at new platforms than they knew what to do with. As a result, the number of offerings in the industry exploded from just a handful to over 150 in a very short time. Then in early 2016, Lending Club, the poster child of fintech, suffered financial fraud and oversight scandals. Investors suddenly fled, optimistic growth projections became pessimistic and the money seemed to dry up overnight.
Many platforms went bust or switched to different business models. Many companies that were expecting to raise additional VC rounds to keep themselves going were forced to consider other options. Fundrise abandoned VC fundraising completely and went direct to investors. As a result of all the mayhem, there hasn't been a major VC raise since. And today in 2017 the industry is much smaller than it was a year and 1/2 ago. So it was welcome news to see that Realty Shares was able to raise a substantial series C venture capital round of $28 million. Per the lead investor Cross Creek Advisors: “RealtyShares is positioned to become the leading marketplace for sub-institutional debt and equity commercial real estate investment. These commercial investment opportunities in multifamily, retail, industrial, and office properties have historically been limited to large institutions, and RealtyShares has been able to break down many of the barriers investors have faced.” This news came quickly on the heels of another announcement that Realty Shares was exiting the residential loan origination business. Realty Shares had won plaudits from this site in late 2016 for its high-volume and diverse selection. More recently, some investors have been complaining about customer service issues. Specifically they have alleged irregularities with tax returns and also alleged inadequate oversight of investments. It will be interesting to see if this new infusion of money will cause investors to report a different take on the company in 2018 or not.