Friday, May 9, 2014
How AssetAvenue Is Looking To Make Crowdfunding Profitable
There's been a lot of hype recently about crowdfunding, particularly of a myriad of consumer-focused products on such sites as Indiegogo and Kickstarter. It seems like you can't go anywhere without bumping into a dozen people all with their own projects on one of those crowdfunding sites, hoping to get enough investors in their projects to take them to the next level. However, to date, even though there have been many, successful fundraising campaigns on those crowdfunding sites--it's been unclear what the return on that crowdfunding has been overall for backers. Recently, Los Angeles-based real estate crowdfunding site AssetAvenue (www.assetavenue.com) has launched its own flavor of crowdsourcing, focused on commercial real estate projects, and hired the first employee out of Indiegogo, Adam Chapnick, to help it with those efforts. We caught up with Adam to hear why he thinks commercial real estate makes more sense to invest in with crowdfunding that other areas.
First, for those not familiar with AssetAvenue, can you talk about what the company does?
Adam Chapnick: AssetAvenue is a brand new company, in what I think is the most exciting space in crowdfunding. It's a new way to connect investors with opportunities they have traditionally been shut out of, where the biggest players have snapped up the most attractive investments. There have been a lot of changes that came from the JOBS Act which have enabled businesses like AssetAvenue to start to break that barrier. That's what attracted me to the business, and that's why it's so exciting.
Why the move here from IndieGogo, and why now?
Adam Chapnick: At the core, I am a disruptor. Everything I do involves my love in bringing order to chaos, and I really love to help people get access where they traditionally have not had it. We did that in an incredible way at Indiegogo, which has revolutionized the ability of regular people to access funding for things they are passionate about. Until crowdfunding came about, they didn't have access to that. There's nothing I can imagine which is more gratifying, than helping people,. We did that with Indiegogo in a huge way. What I love about AssetAvenue, is that it's another opportunity to do that, and it's also the kind of thing that just has enormous upside in terms of making a difference in people's lives. That's why I joined. It's also a brand new startup opportunity, and I love starting things from scratch. I love taking old models and making them into new ones, and involving people in something they've never been involved in before, to literally change their lives.
When you first got involved with crowdfunding, ever imagined it would be so popular?
Adam Chapnick: It's funny. When we first started, it was not a forgone conclusion. I think we all knew that Indiegogo had to happen, but in the early days, I think it took some crafting and recrafting of our message to help people understand what we were buildling. That's what I love to do, learn what people respond to, and sharing the vision of how things connect with the people we're trying to impact. That's part of the fun with real estate, figuring out what is going to be the resounding message that helps get people off the couch and into real estate investing.
AssetAvenue is quite a bit less consumer focused than other crowdfunding sites, do you think you'll be able to get the kind of interest you saw at Indiegogo?
Adam Chapnick: I think they're very different. Indiegogo is extraordinary, because it's global, because it's open, because it crosses so many verticals. By its very nature, the sheer scale of its user base is going to dwarf any crowdfunding site on Earth. As an aside, I'm a huge evangelist of what Indiegogo does and what it is. At AssetAvenue, we're constrained in all kinds of ways, in healthy ways, by things like SEC regulations and other things, to the people who we are able to transact business with right now. Right now, the universe of our users is by definition smaller. But, all great things start with a single step. We'll see where it goes. In the industry, there's a huge opportunity for a land grab, and I can't want to grab that land. Literally and figuratively.
Why real estate specifically?
Adam Chapnick: While most people have been looking at startup businesses as the area that will benefit the most from the rule changes in the JOBS act, I have observed that there are lots of investors who are piling into angel investing, who have forgotten some of the facts. Among those, are how likely it is they might lose 100 percent of their money. I think the exciting thing about crowdfunding commercial real estate, is commercial real estate is typically the component of a portfolio which is the safest part. It's the part that has really respectable returns, and there's also an underlying asset, which hedges you against loss. I think all of us who invest know that we should be more into commercial real estate, but there are many barriers to understanding the ins and outs of real estate, where to get a good deal, learning the ropes, and finding the right deals. If someone can provide a user friendly, trusted method for solving those pain points--and allows the crowd to act as one big institutional investor--then we can also help solve a paint point of real estate operators, by getting them funds they need. That way, everybody wins, investors have a sound investment in that portfolio that doesn't evaporate if a startup goes out of business, which is quite often, since they have a 95 percent failure rate. Real estate is a very sound investment, which everyone wants to have, and I think in the crowdfunding space, that's what's going to be what keeps us around for a long time. People are going to realize that while investing in startups is fun, you'll run out of money unless you're able to diversity among enough that you get that one in twenty hit. That's something you don't need in commercial real estate.