This is how you can succeed in CRE tech now… you make something more efficient for someone and then you white label it for others to use for their business! And that’s exactly what Darren Powderly has done at CrowdStreet.
I must confess that I have been skeptical of many of the original sites that entered the crowdfunding sector. I just felt like there were too many players chasing too small of an initial opportunity. It felt like a goldrush mentality it the beginning. And while I never proclaim to be a guru of forecasting the CRE tech sector, seems like that’s how it played out.
But from the initial rush of activity, it appears some maturity and growth has settled into the sector. And it also seems that Darren and his team have arrived at a really successful strategy.
Here are the highlights of our recent conversation...
Michael: What’s your background and what lead to the formation of CrowdStreet.com?
Darren: I started my first social business at 19 years old while still a college student in Boulder, Colorado. After graduating CU Boulder, I moved to San Francisco to enjoy the last few years of the 90’s tech boom as an internet software sales rep & manager. I worked hard and partied like it was 1999...until 2001 when the dot-com bubble burst and I packed my bags to circumnavigate the globe for nine months with my new wife. That trip was an awesome mind-expanding educational adventure that taught me how to harness our limitless potential as human beings. Upon returning to the US, I became a CRE investment broker, owner, developer & operator for 10 years. Then, in 2012, I conceived of and started CrowdStreet with the help of my venture capitalist friend Dino Vendetti (now Chairman) and internet software expert Tore Steen (now CEO). As real estate and technology investors ourselves, we had an “Ah-Ha!” moment when the JOBS Act was passed as we were convinced we could apply the concept of online investing to the commercial real estate industry. After more than five years of building CrowdStreet, I’m more fired up and confident today than I’ve ever been. We’re making a difference for our investors and clients.
M: Can you describe your site and what differentiates you in the crowdfunding sector?
D: CrowdStreet’s unified approach to investor acquisition and management is really what sets us apart.
CrowdStreet is the ONLY technology solutions company that offers CRE investment firms a white-label software for investor acquisition and management as well as a direct-to-investor fundraising Marketplace. What this means is that CRE firms can grow their existing investor base and automate the management of their new and existing investors - all through a single secure online platform. Furthermore, with 110 customers nationwide and 38,000 unique users, we’re the #1 provider in both our private-portal software and our Marketplace. CRE investment firms partner with CrowdStreet to help them strategize and execute on an online fundraising and investor management plan. We help CRE investment firms grow their business by growing their LP investor base, raise capital for their deals and then efficiently manage both investors and assets. CrowdStreet’s unified approach to fundraising and investment management has been winning customers over from antiquated, point-solutions that don’t communicate with each other and cause administrative headaches. Our growth is accelerating as more CRE investment firms realize that the era of highly productive investor management software has arrived which enables them to focus less on administrative burdens and more on making deals and adding value to their real estate assets. With 110 customers and 38,000 investors on the platform, it clear that we’re onto something very good with our unified approach.
M: Your white-label software model seems to have particularly taken off in the marketplace. Who are your clients and how does this product solve their needs?
D: Yes, our white-label software licensing revenue now exceeds our Marketplace revenue, so we are truly a diversified technology solutions provider to real estate investment firms. Having a first-mover advantage allowed us to interview thousands of CRE sponsors to probe pain points. What we discovered is that they wanted to have a fundraising and investor management capability on their own website to service their existing investor base (both institutional and high-net-worth). Armed with this market intelligence, we made a strategic decision in late 2014 to differentiate ourselves from every other real estate crowdfunding site out there by offering our clients a white-label version of our technology. It was a risky move in 2014, but allowed us to take a commanding leadership role in 2017 and beyond. Of our 110 customers to date, 70 license our white-label, private-portal software to power their online investing platforms. We’re honored to have large institutional clients like Hines, Arbor, KBS & Taurus; mid-sized firms like Denholtz, Hamilton Zanze, Encore & Trion; and small firms like Hayman Properties, Mascia Development and Intellistay. What’s nice is that our software scales up to meet the complex needs of a global enterprise or down to a two-person partnership. It’s truly nimble enough to allow CRE operators to choose their own adventure.
M: The crowdfunding sector was incredibly busy a while back with lots of competition and tons of press around the new financial regs etc...What happened to the sector? Where is it now?
D: Equity crowdfunding became popular as a way to inject capital back into largely frozen capital markets post Great Recession. The JOBS Act of 2012 was a major victory for business people nationwide and gave entrepreneurs hope that they could fund an idea, start a new business and support their families. It was an exciting time for start-ups and the media loved covering the subject. As the years passed and the macro-economy improved, there were a lot of successes and failures as entrepreneurs tested new ideas. Today, we have a smaller, stronger and more viable equity crowdfunding business community with leading companies like CrowdStreet who have fine-tuned their business models, built large customer bases and are now rapidly scaling revenues. While we continue to see new entrants to the industry, we are seeing just as many, or more, companies exit after failing to hit their stride. Overall, the equity crowdfunding, or online capital formation, sector today is healthier and more promising than ever as it enters the hyper-growth stage of the business cycle.
M: How’s business for CrowdStreet now?
D: We’re growing revenue at 275% annually while doubling our customer base and quadrupling our Marketplace investor community. Over 38,000 investors today are using the platform globally to invest in private real estate. We’re hiring smart, talented and passionate people in every department and will grow our team from 25 to 50 people in 2017 (please see our careers page & apply online!). Perhaps most important, is the fact that we’re really living our mission, which is to provide superior technology solutions that enable all investors to directly connect, invest, and create wealth through real estate. We’re well funded and positioned to dominate in the years ahead. It’s fun to win and we’re eager to tackle the next wave of challenges ahead of us. We’re having a blast.
M: What’s next for your company?
D: Continued focus on delivering a world-class white-label software solution while operating the #1 direct-to-investor Marketplace in the US and growing our investor base to 100,000 people. We will accept nothing less than being the dominant technology solutions provider in the online real estate investing sector.