Sort of like a “LendingClub for real estate,” RealtyShares has taken the idea of crowdfunding and applied it to the real estate market. After about a year of operations in which it was able to show product-market fit, the company has raised $10 million in funding from Menlo Ventures to quickly grow the number of projects made available to investors.
Unlike some other crowdfunding platforms, RealtyShares isn’t aimed at the consumer market. Like AngelList, it is focused fully on helping accredited investors easily find opportunities for investment. Its main goal is to reduce the friction between project sponsors and real estate developers looking for capital and investors who are looking to diversify their portfolios.
RealtyShares accomplishes this by doing the actual work of underwriting opportunities for outside investors, and allowing them to invest as little as $5,000 into any individual project. As a result, it can give them access to projects that were either too small or too difficult to underwrite themselves.
For real estate developers, meanwhile, RealtyShare’s model helps them get access to capital much faster than if they were to turn to a bank or other lender to fund a project. Projects on average are fully funded within four days of being put on the RealtyShares platform.
Since being founded, it’s funded hundreds of residential and commercial properties worth more than $300 million. More importantly for investors, it’s already returned some of their capital, enabling them to re-invest in its platform. RealtyShares founder and CEO Nav Athwal tells me that investments on the platform have paid back $2 million in capital so far, though it’s early days.
Returns vary by project, based on the type of deal (commercial versus residential), as well as risk profile and whether they are debt or equity deals. But they can range from 8 percent to 20 percent, which generally outperforms most other investment opportunities available.
RealtyShares has been growing quickly, as it increases the number of projects that investors can put money into. Just over the last few months, it’s seen both the number of deals available and dollar value of investments made on its platform double month-over-month. Part of that growth has just come from having a bigger pipeline of deals come its way.
Athwal says the company is receiving about 1,000 applications a month from borrowers, which is up from about 300 at the end of 2014. It then does the work of narrowing down which projects it makes available to potential investors. According to Athwal, in March investors on its platform funded about 15 deals to the tune of $7 million.
But there’s a lot more deals it could make available, if it had the ability to underwrite its projects more efficiently. That’s where the most recent funding comes in. With it, RealtyShares will invest in hiring more people and streamlining its internal processes in an effort to more quickly vet applications that come its way.
Today it’s announcing a $10 million Series A round of financing led by Menlo Ventures, which also includes participation from previous investor General Catalyst. Along with the funding, Menlo Ventures general partner John Jarve will join the board.
According to Athwal, part of the reason RealtyShares decided to go with Menlo was the firm’s investment in and Jarve’s participation on the board of Betterment. He believes that experience will be useful in helping to grow his platform for real estate investment.
With the newfound cash, Athwal says RealtyShares will be looking to bring on more underwriters to handle the increasing volume of applications coming its way.
The company will also be investing in automating its internal processes for reviewing applications. Athwal believes that such automation will enable RealtyShares to more efficiently screen out projects which aren’t the best fit for the platform, thereby giving its underwriters the ability to focus on more qualified applications and project leads. Either way, the goal is to keep the quality of projects listed high, so that investors can keep investing with confidence.