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Trading Places TECH STARTUP REALTYSHARES CAN SEE A WORLD WHERE INVESTING IN REAL ESTATE IS AS EASY AS BUYING STOCK.
by James Hart
I
t’s relatively easy for the average American to buy into the stock market. According to a Gallup survey from last year, about 55 percent of U.S. adults own stocks. Investment in real estate is another sto- ry entirely. Becoming a real estate investor demands a level of time and expertise that can make it difficult for many people to get into this asset class. But what if it weren’t? That’s the motivating idea behind Re- altyShares, a San Francisco-based startup whose online platform allows “crowds” of accredited investors to put money into curated commercial and residential properties from across the country. The minimum investment is as low as $5,000. Founded in 2013 by CEO Nav Athwal, the company has attracted more than $31.9 million in investment from major venture capital firms like Menlo Ventures and Union Square Ventures, including a $20 million raise earlier this year. The V.C.s believe there’s a huge opportu- nity in using technology to open the world of real estate investment to more people. RealtyShares’ platform also simplifies matters for the professionals seeking funding for these deals. Once due dili- gence is completed, projects are typically funded within days. So far, the startup has facilitated more than $150 million in investment for 330 projects, and more are being completed all the time. That’s why RealtyShares has been build- ing its team of data scientists. It recently hired Simon Morris, a former executive with BitTorrent, the popular peer-to-peer file-sharing service. Morris will serve as
the company’s chief product officer. Along with chief technology officer Gene Linetsky and their team, Morris is reworking the foundation of Real- tyShares’ online platform, so it’ll be capable of exponentially greater growth in the coming months. “I was really impressed by the quality of people,” Morris said of his decision to join RealtyShares. “No investors will ever invest their money into a team that isn’t quality. … On top of that, it’s essentially the size of the opportunity. The size of the opportunity is absolutely massive.” LEVERAGING TECHNOLOGY If you simplify things, RealtyShares just wants to connect real estate investors and deal sponsors. But that process has several moving parts. “It’s not that it’s complicated, it’s just that there’s a lot of stuff that’s there,” Morris said. “It’s harder to conceive of the business as just A, B and C. It’s A through Z.” After all, RealtyShares facilitates almost every part of the investment process. Compare it to the stock market, Linetsky said. If you were taking a compa- ny public, several different players would get involved: investment banks, under- writers, analysts, exchanges and so on. “In our case, we’re doing all those things,” Linetsky said. Arguably, selling stock is even more complicated than investing in real estate—but it’s still relatively simple to go online and buy a piece of Apple. All because systems have been built to enable
those transactions. And that’s what Real- tyShares—and other enterprises like it—is doing for real estate. “As long as the deal is relatively discreet and definable,” Morris said, “then you can build technology around it to facilitate it.” RealtyShares isn’t trying to make a profit for itself alone. It’s creating a system that allows investors and deal sponsors to flourish as well. Some of America’s best tech-driven companies—eBay, Facebook, Google—have built ecosystems where us- ers can make money by selling their own goods and services, Linetsky said. “If you look at the last 20 years, the
highly successful companies are those that have taken an existing asset class and made it much more available at a higher velocity,” Linetsky said.
public tend to be highly regulated,” Linetsky said. He compared it to the medical profes- sion. “We want our real estate agents to know what they’re doing,” he said. But he noted that transportation and hospitality are regulated, too, but that hasn’t stopped companies like Uber or Airbnb from succeeding. “It took about 100 years for equi- ty trading to become mainstream,” Linetsky said, but he thinks Real- tyShares’ model will win over the typi- cal U.S. investor much faster—possibly in the space of three to five years.
Morris is equally bullish. He’s worked with other startups whose entire reason for being was their technology solution. But with RealtyShares, there’s a real busi- ness, and a real market need. He thinks the company’s platform—and its ability to ease investment transactions—could have a transformational impact. “There’s really no good reason,” Morris said, “why capital has such limited access to real estate investment.” •
AIMING FOR TRANSFORMATIONAL RESULTS
Real estate as an industry isn’t exact- ly known for being an “early adopter” of new technology. Part of the problem is regulation. “High-stakes, complex industries with broad exposure to the general
James Hart is senior staff writer for Think Realty Magazine. Contact him at jhart@ithinkbigger.com.
84 | think realty magazine september :: october 2016
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