Time Challenge
Letting the Future Tell the Truth: What’s Ahead For Real Estate Crowdfunding
by AdaPia d’Errico
T he inventor Nikolas Tesla once said we should “let the future tell the truth” about the present. In other words, with hindsight, we’d be able to look back on the “work and accomplish- ments” that got us there. But the future arrives faster than ever, which is certainly true for crowdfunded real estate (RECF). After its fast, para- digm-shifting start in the wake of the JOBS Act a few years ago, what does the future hold? Can it continue to disrupt tradition- al channels of lending, as well as the parameters of neighborhood renewal and revival? And what of the platforms themselves? As laws and regulations keep changing, how will they respond? Can they keep from being co-opted by more traditional players and institu- tions, or will they arrange strategic partnerships with them? Or, will larger financial institutions adopt and deploy technology quickly enough to take the
the lending segment of fintech’s recent troubles, stating, “I would frequently hear people say that they liked Lending- Club’s growth and financial profile, but wished they would admit that they were a specialty lender with a unique funding model versus a marketplace.” The role of technology in real estate finance, then, will be for new companies to keep adding transparency to lending processes that have been opaque, and to automate processes that, while not sexy, could stand to be modernized since many are still done manually and ineffi- ciently. Examples include title searches and recording, or the plethora of other paper-based transactions attached to the purchase and sale of real property. Additionally, they must incorporate data as part of an enhanced, online, “real-time” experience and information exchange to all parties in a particular transaction—from borrower or buyer, to underwriter and processor, to final
early disruptors out of the game? Some of the key themes in the future that will “tell the truth” about where we’ve been—once we get there—will break down into a few major categories: 1 Putting Tech in Fintech 2 Diversification of Product 3 Diversification of Funding Sources PUTTING TECH IN FINTECH Like so many of the crowdfunding platforms themselves, the term “fintech” seems to have arrived in the wake of the JOBS Act. But, beyond ease of use and an online experience, where does the “tech” add substantial value? Part of the change will come with em- bracing the fact that “tech” shouldn’t be the tail wagging the dog (or the “fin”). Lately there has been a rising and crash- ing of “unicorn” startups. Matt Harris of Bain Capital Ventures singled out
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