Website groundfloor.us Founded 2013 | Headquarters Atlanta Number of employees 14 (2016) | |
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Industry Crowdfunded real estate investing Key people Brian Dally (CEO)
Nick Bhargava (EVP) Services Real estate peer-to-peer lending Motto Taking private lending public Founders Brian Dally, Nick Bhargava | ||
Groundfloor (styled all caps as GROUNDFLOOR) is an American real estate lending marketplace. It was the first real estate crowdfunding company to achieve SEC qualification utilizing Regulation A+ since the regulation became operable through the JOBS Act, becoming the only such marketplace open to non-accredited investors.
Contents
GROUNDFLOOR was purposely built to serve self-directed investors instead of institutional ones. Its marketplace provides short-term, high-yield returns backed by real estate. Typical loans return 12 percent annually on a six-to-12-month term. The minimum investment is $10. By December 2015, the company had funded 54 loans and sold more than $3 million in securities. It also closed a $5 million Series A round, bringing its total financing to $7.5 million.
History
GROUNDFLOOR was founded in Raleigh, North Carolina, in February 2013 by Brian Dally (who launched Republic Wireless) and Nick Bhargava (contributor to the JOBS Act). In March 2014, the company raised $300,000 from angel investors in the region. After raising $1 million in seed funding, GROUNDFLOOR moved its headquarters to Atlanta because of the Invest Georgia Exemption (IGE) which allows state residents to invest in crowdfunded projects regardless of their investor accreditation status.
A crucial breakthrough for the company came on 31 August 2015, when it became the first real estate crowdfunding company to achieve SEC qualification utilizing an amended Tier 1 Regulation A offering, better known as Regulation A+, since the regulation became operable through the JOBS Act on 19 June, becoming the only such marketplace open to non-accredited investors. The company opened investing in California, Illinois, Maryland, Massachusetts, Texas, Virginia, Washington, Georgia and the District of Columbia as a result of their SEC qualification in the fall of 2015.
By late October, GROUNDFLOOR tripled daily investing volume and sold out every loan originally listed. By December, the company had funded 54 loans and sold more than $3 million in Limited Recourse Obligation securities. It also closed a $5 million Series A round, bringing its total financing to $7.5 million. The round was led by Fintech Ventures, a $100 million venture capital investment fund focused on innovation in non-bank lending, savings and smart payments, managed by Serguei Kouzmine. GROUNDFLOOR announced it would use the money to expand its business beyond the present nine states where it operates.
Platform
GROUNDFLOOR was purposely built to serve self-directed investors instead of institutional ones. Its marketplace provides short-term, high-yield returns backed by real estate. Typical loans return 12 percent annually on a six-to-12-month term. While investments on other platforms require a minimum investment of $5,000, with Groundfloor, the original minimum investment was $100. In November 2015, GROUNDFLOOR 2.0 was introduced, reducing the minimum investment even further, to $10.
The website enables borrowers to showcase their projects. There is an aggressive pre-screening process for borrowers. The site targets small residential-development projects. If the project is selected for funding, community members can make loans to the borrowers. Groundfloor uses a proprietary loan grading algorithm in addition to application review to assign a loan a letter grade and corresponding rate. Loan terms generally range from six to 12 months and financing can be in a senior or junior position. At the loan maturation, the borrower repays GROUNDFLOOR, which in turn repays the investors their principal investment plus earned interest.
Interest rates, which vary between 7 and 26 percent, are determined by an algorithm, based on criteria such as property valuation, location, the borrower’s experience and how much of their own capital the borrower is investing in the project. The note structure is similar to Lending Club and Prosper. However, GROUNDFLOOR loans generally have shorter terms, higher interest rates and are secured by real estate.
In October 2015, GROUNDFLOOR introduced two new tools that expand peer-to-peer lending of real estate: quick comparison of loans and in-depth analysis of loan grading factors. An automated investing tool, pending further development and SEC review and approval, will be the first automated tool available in peer-to-peer real estate lending.