Home News Crowdfunding Startup GROUNDFLOOR Closes $4.2M Using Its Own Platform In ‘Online Public Offering’

Crowdfunding Startup GROUNDFLOOR Closes $4.2M Using Its Own Platform In ‘Online Public Offering’

by Holly Beilin

Atlanta-based real estate crowdfunding platform GROUNDFLOOR has closed a round of funding raised through an “online public offering”, a unique fundraising route conducted through the startup’s own platform. In about six months, GROUNDFLOOR raised $4.2 million from 2,304 investors.

The fundraise was offered under the SEC’s Regulation A, a rule that allows some companies to use equity crowdfunding to offer their securities without having to register them. This means that both accredited and non-accredited investors could buy shares in the company.

This structure is the basis of GROUNDLOOR’s product as well. The five-year-old startup was the first-ever company qualified by the SEC to offer direct real estate debt investments via their platform for non-accredited and accredited investors, essentially allowing real estate entrepreneurs to crowdfund their next project. 

The minimum investment for GROUNDFLOOR users — of which there are now over 50,000 — is $10. The company has originated over 550 loans totaling over $75 million.

This funding round was a proof point, says co-founder and CEO Brian Dally, that the crowdfunding investment model is an attractive one. The $4.2 million raised puts this campaign in the top 5 percent equity crowdfunding campaigns ever held, he says.

This was the first time the startup had attempted this kind of fundraise. They raised a seed round of $2.8 million in 2013 and a Series A of $5 million in 2015 from traditional angel and VC investors. 

“In the early days of the company I had a lot of people passionate about crowdfunding that were saying, ‘you’re crowdfunding real estate; you should crowd fund the company.’ And I thought they were crazy,” Dally told Hypepotamus.

But he began to like the idea, and in 2017 they took in a $2 million bridge round of debt to finance the larger online offering, which Dally says is “more expensive than you might think.” He pointed to the number of regulatory hoops they had to jump through as well as the high cost of shareholder acquisition.

They conducted the offering in stages, first offering shares to current GROUNDFLOOR customers, then on an invite-only basis, and then to the general public. Dally estimates that current customers made up about half of the total amount raised, and the general public a quarter.

“It did take time for people to understand this,” he says. “Whoever heard of buying stock in a startup online?” To lower the barrier to entry they kept costs low, at just $10 a share.

Beyond the raise, the campaign generated new customers for the GROUNDFLOOR platform, with many new investors also coming on as users. 

Now, the company has more work to do in scaling. They have seen year-over-year revenue increase by 64 percent and headcount about double to 43 employees in the last year. Just this month, they moved into a new office in the Bank of America Plaza in Atlanta’s Midtown.

Dally predicts that if things continue to go well, that headcount could double again in the next year. Specifically, they’re building up the sales team to get more loans on the platforms.

“The number-one feature request is basically more product,” Dally says.

They’re also adding software developers to improve and add features to the platform. Lastly, Dally hints that they plan to expand beyond their current market of residential fix-and-flip projects, perhaps tackling another facet of the booming real estate industry.

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