GROUNDFLOOR, the country’s only equity crowdfunding platform for real estate loans, has closed on a second round of capital from public investors. In this offering, which it raised using its own platform, GROUNDFLOOR took in $3 million from 1,580 individual investors, who purchased shares of the company for $15 each.
In 2018, GROUNDFLOOR closed its first “online public offering,” raising $4.2 million from 2,304 investors. CEO Brian Dally tells Hypepotamus that public investors now own 20 percent of the company.
“We now have a cap table that is almost exactly 40-20-20-20 — 40 percent for employees and founders, 20 percent for angels, 20 for VCs, and 20 percent for public shareholders and customers. We just thought that was kind of a poetic breakdown,” says Dally.
GROUNDFLOOR was founded in 2013 by Dally and co-founder Nick Bhargava to take advantage of new federal regulations that allow non-accredited investors to access alternative equity investments.
To this day, it remains the only company qualified by the SEC to offer this type of investing option — short-term, high-yield real estate loans, with a minimum investment of $10.
The Atlanta-based startup originally funded its growth with traditional angel and venture capital funding. In 2015, they raised a $5 million Series A led by Fintech Ventures.
When it came time to go after more money, Dally had a choice: go the traditional route again, or look to a new model that reflects the company’s own mission.
“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 crowdfund the company,’” Dally told Hypepotamus in 2018.
Now, he reflects on that decision. “The VCs on our Board thought that we weren’t going to get very much the first time. We got a lot. But when we started this year we were like, are people going to invest again?”
“We had no idea what to expect,” he says.
But it only took five months for GROUNDFLOOR to reach their goal. After opening the public offering in February, the company has closed the round today with a full $3 million in new capital.
“If you believe in what we’re doing and you trust us, then of course you want to have a piece of the pie,” says Dally. “It’s only right when you have customers that are helping create the value, that they participate in that value.”
Beyond the customer confidence vote, Dally points to another benefit of raising capital in this way: saving time. Rather than pausing company operations to focus on fundraising, he says that everything remained business as usual.
The result? “Our team really crushed it this quarter,” says Dally.
Here’s what that looks like: GROUNDFLOOR more than doubled year-over-year revenue, taking in $1.6 million in Q2 and $2.6 million in the first half of 2019. They expect to finish the year with close to $6 million in revenue, compared to $4.4 million in the last 12 months.
For their real estate customers, they’re now offering three types of loans available in 30 states and have passed over 1,000 total loans originated over the company’s lifetime.
65,000 users are registered on the platform, with the average investment per loan at around $200.
“When we first started out, the average investment was $1,000 per loan because we didn’t have a ton of loans to offer. Now that we’re offering 50 or 60 a month, the average is now a couple hundred dollars per loan because people spread it out, they diversify.”
The next step is increasing that loan volume even further, says Dally, and spending significant capital on the hiring front to do so. The company will swell from 50 to 75 employees by the end of the year, most based in their Atlanta headquarters.
When he thinks about the long-term growth plan, Dally foresees an IPO as the “most natural path.”
“We already have more shareholders than about 80 percent of all companies that go public. We just have to get to a point where we’ve built enough of a market for our shares, we’ve built enough of a stable, high-growth business that it can survive and thrive as a public company.”
“That does take a lot of work,” he says, “but we’re on that track.”