“Invest in real estate.” Everyone has heard this at least once in their lives.
Since Congress passed the Jumpstart Our Business Startups Act, or JOBS Act, in 2012, the regulations around investing were loosened and private early capital-raising activities were opened to the public. And an entirely new industry was born: real estate crowdfunding.
Several different real estate crowdfunding platforms popped up during this time. The gist of what they do? Pair potential investors with commercial real estate deal sponsors looking for funding and promising high returns.
Verivest, a Portland-based real estate technology company, also came onto the scene in 2013, initially playing in the fund administration space and helping individual investors verify their investments were being used responsibly.
“When the floodgates opened with the passage of the JOBS Act, millions and millions of marketing dollars were spent by real estate crowdfunding platforms to reach your average high-net worth investor to say, ‘Hey, you can invest in these real estate deals that are yielding double digit returns,’” said Pederson. “This was a super attractive departure from the high volatility of investing in the stock market, where you often go backwards before you go forwards.”
But, according to Pederson, investors “quickly realized that real estate crowdfunding sites weren’t the only show in town.”
Instead of relying on these platforms, which take a cut of a deal, investors were able to go directly to deal sponsors. And in many cases those sponsors could be unknown entities to an individual investor.
As a firm that was already handling financial administration, Verivest saw this gap in trust as the perfect opportunity to bring a new kind of service to the market.
“We remove friction from the entire process by charging deal sponsors a membership fee. We then do all the heavy lifting when it comes to administering background checks, digging into financials, and confirming these sponsors are who they say they are,” said Pederson.
As a neutral, independent third-party, Verivest sees themselves ushering in “real estate crowdfunding 2.0.”
“Instead of trying to monetize someone else’s investment, we’ve decided to remain neutral and monetize the verification process and the ongoing monitoring and oversight of the deals,”Pederson said.
Looking ahead, Verivest, which already employs 31 full-time staff, plans to recruit an additional six employees to support the company’s continued growth in 2021.
This is part of a regular guest column written by the Technology Association of Oregon in the Portland Business Journal.