​Grow VC Group Research Paper 1/2017 - Shaping a New World Order

Jobs of 3.5M men that drive cars or trucks in the US are going to disappear through the advent of self-driving cars. Each former driver could get a new job in the future if they moved to China to teach English. Prime Minister Abe gave to President Trump a golf club, when they met in November; it was actually a product of a Chinese company. These stories are just some anecdotes, but they illustrate, how the world is changing. In the past, industrial revolutions have caused political destabilization, new political movements and even civil wars.

The United States and the United Kingdom have been at the forefront of economic development since the Second World War. Both countries have benefited from these networks and often seen themselves as leaders in global development, often above all others earned by their struggles and ultimate victory during the Second World War. The rise of Asia has been underway for decades. In contrast to today’s China, Japan never challenged the US in foreign policy and was fully dependent on the US from a military perspective.

Last year Chinese companies completed the most international M&A transactions in the world. Asian Infrastructure Investment Bank was a Chinese initiative, but it has now representation from dozens of countries even though the US had a negative initial reaction to it and saw it as an attempt by China to challenge the positions of institutions like the World Bank and IMF. The US has accused China of protectionism and of currency manipulation. At the same time, most of countries or market areas, including the US and EU, protect their own markets through various restrictions, customs policies and requirements for local market approval.

Asia is far larger than only China. ASEAN countries have for decades worked for economic cooperation and integration. They were a key coalition in the Trans-Pacific Partnership (TPP) which President Trump has decided to abandon. ASEAN countries have disagreements with China regarding the South China Sea and especially China’s desire to expand its influence in the region. Now the Trump Administration is seeking to challenge China’s position, while opening the door for China to lead economic policy in the region.

Automation, digitalization and artificial intelligence are having an increased impact in world markets and fundamentally changing jobs. Artificial intelligence, Turing Machine, already won a war 70 years ago and had been a major contributor to the post-war security and geopolitics new order that we’d been living in until recently. Countries are also vastly different in how prepared they are for the paradigm shift of the machines.

Digitalization also changes the face of the economy. It allows the rapid creation of global business with minimal equity. Digitalization allows true grass roots global business, where that was earlier limited to multinational companies. Digitization also raises new political and security questions. One example is data security and privacy.

Some people say distributed ledger technology (such as blockchain) will do for finance what TCP/IP did for the Internet – it could change the whole finance world, just as the Internet has changed many businesses and operations since the 1990s. When finance and fintech services become globally distributed, then we can talk about real globalization.

When Asia is emerging to be a leading economy in the world, several countries and cities in Asia are also building their future positions. Brexit has an impact on the role of London as a European and global finance center. Emerging economies, intelligent machines, and raise of middle class in the emerging markets are shaping now the global economy, but also all local economies. More democratic finance services should include all people in the world to use them, enable run business and raise funding anywhere in the world, and enable fairer systems to collect taxes and distribute wealth.

Read Grow VC Group’s latest research paper that focuses on the mega trends in the world and their influence on finance, fintech and economies. You can get the report here.

In mid-2016, the marketplace lending sector experienced some turmoil leading to increased scrutiny from regulators and institutional investors’ concerns about the securitization process and the quality of the underlying loans. However, this slowdown was temporary and personal marketplace loans globally grew by 210% (+64% for small business marketplace loans). 

Even the actors that were hit the hardest were able to bounce back by the end of the year: despite the forced resignation of Lending Club’s CEO, the firm was able to complete its first rated securitization of consumer loans in December 2016 for more than $100M. 

At the same time marketplace lenders are maturing, and their track-record is becoming impressive enough to attract investors that were previously reluctant to enter the market (often due to concerns regarding the potential impact of borrowers’ default). Indeed, marketplace lenders are not covered by the FDIC (or its equivalents) and investors could end up losing all or part of their original investment. Nevertheless, it appears that net returns (including defaults) range between 4.5% and 6.5% across the main platforms, and over the whole lifetime of the industry. 

Another factor has been driving the growth of the marketplace lending sector: its lack of correlation with traditional asset classes such as stocks and bonds. Indeed, the uncertainty associated with upcoming political and economical evolutions in mature markets (new regulations in the US, elections in France and Germany, negotiation of the Brexit, etc.) investors are looking to invest more heavily in sectors less dependent on systemic changes. Given the global context, we can expect marketplace lending’ to become a viable alternative to investors around the world as they are able to easily diversify their loans portfolios, and collect interests regardless of markets’ volatility.


2017, what to expect

Several trends are to be watched for the year to come, some that were already driving the marketplace lending sector in 2017, and others that emerged more recently:

- Partnerships: by nature, banks and fintech companies have different advantages: the formers having an easier access to equity easily and an existing customer base, while the latters provide cutting-edge technologies and a more customer-centric approach. By joining forces, they are able to better address their customers’ needs and to enter new markets. The partnership between JPMorgan and On Deck is emblematic of this type of strategic partnership and services providers are also teaming up to tailor their offers for the marketplace lending industry. Experian (world leader in information services) and dv01 (reporting and analytics platform), for instance partnered in January to provide a complementary solution, tailored to the needs of the market.

- Technology: the perpetual technical innovations that power the growth of the fintech ecosystem are often behind the success of the marketplace lending sector. And practical applications sometimes seem endless. A good illustration would be the creation of Lending Robot, a fully automated hedge-fund that invests in P2P lending platforms via a proprietary ‘robo-advisor’, constantly refining its strategies with the help of Blockchain-based machine learning algorithms. 

- Diversification and consolidation: if most marketplace lending platforms originally specialized in a single niche, they tend to develop their offerings by entering new lines of business, as they grow. For instance SoFi, that used to focus on student loans now offer mortgages and consumer loans; and Lending Club that used to offer only consumer loans enter the auto loans market. By doing so, they are reducing the smaller players’ market shares and naturally driving the consolidation of the industry.

- US regulatory reforms: even if the new administration’s upcoming changes to the regulatory requirements have yet to be fully disclosed, its desire to renew the American “entrepreneurial spirit” through the dismantlement of the Dodd-Frank Act (that is seen as a barrier for small businesses’ access to credit) might translate into more flexible regulations for marketplace lenders. In order to weight on the matter, competitors are joining forces to lobby in favor of a less regulated market. The Marketplace Lending Association for instance recently welcomed 11 new members in an attempt to “advance [their] mutual public goals both in Washington and in state capitols around the country," according to Nathaniel Hoopes, executive director of the MLA.

Crowd Valley’s framework is used worldwide by both upstart and incumbent lenders, and our team has years of expertise in the field. Any interested party shouldn’t hesitate to get in touch. 

The article was first published on Crowd Valley News.

Over the past few decades emergent technologies have impacted nearly every part of the economy, and finance has been no exception. While some could argue that the dominance of large institutions in financial markets has led to a relatively slower uptake of so-called “disruptive” technologies in the sector, the change is now definitively underway. From retail banking, to consumer loans, to money transfers and even asset management, technology is integrating itself into finance more than ever before. Similarly, capital raising methods have been subject to major changes, and it is in this area that will focus our report.

While equity crowdfunding and marketplace lenders (formerly “peer-to-peer lending”) have garnered the most media attention, real estate crowdfunding has become a major force in both the global real estate market and the capital-raising business.

Real estate investing is considered to be one of the earliest forms of investment, and yet despite this, until only a few decades ago direct investing in the market, or using expensive and hard-to-access investment funds, was the only way for investors to partake. The opportunity of investing came with significant risk, as the market lacked liquidity and the sector became known for strong price swings, such as in the Financial Crisis of 2008, or in various “land fever” events in the preceding two centuries. Yet, in 1970, this again began to change as financial and technological innovation brought a step-change to the sector.

The 1970s saw the advent of Real Estate Investment Trusts, or REITs, which were both a financial, regulatory, and technological innovation. This special form of company allowed investors to commit capital to real estate in a lower-fee and high-liquidity medium. REITs are obligated to give back 95% of their returns to shareholders, and hold 75% of their capital in real estate, but so long as they do so, they can avoid being taxed at the regular corporate rate. For the first time, investors could trade in and out of positions with relative ease, all while making good returns. Investors have historically earned robust returns in the sector which have outpaced the S&P 500.
​

However, challenges remain for REIT investors, as the sector is highly sensitive to interest rates, and is generally well correlated to the overall market, lowering its suitability for use in diversification.
Now a new innovation is growing in real estate which is set to yet again yield a seismic shift in the industry. That innovation is real estate crowdfunding (RECF), and like its predecessor, the REIT, it is a product of technological, regulatory, and financial development. For the first time, real estate crowdfunding allows investors the ability to make targeted equity and debt investments in specific opportunities. Rather than having to commit money to a fund or a REIT, investors can place capital directly into real estate investments.

Investments sizes vary greatly, with many investment minimums starting from just $5,000 or lower, with a theoretically unlimited top end. The flexibility of being able to invest small sums in varying amounts of different opportunities simultaneously allows highly targeted investing, while also offering some benefits of diversification. It also generally has much lower costs than other forms of real estate investing as it cuts out the middle man and allows investors to go directly to the source of the investment. In turn, this allows those raising capital to go directly to a larger pool of investors, and compete by offering better terms than if they had to use an intermediary.

While real estate crowdfunding had been limited to accredited investors in the US, as of November 2015 the United States approved a new measure as part of the JOBS act which allows all investors to partake in the market. We thus see this a growth catalyst for sector. In our view, real estate crowdfunding is the next step in the evolution of the real estate investing market, following on its predecessor and cousin, the REIT.
​
You can access our full report on real estate crowdfunding here:https://dealindex.co/research.html

Valuation of early stage companies now made accessible to users of  DealIndex’s proprietary investment and analytics dashboard.

Today we are pleased to announce that users of DealIndex’s Deal Exchange, a crowdfunding aggregrator and investment analytics dashboard, can now access and make use of AlgoValue, an online valuation and cap table analysis platform developed by former ‘Big 4’ valuation experts to easily valuate early stage and mature companies.

The service is available for any industry and follows the same methodology employed by large industry valuation firms, giving instant access to a database of over 11,000 comparable companies. Prices start at US$50 per month.

“We at AlgoValue are delighted to bring to DealIndex’s investors, robust, professional but easy to use valuation at ‘the click of a button’, says Raphael Meyara, Algo Value’s CEO and Co-Founder. “Our valuation tool helps support DealIndex’s mission to use technology to professionalize and open wide crowdfunding for serious investors, empowering them with the ultimate valuation resource.”

“We are proud have on board a partner such as Algovalue, a leading provider of valuation services in private venture-backed companies,” reports Neha Manahaktala, CEO and Co-founder of DealIndex. “This partnership complements and enhances our current service offering for investors using our data-driven dashboard to source for, compare and track investment opportunities in the crowdfunding and alternative finance space.”

About DealIndex

DealIndex (www.dealindex.co) is an intelligent data and deal aggregator of private companies and assets raising capital across leading alternative finance platforms globally. DealIndex adopts a global, curated approach to the alternative finance ecosystem, providing extensive data, research and analytics as part of its service to clients.

The company has pioneered the first global crowdfunding aggregator dashboard that allows investors to navigate and track deals in real-time, manage their portfolio of private company investments, and make informed investment decisions backed by extensive analysis, data and research.

The dashboard provides single sign-on access to hundreds of private companies seeking capital, bringing together, for the first time, curated, quality leading equity crowdfunding platforms spanning across 4 continents.

DealIndex is headquartered in London, with offices in New York and Hong Kong. It is part of The Grow VC Group, a worldwide pioneer and leader in the crowd investing, peer to peer and online investment market.

About AlgoValue

AlgoValue (www.algovalue.com), an online valuation and cap table analysis platform, provides a suite of efficient, intuitive, accurate and analytical tools which bring instant transparency, as well as real-time decision-support data output for valuating early stage and mature companies as well as their equity securities.

AlgoValue’s solution simplifies calculation complexities, eliminates costly errors resulting from numerous data entries from multiple sources, saves time and money, and improves the way illiquid equity investments are valued and managed.

AlgoValue Inc. is based in New York, Tel Aviv and London and is used by domestic and international valuation firms, accounting firms, venture capital firms, law firms, private companies and crowdfunding platforms.

For further inquiries please contact:

AlgoValue

Raymond Rubin

Business Development Manager

raymond@algovalue.com

DealIndex

Michelle Tang

Director of Marketing and Partnerships
​
michelle@dealindex.co

“Real estate crowdfunding has become a major force in both the real estate and the capital-raising business. Rather than having to commit money to a fund or a REIT, investors can place capital directly into real estate investments.”

These days, when it comes to fundraising or investing, “crowdfunding” has become the latest buzzword that is literally, all the rage. From crowdfunding social projects, gadgets, films, and farms (even dates), nearly all types of business ideas have become applicable to the crowdfunding world.

Thanks to the advancement in technology and relaxation in regulations, crowdfunding has even managed to find its way into penetrating the real estate industry. This disruptive innovation represents a seismic shift in the real estate fundraising and investing landscape, both for developers / sponsors, as well as investors.

Traditionally known to be an opaque asset class that is largely limited to the well-connected and wealthy individuals, the average investor – largely due to informational and financial hurdles – was often barred from investing in real estate projects.

The innovation in RECF, and like its predecessor, the REIT, is a product of technological, regulatory, and financial development. For the first time, real estate crowdfunding allows investors the ability to make targeted equity and debt investments in specific opportunities. Rather than having to commit money to a fund or a REIT, investors can place capital directly into real estate investments.

It is on this topic that I would like to turn your attention to. In collaboration with 11 leading real estate digital investing portals, the DealIndex team has recently put together a comprehensive research report that aims to shed light on this new form of investing. If you haven’t done so already, please feel free to download a copy of this report by clicking here.

If you recall, last year we featured a topical “Introduction to Crowdfunding” blog series (i.e. CF101). In the weeks to follow, I’ll be drafting another topical blog series, but this time the focus will be on Real Estate Crowdfunding (i.e. RECF 101). I will be discussing the fundamentals of RECF, including – but not limited to – what is RECF, what’s in it for investors, who can invest, who are the key players, different types of RECF models, RECF vs REITs, and the future trends that may govern this emerging ecosystem. To better elucidate the intricacies of this sector even more, I will also feature guests posts, case studies, and unique insights shared from our leading real estate platform partners.

​To begin with, I would like to present an overview of the interesting facts and figures we unearthed while researching this new “disruptive” sector.
​

s reported by Massolution, the amount of capital raised in total across RECF platforms in 2014 amounted to $1bn. For the year 2015, they predict that the total funds raised will reach roughly $2.6bn, representing a staggering growth rate of more than 150%, making it one of the fastest-growing industry segments of crowd capitalism.

​Note: in the spirit of the new collaborative ‘sharing’ economy – which we are massive proponents of (after all, we are in this space) – we encourage you all to share and pass along any of our posts which you find informative to your associates / friends via our social media plugins.

​Real estate investing is considered to be one of the earliest forms of investment. Yet, it was not only until a few decades ago that direct investing in the market, or via expensive and hard-to-access investment funds, was the only way for investors to partake in this sector. Access to information and the large amount of capital often required constituted two formidable barriers to entry for investors interested in investing in traditional real estate.

In the pre-crowdfunding era, investing in private real estate was all about who you knew. Under the Securities Act of 1933, private securities investments (including securities of real estate companies) could not be marketed publicly. This meant that access to private deals was restricted to investors who were able to seek them out through connections in their personal network. Once an investor was lucky enough to be able to locate a private investment, he/she would then have to provide the necessary funding. For real estate, this could easily run into the six-figure range. These high buy-in requirements and the ban against publicly soliciting for these investments effectively shut the average investor out of a large segment of the real estate market. For real estate companies, this meant that their  access to capital was restricted to who they knew thus rendering capital very inefficient.

With the emergence of technology-driven crowdfunding platforms though, it is now possible for sponsors/developers to present their investment projects online, thereby enabling access to these projects to a wider number of potential investors all across the globe – literally within seconds (i.e. at the click of the mouse). Diversification, transparency, higher returns – there are a multitude of reasons as to why crowdfunding for real estate presents an attractive new business model, allowing the average investor to allocate a portion of their wealth to an important asset class. Though still in its infancy, real estate crowdfunding is rapidly reshaping the way people find and invest in properties. This shift has brought benefits not only for investors but also for real estate companies and for the real estate market as a whole.

To give you a general indication as to the market size and potential, Massolution estimated the size of the global real estate crowdfunding market in 2015 to amount to $2.6 billion. As for the number of platforms in this space, Crowd Valley estimates that there are roughly 230 real estate crowdfunding platforms worldwide to date.

As you can see, RECF has quickly become one of the fastest growing segments of online investing. On the back of this trend, in an attempt to shed more light on this fast-growing sector, the DealIndex team has been diligently conducting research and interviewing our partners to issue Volume II of our Alternative Finance Demystified series, this time focusing on the digital real estate investment ecosystem.

In this report, we take a deep dive into the various parts of the sector, how RECF works, the different models, the leading businesses, as well as the advantages that real estate crowdfunding offers and an outlook as to the future trends. We have also furnished our report with several case studies and unique insights shared by 11 leading digital real estate investment players worldwide.

To give you a gentle teaser as to what can be expected in the report, in conducting our research, we discovered the following key themes that underpin the RECF space:

1. Increased transparency and access to real estate investments; individual investors get access to otherwise closed off high value real estate assets, providing increased diversification with a lower capital commitment.
2. More direct ownership, cutting out the middle man. Sponsors and developers are able to access capital – both equity and debt – from a diversified base of investors through real estate crowdfunding.
3. Technology, speed, and data have come together to reduce the inefficiencies in searching and accessing real estate investment opportunities.
4. Diversity and collaboration between players that exist in the RECF landscape, especially in the US; including sponsors, developers, REITs, new players, and private real estate investment funds.
5. Evolution of real estate crowdfunding in the US with different models encompassing equity, mezzanine capital and debt investments as well as lead generation.
6. Real estate has become a significant part of marketplace lending.
7. Investors are getting comfortable with investing in real estate online and across borders.

Already, RECF has demonstrated its potential to democratise investment options in real estate. For those who are interested to learn more about this evolving sector that is rapidly democratising access to what was traditionally an opaque and hard-to-access asset class, feel free to download a copy of our Digital Real Estate Investment Demystified report by clicking here.

We hope you find the report informative and an interesting read. We would also like to extend our grateful acknowledgement and sincere thanks to all our partners who have contributed to this report. Without your contributions, the report would not have reached its present form.
​

After much anticipation, the exciting news is finally out. In partnership with CNBC, we are proud to announce the launch of four crowdfunding indices: International 50 Index, UK 50 Index, Technology Index, and the International Aggregate Index. The indices take transparency in the crowdfunding industry to a new level by aggregating information on the private fundraising sector into usable and easy-to-understand benchmarks. The indices track the pulse of the alternative finance market, providing a real-time indicator of market activity. The indices are live on CNBC here
Both the International 50 Index and the UK 50 Index are calculated using a basket of the top 50 companies currently fundraising, the former internationally while the latter restricted to the UK zone only. Meanwhile, the Technology Index is a daily average of the top 25 technology companies currently fundraising internationally. Last, the International Aggregate Index measures components of growth to provide a wider market view. In creating these indices, all data is sourced from DealIndex’s data-driven platform, which aggregates real-time offerings across 150+ sectors and 40+ countries.

“These indices represent an important step forward in educating the general public about the vast potential of crowdfunding,” reports Neha Manaktala, CEO and Co-founder of DealIndex. “Similar to our dashboard, through the creation of these indices we hope to inject more transparency to the market and empower investors with more data and tools to facilitate their investment process when it comes to analysing opportunities in the private market.” With more than 2,000 deals tracked on the DealIndex dashboard across leading crowdfunding portals globally, investors interested in private company investment opportunities can now streamline their sourcing and due diligence process by simply logging onto the DealIndex Deal Exchange and utilise the built in advanced analytics and tools to track, compare, and monitor startups raising capital online in real-time.

The alternative finance market has enormous potential. Just five years ago, this was a relatively small market of early adopters crowdfunding online to the tune of a reported $880 million in 2010. Fast forward to today and we saw $16 billion in alternative finance in 2014, with 2015 estimated to grow to over $34 billion. What’s more, the crowdfunding industry is doubling or more, every year, and is spread across several types of funding models including rewards, donation, equity, debt/lending, and revenue sharing.
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With the JOBS Act enacted in 2013, equity crowdfunding has sprung forth as the newest category of crowdfunding and is further accelerating the growth and disruption. As recorded by Massolution, reported growth rates of the equity crowdfunding industry averaged 410% between 2012-2014. It is thus the perfect time to launch the crowdfunding indices, according to Neha. Transparency on investor fundraising activity would be a great value-add in a sector that suffers from a dearth of data. “As alternative finance becomes increasingly more mainstream, the importance of these indices will grow”

While equity crowdfunding and marketplace lenders (formerly “peer-to-peer lending”) have garnered the most media attention, real estate crowdfunding has become a major force in both the global real estate market and the capital-raising business.

Today we would like to introduce you to the latest form of crowdfunding: real estate crowdfunding.
That’s right, real estate and crowdfunding has merged to ‘democratise’ the fundraising scenario even further and enable broader investment opportunities for all. So, rather than having to commit money to a fund or a REIT, investors can place capital directlyinto real estate investments.

More people are being drawn into this increasingly crowded space, with platforms like Realty Mogul, Property Moose and Fundrise leading a sector which globally raised over $1 billion in real estate during 2014. By the end of this year, that figure is expected to almost triple, up $2.57 billion worldwide, according to a Massolution report released this year.
​
Similar to our “DI Sphere” infographic which attempts to capture the key players underpinning the equity crowdfunding market, we have created another infographic to enable a quick visualisation of the core stakeholders that make up the digital real estate crowdfunding landscape.

Following the success of our inaugural equity crowdfunding report released in July 2015, we have been diligently conducting research on the real estate crowdfunding sector and working with our partners to produce our next alternative finance quarterly report on this sector.
The real estate crowdfunding report is a means for us to lend our perspective to investors and the wider market about how this market works, the key drivers, and industry trends. Below is a primer on what to expect in the imminent release of the report.

Real estate investing is considered to be one of the earliest forms of investment, and yet despite this, until only a few decades ago direct investing in the market, or using expensive and hard-to-access investment funds, was the only way for investors to partake. The opportunity of investing came with significant risk, as the market lacked liquidity and the sector became known for strong price swings, such as in the Financial Crisis of 2008, or in various “land fever” events in the preceding two centuries. Yet, in 1970, this again began to change as financial and technological innovation brought a step-change to the sector.

The 1970s saw the advent of Real Estate Investment Trusts, or REITs, which were both a financial, regulatory, and technological innovation. This special form of company allowed investors to commit capital to real estate in a lower-fee and high-liquidity medium. REITs are obligated to give back 95% of their returns to shareholders, and hold 75% of their capital in real estate, but so long as they do so, they can avoid being taxed at the regular corporate rate. For the first time, investors could trade in and out of positions with relative ease, all while making good returns. Investors have historically earned robust returns in the sector which have outpaced the S&P 500. However, challenges remain for REIT investors, as the sector is highly sensitive to interest rates, and is generally well correlated to the overall market, lowering its suitability for use in diversification.

Now a new innovation is growing in real estate which is set to yet again yield a seismic shift in the industry. That innovation is real estate crowdfunding (RECF), and like its predecessor, the REIT, it is a product of technological, regulatory, and financial development. For the first time, real estate crowdfunding allows investors the ability to make targeted equity and debt investments in specific opportunities. Rather than having to commit money to a fund or a REIT, investors can place capital directly into real estate investments. Investments sizes vary greatly, with many investment minimums starting from just $5,000 or lower, with a theoretically unlimited top end. The flexibility of being able to invest small sums in varying amounts of different opportunities simultaneously allows highly targeted investing, while also offering some benefits of diversification. It also generally has much lower costs than other forms of real estate investing as it cuts out the middle man and allows investors to go directly to the source of the investment. In turn, this allows those raising capital to go directly to a larger pool of investors, and compete by offering better terms than if they had to use an intermediary.

While real estate crowdfunding has until now been limited to accredited investors in the US, as of November 2015 the United States has approved a new measure as part of the JOBS act which allows all investors to partake in the market. We thus see this a growth catalyst for sector. In our view, real estate crowdfunding is the next step in the evolution of the real estate investing market, following on its predecessor and cousin, the REIT.

This reports aims to bring the first ever in-depth coverage of the sector, and will include the following information:

• How real estate crowdfunding works
• The different types of real estate crowdfunding
• Case studies highlighting real-world outcomes
• In-depth contributions from leading real estate crowdfunding platforms
• Investors in real estate crowdfunding
• RECF: disruption or collaboration?
• RECF: review of sensitivity to interest rate rises
• An outlook for the future of the sector

Our aim is to shed light on this new and fast growing part of the crowdfunding market, and we hope you enjoy this report and find it useful. Stay tuned…
​

​We recently had the pleasure to speak to Jori Kartikko, CEO of List71. Unlike other equity crowdfunding platforms, List 71, based in Singapore, adopts a revenue sharing approach to crowdfunding.

What was your motivation behind starting a revenue sharing investment platform? Can you explain to us the basic mechanics behind this new model? 

The financing gap in Europe alone was 250 billion in 2014 (Duedil). The power of crowdfunding is potentially substantial but is private company investing in equity and lending always the best way? No.

Investing in private companies is risky, difficult to value and assess – even for professionals who work in the field day-to-day. Equity yields high risk for potentially high reward, and loans possess much lower risk for low rewards. Reaching common ground in valuation tends to be difficult, in almost all cases the entrepreneurs are much more optimistic about the valuation than the investors, therefore entrepreneurs are not keen on equity dilution. And finally, the average “exit” occurs in 8-10 years with little to no liquidity.

Is there a financial instrument where investors can take on moderate risk in order to achieve moderate rewards?  Yes. Revenue-based financing (RBF) a.k.a “royalties.” RBF is not a new concept; however, it’s only accessible to a few investors. List71 is the first to introduce RBF in the crowdinvesting spectrum.

How does RBF actually work? In exchange to an investment, investors receive a percentage of the company’s revenue until the investor has received the investment multiplied by the money multiplier back in full. Investors have access to a company’s monthly revenue, statistics, pitch, team and the offering.

How is revenue sharing different from the other type of crowdfunding models like equity, debt, etc? What are the pros and cons?

For Companies:

• No equity dilution for Shareholders.
• No loss of control for Entrepreneurs.
• No collateral or warranties.
• No valuations.
• Fast hassle-free financing for growth.
• Easy and simple “Exit” possibility.
• Marketing and global presence.

For Investors:

• More liquidity as payments are paid back monthly.
• Shorter ‘Exit’ as the investment and interest is paid back within 5 years.
• Lower Risk level as the revenue-share model ensures consistent monthly payments.  

​What type of issuers are you attracting the most to your portal? Are you noticing any trends?
Since launching the platform in October 2015 we’ve taken on a few hundred angel investors and a few small funds. We have recently been shown significant interest from the institutional side from funds and family offices. For 2016, we envisage funding evenly from private and institutional investors.

What type of investors are attracted to the revenue sharing model of crowdfunding? 
Investors looking for private equity like return multiples in a fixed income like steady monthly cash flows. Shorter ‘Exit’ as the investment and interest is paid back within 5 years.

What headwinds and challenges do you foresee for the revenue sharing business model and crowdfunding sector in the near future? 

So far the feedback for the RBF has been extremely positive from both investors and companies looking for funding. The FinTech industry in the last year or so especially in the non-bank lending arena has shown tremendous amount of innovation. We would like to see more RBF platforms introduced and perhaps a new financial mechanism which can influence and further improve our RBF platform.