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The surge in crowdfunding, where capital for a project, from a Hollywood movie to a painting, is raised on the Internet, seems a bit silly to some people.
Exhibit A: In a story that's gone viral, a Columbus, Ohio, man recently launched a Kickstarter crowdfunding campaign to raise $10 so he could make a bowl of potato salad. His quest resonated so much he generated nearly $50,000 in commitments and pledges in a few days. TV talk show host Jimmy Fallon tweeted about it.
But crowdfunding, which essentially opens up investment opportunities to large swaths of people, has some serious business applications. That's where Sarasota entrepreneur Robert Reardon hopes to make his way. His entry into the market is through commercial real estate with his startup, Crowdflipr.
The model is simple: A person who wants to buy a commercial property registers on the website, crowdflipr.com. Individual investors can back the project in a variety of payments in exchange for an ownership stake in the project or possibly other perks. Reardon gets a 4% fee from the total capital raise, if and when a crowdfunding effort is successful.
So if Crowdflipr supports a capital raise on a $10 million project, it takes $400,000. Reardon launched the website in early July. The focus will be on commercial real estate, and Reardon says the site can also work with a management company that acquires single-family homes or multifamily complexes. A few other crowdfunding firms nationwide focus exclusively on real estate deals.
“I thought real estate was the perfect idea for this,” Reardon says. “Then I saw some competitors pop up, so I knew I wasn't the only one. I think crowdfunding will be transformative over the next decade.”
Reardon, 27, comes to Crowdflipr with a healthy dose of youthful exuberance, along with a stellar resume. A Sarasota native and USF graduate, Reardon was an early employee with Star2Star Communications. The Manatee County firm, with about $30 million in annual sales, provides cloud-based Voice over Internet Protocol communications systems for businesses.
Reardon started in accounting with Star2Star. In four years he worked his way up to finance director and assistant treasurer, where he oversaw a team of 15-20 employees. But Reardon recently gave up that job to focus full-time on Crowdflipr. “It's high-risk,” he says, “but this is something I'm passionate about.”
An admitted techie, Reardon did a chunk of the code development himself. With the site up and running, Reardon now seeks some investment capital of his own — at least $1 million. He would use the funds for sales and marketing.
In addition to capital, Reardon says another core challenge to Crowdflipr is to make sure people who seek to raise funds on the site are legitimate. “My paramount concern is fraud within the platform,” Reardon says. “To mitigate that, we will do heavy vetting. We will filter out bad actors.”
Reardon's business, at the core, is a software platform that connects investors with each other. In pre-crowdfunding days, if someone sought partners to purchase a commercial real estate property, he would use whatever connections he could to find them. But only accredited investors with a net worth of at least $1 million could invest in a project.
Crowdfunding, part of the 2012 federal JOBS Act, flips that upside down. “Instead of pitching it to 100 people,” Reardon says, “you are pitching it to the world.”
That reach is why Reardon expects Crowdflipr to soar. He hopes to have 10-20 multimillion-dollar deals in crowdfunding mode at any given time on the site. If 10 of those efforts close a year, Crowdflipr will be a major success. “Our goal is to build an ecosystem,” he says. “We don't want to just build a platform.”
Follow Mark Gordon on Twitter @markigordon
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