Tore Steen's CrowdStreet gives more accredited investors (and the couch potatoes) access to commercial real estate deals

by: JOSEPH GALLIVAN - Better than golf: CrowdStreets Tore Steen studies the art of the online real estate deal.You know crowdfunding has gone mainstream when it takes on the traditional, serious market of real estate investment. But Portland’s CrowdStreet is making a play for the type of people who plunk down $250,000 to help build a nursing home, condo block or modest office building - the sort of bread and butter deals that are mainstay of American capitalism (and pay about 7% to 14% in interest.)

CrowdStreet came out of FoundersPad, a startup accelerator in Bend. Now its five employees have their own modest office space, above the Jack Spade store at NW11th and Everett St in the Pearl District.

Co-founder and CEO Tore Steen, an admirer of eBay and Kickstarter alike, says part of what drives his company is the desire to democratize deals. That’s fine when you’re sending $10 to the Coolest cooler guy. But replacing Real Estate Investment Trusts?

Real estate investments have a formulaic structure. The developer who wants to build something, whether to keep or flip, borrows 60-70% from the bank, puts in 10-15% of his own money, and raises the rest from accredited investors. These are people proven to have $1 million in net worth excluding their primary residence, and an income over $200,000.

“Traditionally it’s hard work getting that 10%. The developer has to take them to dinner, play golf...” he says with the smile of one who doesn’t have time for all that.

CrowdStreet lets people put in as little as $10,000. 1,000 people have signed up since CrowdStreet launched its platform. So far one deal has closed, two more are open, others are in the works.

“It’s about transparency,” Steen said recently. All the developers are vetted. They are currently turning 80% of them away because the project is not high enough quality. Often it’s because they have little track record, or don’t have their own money invested in the deal, or some other red flag.

The other part of the transparency is the detailed prospectus the CrowdStreet website can offer. “We want people to sit on the couch doing their research. Then there’s s spike of involvement when the deal goes live.”

After a webinar with Mainstreet Property Group boss Scott White, it clicked for Steen that less experienced investors could learn a lot form listening to the comments and questions posed to White by more the experienced. The site is also an investor relations platform after a deal is closes.

Unlike Kickstarter, it’s not a click-and-run experience. Investors must go through several stages which can take from a day to a week. For example, the developer releases sensitive documents to the potential investor once he’s confident he is authentic - and not a competitor snooping.

Part of Steen’s the optimism comes from the statistic he states that crowdfunding has doubled in the last year to a $5 billion market and could reach $20 billion in five years. That’s a lot of clicks worth capturing.

CrowdStreet uses Google Analytics and Amazon web services, probably the most mainstream tools available. They have delivered on the promise of the web to provide fast effective, low cost software services. Which is why such a small team can even contemplate a startup like this.

For automated e-mails CrowdStreet uses SendGrid. They’re not about reinventing the wheel, although real estate companies have inquired about the platform, and Steen says it might be possible to offer it as a white label service, for others to brand.

He see the competition as RealtyMogul, Fundrise and RealCrowd, although each has its own unique take. Meanwhile, big players are moving in - the Carlton Group has its own crowdfunding platform.

Sixty per cent of the 30 investors who chipped in to the first CrowdStreet deal, some senior housing in Bloominghton IL, were on the east or west coasts. CrowdStreet targets investors age 35 to 65. The landing page shows the Portland skyline rather than London’s Gherkin or New York’s Freedom Tower.

“Our developments are midsized, so the image of Portland made sense.”

Steen says the strategy for now is to grow the company, rather than look for a quick exit. He’s hiring sales and marketing people rather than technologists.

It’s still real estate. There are relationships to develop and maintain. Hands to shake. And maybe even a little golf to play.

Tech Tonic is a monthly column written by Business Tribune reporter Joseph Gallivan. He can be reached at: This email address is being protected from spambots. You need JavaScript enabled to view it.

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