A Woman’s Voice for Women

AdaPia d’Errico has recently moved into an advisory role with AlphaFlow.   She is a special advisor with the company, still working closely with them on influencer marketing and business development and promoting the company and its brand.

Read these shownotes and listen to the podcast here.

That said, AdaPia experienced a big shift driven in part by the #MeToo movement.  She found it galvanized her in a way she never could have imagined.  It led her to make a decision to dedicate herself to empowering women to develop their inherent leadership traits and to overcome a lot of the barriers that are not only external societal and cultural expectations, but also largely internal: The voice of the inner critic or fears or things that tends to hold women back.  She chose to work more closely with a lot of women on empowering them to step into their leadership roles that they have inherently and at the same time to work with companies to help them understand how to bring those leadership traits out in the women in their ranks.

This has been very strong for AdaPia in terms of the direction that she wants to take for herself and for her business. Having been an executive for the past several years in very male-dominated industries, AdaPia really understands the impact that she has had as a person, as a woman, on the company culture, on the direction, on the productivity, on the values and very much on the culture of the company. She finds that effect is prevalent with many women who are in management and leadership positions in companies, and she believes it is important that, as a society, we continue to develop more women and work with management teams, who tend largely to be men, to develop that further.

Why Real Estate is So Male Dominated

We can relate this gender bias to the STEM disciplines: science, technology, engineering and math.  There has been some great research done by McKinsey who have noticed that women are underrepresented in STEM disciplines and that as math is a critical skill in real estate finance, you find men disproportionately represented.  It goes back all the way to when we raise our children. Girls are told that they should be nurses or teachers or something in the humanities. They are not encouraged to study sciences and they are often told that they are not good at math. Consequently, they are literally directed in other places, in other disciplines.

Women in Fintech

From what AdaPia has seen in real estate crowdfunding and, more broadly, in fintech, there are quite a few women; still underrepresented, but there are more than one sees in real estate development for example. There is Eve Picker at SmallChange, and Jilliene Helman who founded RealtyMogul.  Both are real pioneers - not only in the industry, but as women in the space. But this is more centered on entrepreneurship and technology than it is necessarily on real estate per se, and there are a lot of women out there starting companies, who need encouragement. 

It is, perhaps, something of a generational shift that is occurring in the sense that real estate crowd funding is a new industry that is emerging during an era of tremendous cultural change in America. For the millennial generation where gender is less of an issue than prior generations, and because crowdfunding real estate is also a new industry, it fits well with a new view of how culture and society should be.

Indeed, there are a lot of societal trends being driven by the millennial generation and they are far more focused on values, and their values are around inclusion, and specifically with real estate crowdfunding, for example, access and abundance of information and sharing and knowledge.  Companies that have a social mission or that are mission-driven, that are purpose-driven companies are going to survive the next generation or the next wave of changes in business.  Their successes are going to be driven by millennials for whom having a sense of purpose is very important to them.

Goals and Aspirations

AdaPia has been consulting for years and that was how she initially got into the real estate industry when she first discovered Patch of Land – and what drew her to them was that they were purpose-driven. They had a social mission – their slogan was ‘building wealth, growing communities.’ For AdaPia, the heart and soul of the company was built on that and real estate crowdfunding was built on the premise of being an industry that was creating more access; it would increase the flow of money to people and projects who needed it and who were revitalizing neighborhoods.

Now AdaPia has taken step back and has asked herself what does she want to do with the rest of her career, and with her life. She loves working with entrepreneurs. The favorite part of working with them is in helping them actualize their vision. She remains focused on purpose-driven entrepreneurs, and, especially, with female entrepreneurs. She also enjoys working with companies who use her insights and expertise to help them understand how to navigate the gender disparity that is in organizations.  She assists them to bridge some of the gaps that have occurred since #MeToo, where sometimes people – men – are a little bit afraid to talk to women now in the workplace. Of course, it should not be this way; it is the opposite of what we want as a society. We do not want any distinction between the genders and AdaPia’s mission is to assist her clients to build inclusive, balanced work environments and cultures.

CFRE – An Educational Challenge

AdaPia D’Errico became involved with real estate crowdfunding around 2013 when she joined the three founders of Patch of Land. It was about three months after they launched and was really the beginning of real estate crowdfunding industry. Patch of Land, a Los Angeles company, was one of the first entrants into the real estate crowdfunding space and, for AdaPia, her industry expertise comes from having been a core part of that team. Their she helped bring not only awareness and demand generation to the platform, but also to raising awareness around the opportunity of real estate crowdfunding to the general public.

Listen to this episode and read the shownotes here 

Indeed, informing people and really talking about the opportunities they have in crowdfunding real estate is very much an educational process.  It really comes down to telling people about it in terms of what it is, what the benefits are, and what value it can bring to them.  One must create a good sense of understanding and awareness. Crowdfunding has a complicated regulatory and legal framework.  You can wrap it in very technical language with a lot of nuances and it can get they can get really overwhelming quite quickly.  It is far better to provide digestible information that helps somebody understand what they are looking at and talking about.

AlphaFlow puts investors side by side with a registered investment advisers (RIAs) simply because they are both looking for the same thing; good risk adjusted returns.  The company tries to help them understand what they want and how they can invest to achieve their goals.  First, they consider their investment profile and risk tolerance as well as other portfolio goals that one should be looking at if one is a financial adviser before making an investment on behalf of a client.  Then it is really about explaining to them the opportunity in the very simplest terms – for example, here is an investment that yields this return.  You get X amount based on an investment of this size. At the end of it you receive this yield times the amount of dollars in invested plus you get your principal back.

At AlphaFlow they actually go a little bit further and talk about overall portfolio with investors and RIAs.   This is in contrast with non-regulated, non-registered companies that cannot have those kinds of conversations.  It allows AdaPia and her team to have a broader conversation with investors which is really fabulous because that allows them to help understand the investor better.  Consequently AlphaFlow can fully explain the benefits of their product and how it can fit within a client portfolio.

Acquiring Loans

AlphaFlow purchases loans from lenders; private money and bridge loans that are sometimes called hard money loans. The company talks to lenders who provide these kinds of loans to borrowers. The lender has a direct relationship with the borrowers and knows them well.  This pool of lenders has little interest in the technology or the analytics where the algorithms are or the investment management style around which AlphaFlow operates. Rather, they look at AlphaFlow as a partner that is creating a secondary market for the loans they originate. From AdaPia’s perspective, she looks at the lenders from the perspective of how they underwrite, how they manage, how well they know their market, how well they understand their borrowers.   Ultimately, if AlphaFlow is purchasing the loans they are taking on the risk. Consequently it is extremely important to understand the process of how a lender underwrites and truly who are they lending to.

Robo Advising

The AlphaFlow model involves implementing a complex algorithm on their portfolio to create optimal investment strategies for clients and investors.  It can be easy for somebody to mistake what they as robo-advising.  Certainly, this is what some of the big guys like Vanguard and Schwab are doing.  They take certain principles of rebalancing and asset allocation and even tax loss harvesting and automate investment strategies around them. When you invest in one of these kinds of portfolios, you fill out a questionnaire about your risk tolerances and goals and capital available, amongst other things. This is often a big questionnaire at the beginning of the process. Then, when it comes time to invest your money, the process is basically constructed for you to allocate assets across your portfolio automatically. This is where the ‘robo’ comes in; there is no human interaction in terms of putting the whole thing together. It is not a financial plan. It is a portfolio of investments robotically compiled which is not the way AlphaFlow operates.

The Algorithm

AlphFlow has a team of very experienced portfolio managers who are actively working with lenders to identify deals and who also actively manage the selection and purchase of the loans that are purchased. These folk are highly skilled and actively management the real estate portfolio that AlphaFlow acquires. They utilize a suite of data analytics – for which they have attracted venture backing that is used to continue to build out the tools that enable portfolio managers to make better decisions, to better understand the markets, and to better underwrite the loans on properties in their portfolio.

When an investor makes an investment, let us say they put in a minimum amount of ten thousand dollars, within a few days it gets spread across 80 to 100 loans across the AlphaFlow portfolio which is constantly rebalanced  on a daily basis. Rebalancing is done with the company’s proprietary algorithm.  This is where the idea of a robotic function comes in; on the back end where AlphaFlow has some sophisticated principles at work terms of rebalancing money to optimize the investors’ portfolio according to individual risk tolerance.

At a basic level, AlphaFlow adopts a moderate risk profile portfolio wide where loan to value, being the most recognized indicator of risk, does not exceed 75 percent of the total weighted average.  No loans are purchased from borrowers who are first time borrowers because experience is so massively important. Instead, loans are acquired from borrowers who have worked with a lender multiple times, and who has a good track record of paying back

Fees

AlphaFlow charges a 1 percent asset-under-management fee (AUM). There are no performance fees but they do have a right to charge other fees which could arise should a loan go into a default scenario.  These fees would cover legal proceedings and things like that.

Tech Meets Real Estate

In thinking about real estate and technology, Zillow and Trulia are real estate companies truly centered in technology.  There are also leasing technologies, and agent technologies, and then there is this real estate investment technology from which crowdfunding companies emerged as a result of the JOBS Act.  This Act made it possible for companies to seek funding from individuals at scale using the Internet. 

Client Base

Currently, AlphaFlow only accepts investments from accredited investors, but they also are seeing some institutional activity, interest from financial advisers and registered investment advisers and from family offices. They even have an endowment investing in the platform. The company does not offer a liquidity option so it is not, as yet, possible to trade invested funds although they are looking at ways to configure the platform to solve that problem.  As a result, investors must basically leave their money invested for the duration of the loan which, for the most part, is a 12 month term.

Looking Ahead

Certainly with housing prices going up, margins for borrowers have been coming down in certain markets but globally, and not every market in the U.S. has peaked. AdaPia sees that some are just getting started. There are still pockets of opportunity having the expertise and the insight and the foresight into those markets becomes really important.  AlphaFlow only looks at the markets that they have identified as being risk mitigated. Some of the data that they look at as is really based on historical pricing of the underlying asset.  Part of their analytics suite allows them to look at the worst-case scenarios. They stress test markets against the worst housing market downturn – which as everyone knows was the 2008-2010 market. 

That said, AlphaFlow looks at a 25 year period to identify the worst the market got and that is where they are basing their comfort level on the loan to value. Ultimately you have to look at every loan from the worst-case scenario which is that they may have to own that property at some point and sell it. That is why they are looking at what the lowest price was in any 12 to 18 month period over the last 25 years. From this they gain a different understanding of in the worst case and what they can sell it for and in order to recover principal.

The company is more interested in protecting the downside than necessarily in maximizing yield at least for their current moderate risk portfolio. Over time they would like to take on higher risk, higher return portfolios but that is a different game and a different investment altogether. For now their focus is on not losing principal.

AlphaFlow has started with the single family private money loans as an asset management platform. There are many opportunities in real estate and different kinds of real estate investment so ultimately the company wants to take the expertise that they are building in the single family residential space and apply that to other segments of the market. For example, looking at multifamily, or small balance commercial loans, or even potentially looking at equity project and are natural extensions of the current model. As the company builds its reputation and its information database and analytics they expect to look at evaluating other property types and other investment opportunities for investors.

Crowd Funding Real Estate – Intersection of Money, Morality and Justice

Amy has always been intrigued by the intersection of money, morality and justice and originally entered the law profession as a human rights attorney.  Moving to Los Angeles some years ago, she became general counsel of a fledgling company at the time called 'Patch of Land', which is now one of the leading real estate crowdfunding platforms. 

See the Shownotes to this episode here

The company was formed at the end of 2013, when the first of the JOBS Act Regulations became effective.  The key component of the Act is called Regulation D 506 (c), which allows people to go out and raise capital and tell everyone about it. The legal term is general solicitation, but it is basically advertising.  You can raise as much as you want, but only from accredited investors.  Patch of Land started doing deals, and at the time Amy joined there were the three founders and one independent contractor.

Amy’s belief in human rights has evolved quite a bit over the last few years and one of the reasons that she joined Patch of Land was because she was looking for something at the intersection of money and morality.  The company was democratizing access to capital to a class of people that traditionally struggled to get it. Perhaps they were underbanked, but usually they are fix and flip developers, and banks do not lend to them.

For investors she thought that they were democratizing access to investment opportunities that they had never had before. On a personal level, Amy is aware of being female, Asian and relatively young, and that people did not look at her and think "Oh, there's a real estate investor, let me approach them about the opportunity". The best deals usually go to people in an 'old boys' club' - a certain age, gender and race, and they do not look like Amy.

Seeking Efficiency

Her personality has always been geared towards efficiency, and she sees the legal industry as one of extreme inefficiency.  One even incentivized by inefficiency.  She believes that if technology can be introduced into the legal industry then access to justice can be increased, transactional cost for business will come down, and a lot of good can be done.  Today we are in the nascent stage of how tech will affect the real estate industry and Amy sees processes that are inefficient and that could be streamlined and digitized.   She has always looked for ways to do things more efficiently, and being a legal counsel and part of a start-up at Patch of Land gave her a lot of license to reinvent the way practice could be.

Crowd Funding Real Estate Platforms

Every real estate crowdfunding platform is different: some are broker dealers, some are sponsors, others are listing aid companies. Some do commercial, some do equity, some do debt.  The vast majority of real estate crowdfunding platforms have their own standardized forms that they try not to deviate from, because doing so increases the transactional cost.  What usually happens is that the lender will negotiate terms with the borrower, who can then accept them or go to another lender. If they accept the terms, they issue a note and fund the loan, and there is very little negotiation.

On the investor side, when the platform is syndicating the debt out to its investor base there is no negotiation. The first part is about real estate and lending laws, and the second is securities law – you are dealing with investors.  Under these laws, all investors have to be treated equally.

Some Platforms Pre-fund Deals

Each of the crowdfunding platforms do things differently. Some, like Patch of Land, will prefund the loan, and they usually have a credit facility and they get paid back when they syndicate it out. Others will not refund the loan, but will put the terms out to the borrower and then put it out to their investor base for funding of the loan. It is riskier from the borrower's perspective, because it might not be funded.  Sometimes these platforms will decide to make a contribution of capital if a loan is 50% funded, syndicate the debt and then get paid back.

The platforms are not incentivized to invest in bad loans - they want to invest in good ones so that their investors make good returns. When they have their own money in, that says a lot about their confidence in the deal.  We are seeing a trend in crowdfunding as a whole, where if a platform performs a lot of due diligence and is able to curate and choose the good opportunities, the investors start to put their trust in the platforms rather than the sponsors.

An important component of the process today is that now we have the internet and everybody on the Internet talks. For example, real estate crowdfunding investors talk about their investments, and if these are not performing, they warn everybody else. News travels fast online, and people talk when they are unhappy.

From a regulatory perspective, what makes this challenge is that you have got a lot of unsophisticated investors looking at a very sophisticated and complex industry - real estate. Then you are adding the tech layer to it. You may have a great platform with fantastic deals, but if the platform fails, that is another layer of risk that you never had before in real estate.

Real Estate Democratized

An emerging trend is the democratization of real estate crowdfunding platforms, so instead of large, venture capital-backed platforms, we are seeing the rise of tiny real estate companies putting out their own platforms. They are not raising money for other people, but are offering investment options on their existing websites. When someone clicks on this, they are taken to a white label site that has already been built, meaning that the cost of technology to build a platform has decreased. That means that real estate developers are now able to move from getting support from their immediate contacts to involving the local community.

Bootstrap Legal

Amy remains focused on economic justice and efficiency. With the cost of legal counsel so high, any wanting to do a small deal meant that hiring an attorney did not make sense for them.  Instead, they were downloading random legal documents from Google and trying to draft something useable themselves, which got them into trouble.  So much of the USA is powered by small businesses, and they employ a lot of people. And yet there is an injustice when they try to raise capital. They cannot afford to pay for help and when they do it themselves they can structure things incorrectly, which does lasting damage to their business. There are actual cases where start-ups have inadvertently giving away 80% of their company.

Indeed, there is a lot of inefficiency in how law is practiced, and injustice because legal services are priced too high. If we can integrate technology into law, we can bring down the transactional cost of a lot of legal services so more people can afford them, and then grow their businesses and employ people.

Lowering Costs, Speeding Transactions

Starting in the real estate sector, BootStrap Legal is creating software that will automate highly complex legal documents that people need in order to raise capital. These are the legal documents you need for a real estate syndication, real estate private equity fund or a real estate crowdfunding deal. Traditionally, this would have cost anywhere from $10,000 to $25,000, but with Bootstrap Legal the cost is significantly less.

Amy is not only lowering the cost, but is also speeding up the transaction. If you go to an attorney, you would usually wait two to four weeks for the first draft of your documents, but at Bootstrap they are turning them around in 48 hours. This can give real estate investors more time to raise money.

The process Amy is employing at Bootstrap originally was intended to integrate AI (artificial intelligence), but she has found other creative ways to get to where she wants to be.  Amy likes to think of it as 'AI-Lite.'  There are a lot of rules and it is an expert system, but the idea is that the user goes in, and answers an adaptive questionnaire. The system asks what type of regulation they are trying to use and who they are raising capital from and the type of real estate.  Typical clients are real estate syndicators, investors or sponsors - basically anyone who is trying to raise capital for a real estate project.

Legal Counsel for All

Although Bootstrap has started off with real estate, she has her sights set higher. Amy is primarily focused on changing the user experience around how they interact with legal services which currently centers a lot around the attorney.  If it could be centered around the client, everyone would be happier. In particular, moving away from the billable hours system would be better for all. You can make things more efficient by decreasing transactional costs, and clients would be happier. In this way, and through Bootstrap legal, Amy wants to have an impact on creating more jobs and levelling the playing field for all.

Architect Developer

Jonathan Tate runs a small architectural practice in New Orleans, Louisiana that prides itself on its experimental approach and its contemporary aesthetic.  He has been practicing for 20 years now and has always been interested in housing and so that has been the undercurrent of his practice.  He focuses on residential projects across the spectrum whether it is private clients or for a single family house or a multi-family project for affordable housing, and integrates his designs while keep an eye on urban scale issues and urban environments. 

Listen to the episode and read the shownotes here

The last thing Jonathan ever imagined himself to be was as a developer.  He often saw friction between what development and architectural agendas. The first thing that gets compromised often in that process is the architectural agenda and he enjoys the challenge of trying to exercise an architectural agenda while also addressing the developer's imperatives.  This approach afforded him an appreciation from the consulting side of things of what the pressures were and what the general parameters are around development.

Two to three years before embarking on the first regulation crowd fund deal on the SmallChange website, Jonathan found himself increasingly aware of the conundrum of housing in New Orleans.  He saw an increase in housing prices and a sort of inversion that created the consequence where people were, and are continuing to get pushed out basically to the periphery as the cost of housing in the city and adjacent to downtown was getting exorbitantly expensive.  Historic parts of New Orleans are simply unattainable at any decent price point.  Jonathan saw that nobody was addressing this problem, certainly the cost aspect of housing, but also with by taking a closer look at the type of housing that was available. Mostly what he was seeing was renovations of existing housing stock or, if new, then simply a recreation of existing housing stock by manufacturing new homes to look old. Nobody was really offering sort of middle market custom design or contemporary design housing.

Jonathan saw a gap and that is where it started.  In fact, it was by paying attention to gaps in the landscape of New Orleans that the process of finding lots began in earnest. 

Developable lots were either priced way out of affordability range and drove the desire to provide housing to potential buyers that was affordable by design.  The search for workable lots became largely a land play but cheap land in areas of the city that were desirable were hard to find. What Jonathan noticed, however, was an abundance of parcels of land in the city that most people would not identify as being buildable. These nonconforming or small lots or odd lots were being overlooked because most of the folk that were developing housing in the single-family infill space were not interested in them at least initially because they have models for design and aesthetics that do not fit. Jonathan tasked his team with research to locate all this property in the city in areas of the city that they felt that they wanted to engage in.  And then they filtered this list to find the sites that they specifically thought would work for their purposes. 

Starter Home

Their target market for end user was housing catering to first time and last time homebuyers in the middle market price range. In other words, not deeply affordable but not high-end market housing that offered entry opportunities into historic neighborhoods.  These areas were otherwise quickly closing up due to the escalation of housing costs in that kind of inner city areas.  To put that into perspective, a standard housing lot in the neighborhoods that Jonathan was interested in could be $300,000.  The cost of the nonconforming lots, on the other hand, averaged between $30,000 and $50,000 a lot which, of course, has a significant impact on the cost of the finished home.

The approach was successful, and Jonathan now has either under development or in construction or constructed some 17 houses that are part of the starter home strategy.  The two houses that were crowdfunded are two that belong to this whole index of housing in the portfolio.

Tiny House

There has been one notable exception to the spec home formula that Jonathan’s firm generally engages in. They designed one home specifically for an individual.  It was a self-built home i.e. the client built the home himself. The home was designed for a small lot and was designed specifically so the client could understand how to build it on their own. The home stands out because it is the smallest permitted house in the city of New Orleans.  It is only around 192 square feet in size, and, although you could squeeze another square foot or two out of it, it is basically the smallest house that code will allow in the City of New Orleans – and at a cost of around $100 per foot probably the least expensive house in the city also.

Small Change

For the most part, the homes that Jonathan builds under the Starter Home banner are not designed for any one particular individual; they are truly spec housing and the process of developing this direction for the firm was just getting off the ground (or into the ground) at roughly the same time Eve had engaged them about to work with her and SmallChange.  At around that time, the city of New Orleans was auctioning off a number of their abandoned and vacant properties throughout the city, and in that mix, as it turned out, was a number of nonconforming lots.  NPR ran some coverage on Jonathan’s nonconforming lot Starter Home concept so while people were buying these odd shaped lots at auction, his firm was getting some press coverage. The phone started ringing from people who just bought these funny little lots and did not know what to do with them.

The SmallChange project is actually two parcels that are being developed into two individual houses right next to one another. The lots are about 1,200 to 1,300 square feet apiece so though not so small but they are not enormous either, and definitely not a standard lot. The homes that are being built on these lots are just a hair over fifteen hundred square feet each, two floors, with one parking space each.

Eve was aware of the work that Jonathan was doing and met with him during a visit to New Orleans for a conference. Jonathan became fascinated with the mechanism of financing his projects in this novel crowdfunding way because it embodied the spirit of investigating creative possibilities in everything he was doing through his work. It presented a fascinating possibility and they tracked the opening up of Regulation CF in May of 2016.

The Reg CF Process – Developer’s Perspective

The first thing that needs to be compiled is a package explaining the project that you can present to the world basically. In many respects it is no different than a package you might put together and walk to a bank and say, ‘here let me tell you about our project and why you should invest in it.’ The developer needs to be able to tell a story about your project, why it makes financial sense, and needs to be able to talk about him/herself and what their qualifications are for doing the deal.

The first person that needs to be sold on the project at the funding portal, because you want them interested in you, and, of course, as Jonathan used the SmallChange funding portal, that person was Eve Picker. Once that hurdle is cleared, there is a background check that covers regulatory requirements, but a lot of the vetting actually comes through conversations and mechanisms that the portal has in place that says OK I need to get to know these people and know something about them. Because the funding portal is so heavily regulated, there is an imperative to be able to trust the developer, know who it is, and understand exactly what they are trying to accomplish. 

It is the developer’s responsibility to pull the material together that explains the project in all aspects, and it needs to be distilled in some way so that people can understand it in plain English.  There are a series forms to fill out that are required by the Act and the developer generally needs guidance in completing, submitting and uploading these, including Form C, to the Securities and Exchange Commission, the SEC.  Together with SmallChange, Jonathan found himself completing the first Regulation CF offering completed on the platform, so they approached it as a process for which kinks would need to be ironed out. Naturally along the way they were feeling around in the dark in a few places but were able to get through and consequently, the next time around, no matter who that is, the process will be a lot easier.

Marketing

Smallchange has a network of investors that they have developed over the last few years; people who have signed up to newsletters and who get announcements about new opportunities.  It is a pool of people that the portal can immediately send information for any of the offerings. For the most part, Jonathan relied upon SmallChange’s network but they did put a sign out on the site to let people know that there was an opportunity to engage in funding, and they conducted personal outreach and alerted people to the project and the process.

In total it was a three month raise. The first month when it came out, there was a lot of activity with potential investors immediately, and they had a good burst of folks that jumped on board right away.  The majority of these came from Eve's network.  In total it was a $95,000 raise, with a minimum of $40,000 which was hit really quickly, perhaps in that first month.  Then the next month was fairly quiet and dormant. Actually, during this middle period there was not a whole lot of activity and people were investing but it was not the kind of quick pop that the saw at the beginning. And then the third month was really active where they closed the gap on the funding and and made it all the way to the ultimate $95,000 goal.  This final push was largely thanks to an aggressive marketing campaign from SmallChange.

The Investors

Having a large social media following would likely have helped Jonathan with is raise.  If you already have an embedded audience associated with you that you can reach out to then that is probably the best platform you could have starting out with. For sure there are certainly people familiar with his work but it is not like he sends out e-mail blasts to thousands of people every month. If you do, this could be helpful in conducting a Regulation CF raise.

Jonathan has an investor that he works with all the time and with which he really enjoys working, but the opportunity to pursue the crowd funding option was one that allowed him to broaden what he was doing.  Furthermore, his own investor network is limited and frankly is not a big pool of investors or friends and family that are willing to give money to him and yet from the SmallChange raise he was able to find an additional 38 investors with whom he can now work.

Smallchange itself is essentially a host to an offering and that is it. When the offering is done they close up and then it is up to the developer to manage the rest of it.  The Starter Home investors come from all across the country, with concentrations on the coast and as far out as Australia. There are only three people from New Orleans that participated in the offer.

Surprise

What Jonathan found most captivating about raising money through SmallChange and Regulation Crowd Funding was watching the process evolve and seeing how people found it and decided to participate. He actually had an investor that was ready and actually had been keen to invest the entire $95,000.  He was the person who helped with the first Starter Home project and was interested in anything else Jonathan was doing. He thought Jonathan was crazy to be raising only $95,000 through the crowd funding process rather than just taking a single check from him.

But for Jonathan, the process has not been burdensome at all, and in fact he says that it has been quite pleasurable and intriguing and worth a lot beyond just the capital raise because of some really incredible conversations that have resulted. He feels comfortable recommending Regulation Crowd Funding and SmallChange to people who might be interested in it.  What he particularly likes about it is that it raises awareness of his work in and around different scales of communities.  If you are doing socially minded or urbanistically minded projects, whatever you name, if there is an agenda around your work then crowd funding is a great platform for people to both to see your work and to be able to contribute and help support it.