The power to determine the future and what the real estate industry looks like is being put back in the hands of agents, as more and more Aussie PropTech companies turn to crowdfunding.
We sat down with Market Buy Chief Executive Officer, John Hellaby, in the lead-up to their next funding round to ask why crowdfunding is becoming more popular among start-up and scale-up businesses.
So John, why are Aussie PropTech’s turning to crowdfunding?
The short answer is that there are a lot of road blocks to the traditional sources of funding in Australia, a lot of hoops to jump through and even then you could tick all the boxes and not get funded.
Crowdfunding opens up a direct connection between a business and its market, allowing agents to own a piece of the products and services they use in their business every day.
This in turn allows PropTechs the opportunity to truly challenge the status quo.
An opportunity that may be denied them under traditional models, if challenging the status quo, is a threat to the controlling interests in our industry.
Why do you think this appeals to agents?
They get to own a share of the company that is making the tools they rely on.
It creates a wonderful connection between the agent’s success and the success of the product.
I think at a fundamental level, you want to invest in something that you see the use and value in.
If you’re investing in a product you use in your business, you see its value and that has strong appeal.
Is this why Market Buy is considering a crowdfund?
Absolutely, we have always been, “By agents for agents” and we have seen massive support from the agents in our industry.
It makes a lot of sense that agents should own a piece of Market Buy and have a say in the future of their industry.
Have Aussie PropTech’s crowdfunded in the past?
There’s been some incredible success stories in the PropTech space with crowdfunding and there will continue to be within this space.
Instarent recently raised $333,796 from 177 investors, Listing Loop raised $524,221 from 167 investors and there’s plenty more examples.
Why is crowdfunding gaining popularity?
We’ve seen a massive shift away from the status quo over the past 10 years and much of that shift has been to put the power back in the hands of the people.
We’ve seen cryptocurrencies and crowdfunding take off because they put the power of change in the hands of the market and the market has shifted at a faster rate than the traditional institutions across the globe.
I think there’s a real shift in the dynamics of funding for anything occurring at the present point in time and it’s an exciting opportunity for PropTechs and agents.
How does crowdfunding work?
To crowdfund you need to go through a licensed crowdfunding platform, such as birchal.com and there is legislation in place to govern how it must work and the relationship between the company and the investors (the crowd).
There are also certain limitations in place to protect retail investors – for example retail investors can only invest up to a maximum of $10,000, unless they can qualify as a wholesale investor and the legislation specifies how that qualification happens.
There are a number of rules and regulations around it, but the licensed crowdfunding platform will often help PropTechs navigate that.
Why would a PropTech crowdfund rather than seek traditional investment?
Speed and agility.
The process of acquiring traditional investment is often an elongated and convoluted process and we live in a world where the market can shift in days, not months.
PropTechs need to be nimble and having the ability to raise funds quickly, from a group of avid supporters, gives them an edge to respond to those market changes far quicker than larger companies relying on traditional funding and the caveats that come with it.
This allows a PropTech to pivot quickly and support agents at a far higher level during heavy growth periods or volatile markets.
Does this mean the end of traditional investment?
Industry-based investment has its merits and opportunities and is still a staple for PropTechs.
The advent of crowdfunding provides an alternative or a complement to the funding options traditionally available, and it gives a PropTech options when it comes time for their next funding round.
Would Market Buy take on traditional investment?
Of course, and we have in the past. We will in the future.
The reason crowdfunding is being seriously considered for our next round of funding, is that with our expansion into the US market, it is the perfect time for us to fulfil a goal we’ve had since day one and that is to be, in some part, industry owned.
If Market Buy does launch a crowdfund how do people get involved?
At this point, we’re considering all our options, but you can be kept in the loop and be the first to know when and if we crowdfund by visiting www.marketbuy.com.au/crowdfund and registering your interest.
With any crowdfunding investment, always consider the general CSF risk warning and offer document before investing.