Crowdfunding, CrowdFunder of The Year, Jilliene Helman

CrowdFundBeat Honors Real Estate ‘Mogul’ with Crowdfunding Award,  

By Robert J. Mullins , CFB Senior Staff  Writer,

Jilliene Helman has discovered the power of using crowdfunding to open up the market for real estate investments. As the co-founder of Realty Mogul, along with partner Justin Hughes, she has already completed multiple deals across the country in just eight months of fulltime operation.

For her success and for her advocacy on the subject from appearances at several crowdfunding conferences, CrowdfundBeat is awarding Helman its CrowdFunder of the Year Award for 2013.

In an interview with CrowdFundBeat Senior Staff Writer Robert Mullins, Helman discusses the new U.S. Securities and Exchange Commission (SEC) rules on crowdfunding by accredited investors, coming new rules on non-accredited investors and the philosophy behind Realty Mogul:

Jilliene Helman: The hypothesis that we’ve been operating under is really twofold. On one side, there’s an economic opportunity for investors to invest in real estate and make money investing in real estate and generating income. So all of the transactions that we do generate cash flow for our investors. We’re looking for opportunities to get dividends back to our investors, directly back into their bank accounts. Then the other hypothesis for starting the company was the political rationale. The JOBS Act passed through Congress last year and while we still don’t have final regulations on Title III, which is for non-accredited crowdfunding, there is a huge market of accredited investors that has been largely untapped. You look at the number of accredited investors in private placement in 2012 and it was less than 40,000 accredited investors out of 7 or 8 million. So we thought that there’s this political opportunity where people are going to be more comfortable investing through the Internet and we took that economic opportunity and that political opportunity, put them together and out came Realty Mogul.

Robert Mullins: You said in an article that “crowdfunding was revolutionizing capital formation in real estate.” What changes with crowdfunding?

Helman: I think the biggest things are access to deal flow and access to capital. When it comes to deal flow, millions of investors have never had access to deal flow, historically. There’s been no simple way to get them access to that deal flow. Now that you have the Internet and have the ability to transact online, we can open that up to millions of investors all over the world. So the access to deal flow is huge. And the flip side is access to capital. You have these real estate companies who historically were working with the banks, investment banks or the other established players to get capital, but they didn’t have a base of thousands and thousands of investors that they could go to. And that’s where we are. We’re a conduit in the middle and that’s what I think revolutionizes this market.

Mullins: The SEC has approved regulations for accredited investors but the regulations for non-accredited investors won’t be finalized until sometime in 2014. What are your concerns about what the final rules on non-accredited investors will be?

Helman: The rules for accredited investors allow for general solicitation as long as the investors are validated. I think the SEC gave pretty decent guidance on how to accredit those investors.

It’ll be interesting to see with the Title III rules [on non-accredited investors] how they come down on doing simultaneous [fund] raises with accredited and non-accredited investors. It looks like they’re going to deal with that in a way that’s favorable and we’re looking at that very closely.

Mullins: What kind of deals have you done so far at Realty Mogul?

Helman: We crowdfunded what we think is the first shopping center in the country, maybe in the world, in Monterey, Calif. We have some top-tier tenants such as Safeway, CVS, Subway, Starbucks, McDonald’s and it was a great opportunity to allow investors, again going back to this nucleus of access to deal flow, many of whom never had access to that type of deal flow.

We own a 267-unit apartment building in Texas, we own a couple of assets in the Kansas market including a shopping center in Lenexa, Kansas, we own a host of single-family homes in the Tennessee market. We’ve done a variety of interesting transactions.

Mullins: Are you seeing competition from other crowdfunding real estate ventures?

Helman: Real estate is a really big space. Real estate alone is a $17 trillion business so there are going to be numerous people who will take to the Internet to raise capital for real estate.

At the end of the day I think it’s going to be about performance. We are really proud that eight months in business, we’ve already distributed over $600,000 back out to investors in distribution and principal payments. We really focus on cash flow. The need that we serve is generating income for investors, generating cash flow and also potentially investing for appreciation and longer term investments.

Mullins: How did you get into real estate in the first place?

Helman: I grew up talking real estate around the dinner table. My mom’s been in the real estate industry for decades, my father owned commercial and industrial projects. My grandfather built properties in the Los Angeles market, so I really learned my real estate chops from the dinner table.

UC Berkeley to hold research conference on crowdfunding

UC Berkeley to hold research conference on crowdfunding

Startups Take Mixed View of Crowdfunding at Stanford

CrowdfundBeat – Robert J. Mullins – Sr. Staff  Writer,

September 16, 2013 - Stanford University has created a nonprofit startup accelerator called StartX with a $3.6 million grant, as well as a separate fund, Stanford-StartX Fund, to actually invest in emerging companies. But StartX organizers and some of the startups themselves see a limited role for crowdfunding in nurturing these fledgling businesses.

Crowdfunding certainly helps to develop a prototype of a physical product or to demonstrate some market validation for a company, but here in Silicon Valley, funding from angel investors or venture firms shows a startup is better qualified as a viable business than one that just asks for contributions online, said Cameron Teitelman, founder and CEO of StartX.

“In Silicon Valley, if you crowdfund instead of taking money from angels, then it’s a negative signal,” said Teitelman. “They’ll be like, ‘Why didn’t you raise from angels? Could you not raise from angels and you need to get money from random people?’” Teitelman said.

Teitelman presided at a StartX event Sept. 12 in Palo Alto, Calif., where 11 startups that grew up within StartX presented their business models to potential investors. It was also a kind of graduation ceremony for companies that worked within StartX over the summer. StartX is supported by Stanford University as well as Stanford Hospital & Clinics because some of the startups are medical related. StartX mentors advise more than 300 entrepreneurs– including Stanfod undergraduates, graduate students and alums — in the development of their businesses.

While the emphasis at StartX is on angel investment and venture funding, a few of the companies have also done some crowdfunding.

“We have sought crowdfunding in the past and will do it again in the future,” said Adam Kell, co-founder of FlameStower, maker of a device that uses flame, such as from a campfire, to recharge a cell phone much like you would use a solar-powered device for recharging.

“The concept is called thermal electrics so it basically does the same thing for heat that a solar cell does for light,” Kell explained. “You can cook a pot of rice and charge your mobile phone at the same time. “

FlameStower raised a small amount of money on Indiegogo to create a prototype and build 50 models of the devices that were used for beta testing, he said. The company is next planning to raise another round through Kickstarter to gear up production. The company is currently pursuing market opportunities in North America and Europe with an eye on expanding into Africa and India.

While embracing his crowdfunding strategy, Kell knows that crowdfunding is no guarantee of success.

“There have been a lot of crowdfunding successes where people haven’t necessarily built the strongest businesses. StartX has been really good about facilitating along the path of building the business,” he said. “I think having product out in the world proved that [FlameStower was] not just thinking of a neat idea.”

But others in StartXconsidered crowdfunding but decided against it.

TangiblePlay is a startup that takes popular board games and creates a video game version of it. At the Sept. 12 event, it demonstrated a version of Hangman on an Apple iPad. With the iPad sitting in a holder, the iPad camera watches tiles with letters of the alphabet tossed down in front of it. If the letters are in the word the player is trying to guess, they pop up on the iPad display.

It’s been said that crowdfunding is better suited to business-to-consumer products than business-to-business ideas because the average investor can understand the B2C concept. But Jerome Scholler, founder of TangiblePlay, thinks there are limits to how far crowdfunding can take a business.

“What’s happening with crowdfunding is that you put a project out there and even if you have a very successful project funding, it’s very hard to convert that excitement into a real business,” said Scholler. “So what we try to do first is create the business and maybe use crowdfunding to really market it but not as a founding platform.”

TangiblePlay used angel investing to develop the product to the point where it could demonstrate it at the StartX event. It is using seed money to scale the business to where the product can go into production. It may use crowdfunding at some point to launch the product onto the market but that remains to be seen, he said.