Real Estate Crowdfunding Portal Raises Money Via Wefunder
Small Change CEO Eve Picker Highlights Social Impact Inherent in Regulated Investment Crowdfunding
Devin: What do you think of as your superpower?
Eve: My superpower is when someone says “no” to me, that just makes me go harder. Seriously, I have incredible stick-to-it-iveness. My superpower is endurance.
Eve Picker, CEO of the regulated real estate investment crowdfunding portal Small Change, has put the shoe on the other foot. She’s raising money for Small Change on Wefunder. (Full disclosure: I’ve already committed funds to Small Change.)
Meet Small Change
“Small Change is a real estate crowdfunding portal, which means that we are registered with the SEC and members of FINRA, and we can use a pretty new securities rule called Regulation Crowdfunding, which permits anyone who’s 18 and over to invest,” Eve says.
“We focus on real estate projects with impact—with a mission,” she says. “Small change is amazing because we’re tackling projects that I think will make cities better in so many different ways.”
The impact goes beyond the obvious, she says:
What I love about what we've done and what's happened over the last couple of years is that not only are we supporting projects in disinvested neighborhoods and building net zero buildings and things like that, but we have had a groundswell of emerging developers come to us, and at this point, we have almost 60 percent of our developers or issuers are minority and or women, which I think is staggering given the very old white boy club that the real estate industry is.
The projects on Small Change are also profitable. “The projects that have gone full cycle that raise money with us have averaged about a 12 and a half percent internal rate of return, which is a great record,” Eve says.
Raising Capital on Wefunder
It seems odd for a company to raise capital with a business that could be considered a competitor. It feels a bit like a Chevy dealer selling brand-new Ford trucks.
Eve explains the regulatory environment that requires this practice. “The reason we’re raising money on Wefunder and not on our own platform is that under Regulation Crowdfunding, we can’t have an interest in any project that is on our platform.”
That prohibits a portal from offering shares on its owned portal. Small Change isn’t the first, nor will it be the last, to raise money using a competitor’s site.
Unlike crowdfunding sites like GoFundMe that collect donations, or sites like Kickstarter and Indiegogo that pre-sell creative content and other innovations, regulated investment crowdfunding sites sell investments. Many structures are used, from debt to equity, with hybrid solutions like convertible debt being common. Simple Agreements for Future Equity are often used, too.
Regardless of the instrument used, the entrepreneur or business raising money is issuing an instrument designed and intended to provide a financial return.
Small Change Project Example
Small Change has hosted a variety of projects across the country since Eve launched the site. She shared a profile of a pair of developers in Oregon raising money on Small Change today.
I hope some bankers are listening.
We have two gentlemen who are black, who have purchased a building in Portland, Oregon. They are world-class artists. One of them works for a sports franchise and designs their uniforms and does other work. The other is an astounding photographer who has had clients like National Geographic and Fortune 500 companies.
They decided that they wanted to create a creative hub in downtown Portland. With the help of a seasoned developer, they found a building and purchased it. The purpose of it is to create a meeting place for other people who look like them.
They say they really have nowhere else to go, and they want to create a place where they can have gallery shows, where they can play music, where they can have rental studios for people so that there's a little hub of activity for people who— at the moment—don't have anywhere to congregate.
What almost makes me want to cry is when they talk to me about how difficult it's been for them to find a bank loan. I don't want to believe it's racism. But on the other hand, I have to believe it's racism because they've been to a dozen banks with a very professional-looking business plan which had their images in it. Once they took the images out, the bank started talking to them.
Eve’s seen it before from her own experience as a developer before launching Small Change—providing some motivation for it.
As a woman developer, I go back in my mind over my career, and what I encountered. No one ever said to me, “I'm not going to lend you the money because you're a woman.” But I am certain that I was stopped in many ways because I am a woman. And I'm certain that many minorities are treated the same way.
Crowdfunding is different. By enabling people to raise money from their own community, underrepresented entrepreneurs see greater success. “Crowdfunding at least provides a place where people are thinking a little more equitably—a lot more equitably. Certainly, the statistics in Crowdfunding are quite different than in the VC world or the real estate world,” Eve says.
Still, she points out, the crowdfunding space is a tiny part of new venture and real estate finance. That underlines the long-term potential for growth.
In her work, Eve leverages her superpower of endurance.
How to Develop Endurance As a Superpower
Eve is proving the power of endurance for both financial success and impact.
She says, “I have developed very strong ideas about who I am and how I think the world should be, and it’s very difficult for me to pull myself away from that. This is sort of part of my DNA.”
“I dot my Is and cross my Ts,” Eve says. “So when I do a project like Small Change, I’ve thought it through.”
She shared an experience from her time developing real estate to make the point.
For example, I built a loft building in downtown Pittsburgh; it was actually the first loft in downtown Pittsburgh. At the time, I was really stunned when a banker told me, “Oh, honey, no one’s going to live downtown.” I thought, “What have you been reading? This is not rocket science. All over the world, people are moving downtown.”
I must have looked to him like a crazy person. To me, it seemed absolutely sensible. So, if someone says to me, “No, you can’t do this,” and I’ve really thought it through, I’m going to dig in.
That story highlights a critical insight for developing similar endurance. She says, “If I’d listened to all the no’s, then none of this would have happened.” Regarding the naysayers, she says, “Another superpower I have is not listening to people, which some might think is bad, but I think is actually good.”
In other words, her take on the old saying that “people who say it can’t be done should stop interrupting those who are busy doing it” would be “people who are busy doing it should not be distracted by people saying it can’t be done.”
By following Eve’s advice and example, you can develop endurance as a superpower, enabling you to do more good in the world.