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Investment Platforms and Marketplaces

Feb 21 2021

Real Estate Investment Platform Fundrise Explains how Long-Term Net Return Is Most Appropriate Way to Measure their Performance for Investors

Fundrise, a real estate investment platform using Reg A+ to provide access to “eREITs and eFunds,” notes that it’s hard to imagine a single person or industry who may have been left untouched by the unprecedented events of 2020 (following the COVD-19 outbreak).

Fundrise is “no different,” the company acknowledged. While it has always been one of their “deepest-held” convictions that they need to make preparations for the unpredictable as though it were “inevitable,” the events of the past year were “beyond anything we could have imagined,” Fundrise admitted.

Because of these events, 2020 proved to be the “truest test to date” of the Fundrise platform, the “durability” of the business model they’ve developed, and the overall quality of our preparation, the company noted.

They also mentioned that at the end of the day, net return (over the long term) is “arguably the most appropriate way to measure our performance for investors, and given that last year saw the worst real estate downturn in over a decade, we are once again encouraged by the resilience of the portfolio.”

The company confirmed that the net Fundrise platform return was around +7.42% for the year, in comparison with about +20.95% for the stock market (as measured by the Vanguard Total Stock Market ETF) and -4.72% for publicly-traded REITs (as measured by the Vanguard Real Estate ETF).

The Fundrise team added that although they view these results as “further validation” of their direct-to-investor, “technology-enabled,” long-term approach, a single number “feels lacking in its ability to paint a full picture of all that transpired.” They also noted that as they take this time to reflect and evaluate their work, they’re hoping that by providing transparency into their decisions and actions, their investors stay well-informed and “clear-eyed” regarding what to expect from Fundrise moving forward.

The Fundrise 2019 year-end letter to investors (Jan 16, 2020) had noted that “some may call this approach too conservative, but our belief is that the investors who have achieved consistent success spanning multiple decades tend to spend more time protecting against the downside than they do regretting the upside they may have missed.”

Fundrise confirmed that they began the year in “awe” of a stock market that “seemed further and further disconnected from reality and concerned about what we felt was a general bubble forming across many different asset classes.” That’s why they’ve focused their attention on reminding investors of “what they could expect in the event of a sudden market downturn, as well as building out investment strategies” that they think are sustainable through “substantial near-term headwinds as a result of having strong long-term fundamentals.”

The Fundrise market report, published on February 12, 2021, noted:

“Similar to the stock market, the real estate industry was experiencing a K-shaped recovery where some asset classes, such as suburban apartments and industrial logistics facilities, were actually seeing increased demand due to the impact of the virus, as well as improved financing due to lower overall interest rates. Meanwhile, urban apartments, retail centers, office buildings, and hotels were all struggling to survive dramatic decreases in demand.”

The report continued:

“Unlike the stock market, distressed real estate assets were not ‘repricing’ — in other words they were not available for purchase at 30% less than their previous price. In fact, given that such assets would likely be priced lower by the market, most were not being offered for sale at all. Instead, as is logical, they were being held onto by their owners in a state of limbo as lenders and banks offered temporary forbearance.”

The report added that when faced with “fewer overall opportunities,” and in many instances assets that “arguably had yet to price in the impact of the pandemic on their operations, we chose to remain patient.” Fundrise also mentioned that they “generally held onto cash instead of deploying into overpriced assets,” and when they did actually engage in transactions, they mainly focused their acquisition efforts on those “same strategies” that they felt were well-positioned to “succeed over the long-term, regardless of near-term pricing inefficiency.”

While the 7.42% return recorded last year represents the weighted average performance of around 150,000 unique Fundrise investor accounts (as one figure), it “fails to capture the nuance of both what drove those returns, and how those returns were distributed across our increasingly large and diverse investor base,” the company explained.

They clarified:

“Our managed funds, which together make up the Fundrise portfolio, ended the year with approximately $265 million of cash on hand, which represents approximately 20% of the roughly $1.3 billion of collective equity. And while much of that is to be invested over the coming months (we ended the year with more than $350 million of deals under contract and expected to close during the first half of 2021), holding that amount of cash does serve to lower returns in the short run.”

The Fundrise report added:

“Although not representative or indicative of any actual or potential net performance for our investors, if one were to calculate the same income and appreciation earned from our real estate investments last year against a denominator which approximates historical cash levels, it would yield a hypothetical return much closer to our historical average platform performance.”

Fundrise notes that much of this success may be due to them consistently maintaining a “disciplined value” investment approach, led by their “most active strategy” of investing in affordably priced apartment communities in “growing cities throughout the Sunbelt.”

The Fundrise team concluded:

“In this coming decade, we believe that the application of technology will be transformative to real estate, one of the last old-line sectors still largely undisrupted. As a company built on the synthesis of real estate and technology, we believe we are uniquely positioned to help bring about that change, transforming operating costs, leveraging data more effectively, and challenging status quo practices — all for the benefit of our investors.”

Source

Written by bizbuildermike · Categorized: Crowdfunding · Tagged: 2020, 2021, acquisition, Banks, bubble, business, Cash, Cities, company, Conservative, coronavirus, covid-19, data, deals, ETF, Event, events, fundrise, hotels, Interest Rates, Investing, investment, Investment Platforms and Marketplaces, Investments, investor, Logistics, market, market performance report, Model, more, other, outbreak, pandemic, portfolio, property investments, Real Estate, Reg A+, report, research, retail, return, returns, stock, stock-market, sustainable, Technology, Transactions, upside, urban, view, work

Feb 20 2021

SME Lender October Confirms that French Government has Extended State-Guaranteed Loans Program to June 2021

European online lender October notes that in March 2020, the French State had announced a package of €300 billion in State-guaranteed loans (PGE) in order to support small and medium-sized enterprises during the COVID-19 pandemic.

Following the amendment voted on in April 2020, lending marketplaces like October had been eligible or qualified to take part in these French state-guaranteed loans schemes and were offering state-guaranteed loans to qualified borrowers.

Since the introduction of the first state-guaranteed loan on October’s platform in June of last year, 68 French state-guaranteed loans were reportedly funded by institutional and retail lenders for “a total amount of €13,167,000 and new loans will be granted in the coming months, following the government announcement to extend the guarantee program until June 2021,” October confirmed in a blog post.

In December of last year, the French government had also announced a modification or change to the repayment scheme for these initiatives. Companies or businesses that would like to delay the capital repayment of their state-guaranteed loan are now able to request a 1-year “additional deferral to their creditor, who will choose to grant it or not,” the October team noted.

While commenting on the initial repayment scheme, the October team explained that the state-guaranteed loans are different from the standard loans available on their platform. The characteristics of these loans (for instance, the duration, interest rate) have been “set by the French government,” October confirmed.

They also noted:

“French state-guaranteed loans are initially 12-month deferred loans with payment of interest (2%) and principal at the end of the loan. However, what makes the state-guaranteed loan unique is that the borrower can decide to extend their loan after the first 12 months, with a higher interest rate.” 

At the conclusion of this period, the borrower has the following options: loan fully repaid after 12 months; duration extended after 12 months with no capital repayment; duration extended after 12 months with partial capital repayment (Note: for more details on these options, check here.)

While discussing the new repayment scheme, the October team noted that following an announcement from the French Ministry of the Economy and Finance (on December 14, 2020), all firms that had been issued a state-guaranteed loan (regardless of their activity and size) may apply for “an additional one-year deferral to start repaying the capital of their state-guaranteed loan.”

October’s management further noted:

“If a borrower wishes to extend their loan, they can now ask October for the extension of the deferral period for another 12 months, during which the company would repay only interest every month, followed by an amortization period of up to 4 years, during which the borrower would repay both capital and interest (i.e. the maximum duration to fully amortize the loan remains 5 years).”

They also confirmed that the interest rate “applicable during the additional 12-month deferral period is between 3.71% and 4.91% depending of the project rating.”

They also mentioned that when applying for the extension of the deferral period, the borrower will have to “indicate whether they will repay their loan immediately at the end of the deferral or whether they will spread the repayments over several years (in that case, they will also need to state the duration of the amortization).” If the company “decides to spread the capital repayment after the extra deferral period, the loan will be repaid through annuities, with an interest rate comprised between 3.71% and 4.91%.”

The October team clarified:

“Contrary to the extension of the amortization period for a period of 1 to 5 years, this extra deferral period is not granted automatically. October will study the applications on a case-by-case basis and will verify the company’s need to request the extra deferral period by requesting additional documents, studying the impact of Covid-19 on the company’s sector…If the October Committee accepts the application, we will ask the October lenders to vote.”

While commenting on what these changes mean for retail lenders, October noted that if a firm you’ve financed requests the extension of the deferral period for their state-guaranteed loan, then you will be “notified by email and request to vote on the additional deferral period.”

And if the majority of institutional and retail lenders (in volume lent) “votes in favor of the additional deferral period, the extra 12-month deferral will be granted and the company will only repay interest during that time.” The interest rate you’ll get “will be increased.” The new repayments will be “displayed in [the client’s] portfolio, on the Future Transactions tab.” From June 2021 onwards, October confirmed that they would begin receiving “some extension requests from borrowers who were granted a state-guaranteed loan.”

Not all firms may request the “additional” deferral period, but still you should be “prepared in case that happens,” the lender noted. It also mentioned that the platform’s management is available for questions you might regarding this change or update.

Source

Written by bizbuildermike · Categorized: Crowdfunding · Tagged: 2020, 2021, blog, Businesses, company, coronavirus, covid-19, economy, email, Europe, finance, france, Future, Global, government, Investment Platforms and Marketplaces, lending, marketplace lender, more, note, october, online lender, online lending, pandemic, payment, portfolio, retail, small businesses, smbs, SMEs, state guaranteed loans, Study, Transactions

Feb 19 2021

Southeast Asia’s Funding Societies, an Online Capital Formation Platform, Reports S$2 Billion in Business Financing Disbursals

Southeast Asia-based Funding Societies, a digital financing platform, has revealed that it has made S$2 billion (appr. $1.5 billion) in disbursals of business financing to SMEs across the region as the company enters its sixth year of offering loans.

Funding Societies’ management noted that the amount is partly crowdfunded by more than 200,000 retail investors on its platform and has been disbursed through 3.7 million+ different loans.

Funding Societies reported S$ 850 million (appr. $640 million) in disbursals last year, meanwhile, its platform default rate managed to stay below 2% during the COVID-19 pandemic.

In an effort to reduce its portfolio risk during 2020, Funding Societies had tightened up its credit underwriting criteria so that only quality notes would get crowdfunded. The platform also focused on companies that were likely to do well during the pandemic.

These high-performing industries include healthcare, medical supplies, transportation, among several others. Funding Societies reported an 18% growth in platform investors since January 2020.

Big Four auditing firm Ernst & Young’s 2020 ASEAN SME Transformation Survey has revealed that 68% of the surveyed 1,200 SMEs across the six major ASEAN nations (Singapore, Indonesia, Malaysia, Thailand, the Philippines, and Vietnam) are open to doing business with non-traditional lending platforms.

Non-traditional lenders may be appealing because of their greater speed and convenience. Small and medium-sized enterprises may prefer the faster and more flexible loan approval process and the digital know-your-customer (KYC) processes, which usually don’t require asset security or visiting physical bank locations.

At present, there’s an annual trade financing gap of approximately $150 billion in Asia, according to estimates provided by the Asian Development Bank. Around 60% of firms have had their applications rejected when applying for trade financing, the bank noted, while pointing out that these businesses did not proceed with the trade due to the lack of funding.

Kelvin Teo, Co-founder and Group CEO of Funding Societies, stated:

“We’re thrilled to reach this major milestone before we even realised it. It is a momentous occasion and encouragement for us. There is much more to do, as we continue to serve the needs of SMEs and Investors in the region. We’re grateful to raise Series C funding last year, enabling us to further help SMEs even amidst uncertain times.”

As reported earlier this month, Singapore based Funding Societies had announced the expansion of operations into Thailand. The online capital formation platform will operate under a crowdfunding license authorized by the Thai Securities and Exchange Commission.

According to a note from Funding Societies, the company worked for more than a year with regulators to set up operations in the country.

Funding Societies currently operates in Singapore, Indonesia, and Malaysia. Thailand will be the fourth country where the marketplace will operate in its six years of activity. Funding Societies notes that it is the only SME digital financing platform in Southeast Asia to be licensed in four countries.

Source

Written by bizbuildermike · Categorized: Crowdfunding · Tagged: 2020, asean, Asia, Bank, business, Businesses, ceo, Co-founder, company, covid-19, Crowdfunding, digital, digital financing, exchange, expansion, funding, funding societies, healthcare, Indonesia, Investment Platforms and Marketplaces, kelvin teo, KYC, lending, linkedin, Malaysia, milestone, more, note, online capital formation, pandemic, Philippines, platforms, portfolio, retail, retail investors, risk, securities, Securities and Exchange Commission, security, series c, Singapore, small businesses, smbs, SMEs, Southeast Asia, survey, Thailand, the philippines, trade, transportation, us, vietnam

Feb 14 2021

Global Microlending Market Is Projected to be Valued at Over $340 Billion by 2027, with Funding Circle, Kabbage, Others as Key Players

The global micro-lending market is projected to reach a valuation of $343.84 billion by 2027, according to a new report.

The expected increase in adoption of microlending in developing countries may improve consumers’ lifestyle or standard of living. The anticipated shift from traditional lending to micro lending may reduce operational costs and lower market risks, the report noted.

Based on providers, the banking segment held the “major share” in 2019. By region, the market across the APAC area should remain “lucrative” during the forecast period (until 2027).

As mentioned in the report by Allied Market Research (AMR), the global microlending market was valued at around $134.35 billion in 2019 and is on track to surpass the $340 billion mark by 2027 (a CAGR of 12.6% from 2020 to 2027).

As noted in the report:

“High interest on small amounts and shorter repayment [schedules] … by micro lenders [could] restrain the growth to some extent. [But the] adoption of advanced technology in micro financing is projected to create lucrative opportunities in the near future.”

While highlighting some key developments, as they may relate to the Covid-19 outbreak, the report from AMR confirmed that the pandemic led to the shutdown of many micro and small businesses. This has negatively affected the global microlending market, the report added.

It also mentioned that the worldwide pandemic situation also “hampered the cash flow of several business operations, which in turn paved the way for lucrative opportunities for the frontrunners in the industry.”

The AMR report further noted that the Micro Finance Institute (MFI) segment may register the fastest CAGR of 14.0% from 2020 to 2027.

Based on end-users, the small enterprises’ segment represented almost 40% of the total market revenue during 2019 and is projected to grow steadily until 2027 (at least). Notably, the solo entrepreneurs or self-employed segment on track to record the fastest CAGR of 13.9% during the forecast period.

Based on geography, the APAC region generated the “major share” in 2019, garnering around “half of the global microlending market,” the report revealed. The same region is also expected to register the fastest CAGR of 13.0% by 2027. The other world regions analyzed in the report include North America, Europe, and Latin America.

Some of the key market players operating in the microlending industry include Accion International, BlueVine, Inc., Fundera, Inc., Funding Circle, Kabbage, Inc., Kiva, Lendio, LENDR, OnDeck, and StreetShares, Inc.

These industry players have adopted several key strategies such as forming strategic partnerships, expanding or diversifying their products, collaborating with other firms, and launching joint ventures.

As reported recently, New Delhi based SATYA MicroCapital, a microlending firm, secured over $21 million in additional funding.

As covered, Indonesia’s social security program provider, KMSB, has partnered with Logiq to offer microlending services to local residents.

Source

Written by bizbuildermike · Categorized: Crowdfunding · Tagged: 2020, Adoption, allied market research, amr, apac, apac region, Asia Pacific, Banking, business, Businesses, Cash, circle, covid-19, Delhi, Developing Countries, Entrepreneurs, Europe, finance, fintech, funding, Future, Global, international, Investment Platforms and Marketplaces, lending, lendio, lifestyle, market, micro lending, microlending, North America, other, outbreak, pandemic, Products, report, research, Research Report, revenue, security, small businesses, social, Social Security, Technology, Valuation, world

Feb 03 2021

Crowdcube and Seedrs Explain Competitive Reality to CMA in Quest to Complete Merger

Crowdcube and Seedrs are in the midst of a review by the Competition and Markets Authority (CMA) regarding the proposed merger between the two early-stage funding platforms. The proposed merger was revealed in October of 2020. At that time, Seedrs CEO Jeff Kelinsky stated:

“We are both Fintech pioneers that have challenged the landscape of capital raising in Europe, building marketplaces for private equity investment. We believe that you need to be a player of greater scale to serve companies and the investors who support them. Now is the right time to bring our strengths together, in order to meet our common mission to deliver a step change in the accessibility and efficiency within private company investing.  This will not only create value for ambitious companies and their investors, but also for the economies and communities that they serve.  As we look to the future, we’ll be well positioned to build on our combined strengths and create a powerful global private equity marketplace that will transform the ecosystem of equity finance globally.”

Darren Westlake, Crowdcube founder and CEO, added:

“Together with Seedrs, we can accelerate plans to further expand in the UK and overseas, launch innovative new products and improve our customers’ experience.”

Last week, the two securities crowdfunding firms responded to the CMA’s issue statement defending their intent to merge the two platforms warning the regulators that a decision to not allow the firms to combine could create a rather dire outcome.

While the CMA has initially viewed the merger of the two Fintechs as creating a dominant platform in an already small market, the truth may be much different as Seedrs and Crowdcube obviously compete with all private company funding options seeking to entice issuers and investors.

Seedrs and Crowdcube were created as forward-thinking Fintechs leveraging technology to match investors with private firms in a sector traditionally dominated by big money. Incumbents, such as venture capital firms, angel investors, funds, and other online capital formation sites, directly compete in the marketplace to fund early-stage firms. Seedrs and Crowdcube continue to lose money similar to platforms in other markets like the United States. By merging the two, the founders and management hope that a combined firm can more effectively compete in the UK as well as potentially in other markets such as continental Europe and perhaps elsewhere like Asia or the US.

The documents submitted by Seedrs and Crowdcube offer interesting insight into the thoughts of the two platforms that are not only leaders in the UK but are widely watched around the world as the UK was one of the first jurisdictions to legalize investment crowdfunding and thus more mature.

Seedrs believes that if the CMA narrowly defines the industry as investment crowdfunding, at most just one provider will survive and, even then, will struggle to break an event. To quote the document submitted by Seedrs:

“We think it is clear we are competing within all the established players in the SME equity funding (Goliath) rather than operating within CMA’s proposed narrowly defined market of equity crowdfunding ….”

Seedrs states that the merger is the only realistic option to achieve a “sustainable scale.” To achieve a “minimally efficient scale” a platform would need to fund substantially more deals each year that are currently funded by all UK equity crowdfunding platforms combined, claims Seedrs.

“In order to believe that the former of these – that equity crowdfunding is itself a market – one has to believe that equity crowdfunding platforms are competing for an essentially worthless prize.”

Seedrs reports that currently, it competes with around 300 VCs, EIS/VCT firms, and around 20,000 angel investors. They believe this market will grow in size over time but at this moment, Seedrs does not have sufficient scale to turn the corner on profitability.

As well, Seedrs anticipates that a new entrant in the investment crowdfunding sector would cost less than £250,000 and take about 18 months to accomplish and thus the barrier to entry is low – at least to build a platform.

“Broadly speaking, we think there are three types of potential entrants to this segment: foreign equity crowdfunding platforms, investment platforms in adjacent spaces, and established SME equity funding providers.”

Seedrs admits the reality is a bit challenging as:

“… neither Seedrs nor Crowdcube, as the two largest firms in the segment, have yet been able to turn a profit, and we both remaining meaningfully sub-scale. While in early days there was significant optimism in the wider market about the growth potential of equity crowdfunding, our understanding from conversations with a range of other market players is that, in recent years, most knowledgeable observers doubt that there would ever be the potential to make meaningful returns on investment by doing what we do.”

In fact, Seedrs is of the opinion there is no plausible path for the two firms to compete and both emerging as sustainable. In the end, Seedrs predicts that eventually one or the other will run out of money and one may survive or, or worse, none at all. Seedrs describes the state of affairs as being at a crossroads and the merger is the best option to keep things going.

As one may anticipate, Crowdcube is of a similar opinion.

Crowdcube notes that investment crowdfunding is just one segment of the private company funding market and they aggressively compete with VCs and more to list securities in promising early-stage ventures. Crowdcube says the economics do not currently exist to create a sustainable platform minus the proposed merger.

Crowdcube admits that its annual accounts show “significant” losses and does not cover its operating costs. While in lieu of a merger, Crowcube anticipates a “major reorientation of business focus” as well as additional capital. The pivot is not defined.

Crowdfund Insider has long stated that for investment crowdfunding to survive each of the constituent stakeholders must generate sufficient value to thrive. Issuers must be able to raise needed growth capital, investors must be able to generate a positive return on a portfolio basis, and platforms must be able to turn a profit. Foregoing any one of these foundations undermines the sustainability of this sector of Fintech.

As longtime observers of the sector, we are not aware of any early-stage online funding platform turning a profit but we have watched as crowdfunding platforms have iterated and added new services while branching out into adjacent sectors seeking to drive scale. Perhaps a good benchmark is international crowdfunding platform OurCrowd that is a VC hybrid charging a carry while providing access to securities offerings for smaller investors alongside global investors like big-name VCs and family offices. In recent years, OurCrowd has seen institutional money top individual investor participation as it too looks to scale and become sustainable. Bigger deals and more mature issuers are needed as just like any VC the few wins pay for the vast number of investments.

Early-stage investing is not for the impatient nor the risk-averse but it is also critical to creating an innovation-driven economy. New, innovative young firms raise risk capital which is immediately injected back into the real economy creating jobs and teaching skills. Many of these firms will fail but a few will survive and thrive. That is how you get to the next Apple. Crowdfunding platforms have emerged as an important funding venue for private firms aiding in economic growth while broadening access to capital. A combined Seedrs and Crowdcube operation will most likely be better positioned to expand into other markets while adding new services, eventually generating a profit, but that is not forgone conclusion at this point in time until the CMA makes its decision.

Source

Written by bizbuildermike · Categorized: Crowdfunding · Tagged: 2020, angel investors, apple, Asia, business, ceo, cma, company, competition and markets authority, conversations, Cover, crowdcube, Crowdfunding, deals, Economic Growth, economics, economy, Europe, Event, fail, Family, Featured Headlines, finance, fintech, founder, founders, fund, funding, Future, Global, going, international, Investing, investment, Investment Platforms and Marketplaces, Investments, investor, Jobs, market, markets, merger, money, more, Offerings, opinion, other, ourcrowd, platforms, portfolio, Private Equity, Products, return, returns, risk, securities, seedrs, step, sustainability, sustainable, Technology, uk, United States, us, Venture Capital, world

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