When participants in your Series A round include past investors and noted alt-fi backers, you know you are doing something right.
That is where online commercial real estate platform Asset Avenue finds itself at the conclusion of its $11 million Series A funding round.
DCM Ventures led the round. They have invested in more than 250 technology companies in the United States and Asia, including student loan platform SoFi and have north of $2.5 billion under management.
Asset Avenue CEO David Manshoory is excited about the collaboration with DCM.
“DCM is bullish on alternative lending,” Mr. Manshoory said. “They are passionate about what we are building and they believe in the size of the opportunity.”
DCM General Partner David Chao will serve on Asset Avenue’s board. “He’s seen a lot and is a great investor,” Mr. Manshoory added.
Matrix Partners and NetEase, lead investors in Asset Avenue’s 2014 seed round, also participated in this round.
When looking for a capital raise, there’s an art to the where and when, Mr. Manshoory said.
“Every single raise requires you hit a certain milestone in the company,” he explained. “A seed round is different than a Series A and inherently diff than a Series B and a Series C and a Series D until you go public or get a buyer.”
“Leading up to the Series A our goal was to get initial market validation, which we quickly did with institutional investors.”
The groundwork for Asset Avenue’s rapid growth was laid early on as the founders began building the team.
“We were very thoughtful about team building in technology, marketing, and the real estate finance team,” Mr. Manshoory said. “The strength and experience of those individuals allowed us to build a solid foundation.”
Given this is his third company and the second raising $11 million in precisely 15 months, Mr, Manshoory knew what to expect coming into this Series A, which he said took 10 weeks from start to finish.
The venture capital community remains interested in the space – as are traditional financial service entities. The community was interested enough that the round was oversubscribed, Mr. Manshoory said.
“The number of non-tech VC investors that wanted to get in was overwhelming but a pleasant surprise,” Mr. Manshoory offered. “That to me is an indication of the validation this is bringing to the market.”
“Based on what I heard and saw at LendIt we are still in the early stage on a national level,” he said. “P2P is still not in the mainstream. If you asked 100 people on the street what it is the majority would look perplexed, but in the industry the growth is fascinating both from investors and from those seeking financing.”
“The financial services industry and the credit industry is so large that even Lending Club being a public company and Prosper being as big as it is and OnDeck going public and talks of SoFi going public, and it is still not mainstream.”
“That’s how small the industry still is relative to the magnitude of the market opportunity.”
Mr. Manshoory said he was “taken aback” by how quickly peer-to-peer lending has grown in China and how mature the industry is.
“They are years ahead of the U.S. in terms of P2P largely because there are so many people there. The capital coming into their platforms is largely from individuals. It is the opposite here.”
Mr. Manshoory said U.S. real estate investors are more interested in debt than they are in equity, with the reason being they want to invest in a fixed income product they can lever or securitize. Debt naturally plays well to those while equity does not, he said.
He is also suspicious about the hype around Regulation A+.
“I think it’s more shine and dazzle than practicality,” he said. “I don’t know if it’s going to have the impact that most people are thinking, at least in real estate.”
“Crowdfunding is great for verticals. Fifty thousand for a business to get up and running is a big deal. That is nothing in real estate let alone a million.”
“Given the regulatory constraints I don’t think it is providing a flexible alternative of capital for the unaccredited investor market. We’re not really holding our breath.”