Christopher Crippen believes crowdfunding is the future so much he travels the country delivering workshops at little or no cost to students and entrepreneurs, sharing his own experiences in real estate in the hopes of growing the nascent industry.
Mr. Crippen founded the US Residential Asset Fund to capitalize on the opportunities generated as the economy recovered following the recession, with a particular focus on single-family and multi-family properties.
He had previously worked for Fannie Mae and the FDIC, where he led teams that closed 153 banks and sold more than 23,000 properties worth more than $2 billion.
Then Mr. Crippen attended a crowdfunding conference in Las Vegas in 2010 and everything changed.
“I got it immediately and didn’t get how others did not,” he recalled.
But the need for education was clear after Mr. Crippen watched an episode of Shark Tank where an entrepreneur was pitching a crowdfunding idea.
“The poor guy did not even get through his presentation. Mark Cuban lambasted him. He called it a ‘fad’.”
Crowdfunding in all its forms is definitely not a fad, Mr. Crippen said, noting this is reflected in the rewriting of laws originally enacted 80 years ago.
“Congress recognized this change in their first attempt to rewrite the legislation,” Mr. Crippen said.
Under Rule 506 (b) of the U.S. Securities and Exchange Commission offering companies were only allowed to promote opportunities to existing contacts. Now Rule 506 C allows for general solicitation.
As the economy heals post-recession it is getting harder and harder to find lower-priced distressed properties, Mr. Crippen said. Funds and other players have no choice but to move to more expensive properties, a shift which lends itself well to crowdfunding.
Mr. Crippen also created the Crowdfunding Renegade, a series of lectures and workshops he delivers at little or no cost throughout the United States. He does this because education is crucial for the industry to fulfill its potential, which he believes can reach $300 billion in the coming years.
Five years from now Mr. Crippen believes crowdfunding will be an accepted part of the investment and development landscapes. Government will struggle to catch up because they essentially cannot afford the brain power to keep up with a motivated group of entrepreneurs.
Mr. Crippen believes Title II will have a “huge” impact on real estate. A portal’s ability to assemble a self-selected database of accredited investors is “revolutionary”.
“People should embrace it and learn about it,” he recommended. “It allows for more opportunities to generate more capital.”
Those worried about fraud should look to recent examples in the traditional business community for proof you cannot create an entirely foolproof system.
“What you can do is limit it and recognize the wisdom of the crowd is a much better safeguard.”
While the crowd can protect against fraud, it will be time and the natural cycles that will reveal which platforms stick around long-term.
“There is some false bravado being shown by people behind some portals,” Mr. Crippen admitted. “Some of them have zero real estate experience.”
“Real estate is a deal making environment. You need boots on the ground and experience making deals happen.”
Many experienced real estate people shun such portals, because you simply cannot sit behind terms and negotiate a good deal, Mr. Crippen explained.
The industry will mature partially through failure, Mr. Crippen predicts. Many lessons are learned through negative experiences. Case law is also established, he said.
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