Crowdfunding Set to Generate $20B

LOS ANGELES—“Crowdfunding is inevitable,” said Lew Feldman on the crowdfunding panel at the USC Gould Real Estate Law and Business Forum on Thursday afternoon at the Jonathan Club in Downtown Los Angeles. Feldman moderated the panel, which featured speakers Fred Bryant, co-founder and COO of WealthForge; Jilliene Helman, founder and CEO of Realty Mogul; Benjamin Miller, co-founder and CEO at Fundrise; and Amy Wan, general counsel at Patch of Land. In between detailing their company profiles, the panelists talked about the future of the industry.

Feldman started the conversation by describing the five themes driving the crowdfunding market: the Affordable Care Act, energy independence, cannabis (as it drives demand for industrial space), industrial as the new retail and intermediation, in other words the removal of the middleman. With these drivers propelling the industry forward, he predicts that the crowdfunding space will generate $20 billion in 2016, while institutional investors will continue to use the space to buy assets and investments. Additionally, he said that the space will open up to non-accredited investors by 2016.

“We are doing with the internet what we used to do with the telephone. We are taking things that are not online and putting them online,” said Feldman, pointing out that brokerage and banking were the first to take the plunge to the online market, and now alternate lending and asset management have online platforms.

Currently, only 3% of accredited investors are active, but as crowdfunding gains steam and awareness, it will open the door for other accredited investors. According to Helman, whose Realty Mogul just reached its $50 million milestone, debt transactions are the most popular on the Realty Mogul site, selling out within 10 minutes of being posted. Equity transactions on the other hand are much less popular, which she says may be due to the greater complexity and risk involved. She also notes that in the two years since launching, the company's employee base is up 500%, illustrating the growth in the sector.

From the legal perspective, Wan closed the conference with a message about the things that keep her up at night. She noted that while her company, Patch of Land, is conservative, other companies play close to the line, and although the SEC has not come out to sanction anyone, these business owners are putting themselves at risk. She explained the importance of creating a compliance program at the company to follow thoroughly. She adds, “This is a new medium, but an old industry, even though there are a few new regulations.”