Crowdfunding & Real Estate Investing

For 2014 there are some regulatory changes impacting crowdfunding. A little history and then some things to ponder.

It is fair to say that in the past, crowdfunding was mostly about pre-selling products or events. Maybe someone wanted a walk-in role in a movie that some artist was trying to fund. Or someone else wanted a device to mount their iPhone to a tripod so video would be captured without shaky images. I bought a Glif on Indiegogo. It was fun to watch the campaign develop and then see my purchase arrive in the mail. Kickstarter is another platform that has wide success.

The key to the past was the heavy restrictions on anything that provided a financial returns. Initially, there were no platforms that could put offers in front of members of the retail public where the opportunity involved a financial investment (loans or equity). The USA passed the JOBS act and then the SEC was left to figure out how to implement the new law. Some loan platforms were created as loans are somewhat easier for the consumers to understand. In the UK some crowdfunding involving the sale of equity has taken place while the laws are being updated. The UK’s FCA will take over control in April 2014 and it is expected they will be publishing new guidelines for the sale of shares in early stage companies when the promotion is to the retail public.

Looking forward, what is possible for real estate investing? Good question and something I expect to explore. There are times when trying to get first mover advantage is bad for your health. Even Google was late to the search game so being first is not a guarantee of success. That said, being in the market and learning as you go does increase the odds of making smart moves as the marketplace evolves.

I have signed up with Bank To The Future so I can launch a new company on their platform. I intend to sell shares to the UK public as well as offer rewards for those who want to be a supporter without an equity investment. The details of the company are evolving as the business plan, the financials and the video are produced. I formally signed up for the Bank To The Future incubator so I am on a 4 week timeline to have all the pieces in place.

The only lead item that seems fall outside of the 4 week cycle is the process to obtain HMRC approval for the SEIS program. For those who do not know, SEIS is a government tax incentive for start up funding. If both the company and the investor fit the detailed requirements, the investor can obtain 50% of their investment back after month 4. This means it is almost like buying shares at half price. Or similar to paying full price at the shop when you buy and then receiving a rebate back in the poste once you submit proof of purchase.

If you run the math, an invest who buys shares that qualify for SEIS tax treatment are facing a downside of only 14% if the shares become worthless and an upside without UK capital gains if the company does well. There is a video I can point you to that does a good job of explaining things or there is the HMRC website. The application packet ready to mail is below. Yes, HMRC uses paper for this process.

Watch this space for further updates.