Co-founder and CEO of CrowdStreet Tore Steen is moving his startup toward more than $1 billion in investments in 2021.
Founded in 2013, CrowdStreet experienced its most successful year ever in 2020, despite a 32% drop in deal volume across the U.S. commercial estate sector versus 2019.
The crowdfunding platform attracted more than $640 million in investments across 90 deals last year. In the past seven years, the startup has arranged roughly $1.7 billion in investments via more than 470 projects. From 2016 to 2019, CrowdStreet posted revenue growth of 844%, earning it a spot on last year’s Inc. 5000 list of the fastest-growing private companies. The company has also relocated its headquarters from Portland, Oregon, to Austin, Texas.
Steen views this time as a “defining moment” for not only CrowdStreet but proptech in general, as the coronavirus pandemic has underscored the growing importance of technology in commercial real estate. In fact, he thinks proptech’s trajectory will mirror that of the sizzling e-commerce industry.
“This has propelled a lot of traditional real estate firms to understand that they have to get digital,” Steen told FinLedger. “While they might have been trying to innovate and trying to put resources behind it, I think this just opened their eyes to the fact that there’s no more waiting. It’s time across their businesses — everything from building management to raising capital to managing properties — that this needs to be a part of what they’re doing, and not just a nice R&D project.”
In terms of commercial real estate investing, Steen said the pandemic boosted CrowdStreet because travel shutdowns forced many investors to execute deals virtually and because some investors saw the economic downturn as a buying opportunity. Sectors that CrowdStreet envisions percolating this year include industrial, medical office, multifamily and self-storage, while hospitality, office and retail are among the sectors facing headwinds.
CrowdStreet competes with the likes of DiversyFund, EquityMultiple, Fundrise, RealtyMogul and Yieldstreet in commercial real estate crowdfunding, but Steen said there’s room for several players. All of them operate in a sector that’s exploding. One report estimates the global market for real estate crowdfunding will skyrocket from $13.2 billion in 2018 to $869 billion by 2027. Another report forecasts the global market will soar from $120.7 billion in 2019 to $851.3 billion by 2028.
Steen said CrowdStreet stands out from its rivals thanks to diversity in both sector and geographic offerings and to a healthy track record of performance. Furthermore, he said, CrowdStreet brings a sizable chunk of equity to the table — around $10 million to $20 million for the typical deal of $50 million to $100 million.
Steen noted that CrowdStreet is transparent not only about its blockbuster deals but its less-than-stellar deals.
“It’s not all home runs,” Steen said. “We love to talk about the home runs. We talk about the doubles and the singles. Nobody really likes to talk about when you didn’t get on base.”
As it relates to home runs, CrowdStreet — which has pocketed nearly $25 million in funding to date — doesn’t want to score growth by acquisition. Rather, Steen said, the company seeks to develop strategic partnerships with complementary businesses in areas like wealthtech.
“What’s happening now is the advisory channel, the financial and wealth management channel, they’re starting to now recognize that this might be something they need to bring to their clients,” Steen said. “We’ve been very much direct-to-consumer. … We’re now starting to see advisers come and say, ‘How do I participate on behalf of my clients?’”