Citiniche – a crowdfunding model for residential property development
Crowdfunding is a relatively recent phenomenon that has the potential to change the way people raise capital. With the arrival of social media and connected online networks it has become much easier for online marketplaces to start to match people who need capital with those that have capital to invest.
Typically most crowdfunding platforms revolve around an all-or-nothing system. People post ideas or projects and if a project fails to appeal and reach its target, then pledged amounts are cancelled.
Last year the leading crowdfunding site in the US Kickstarter raised $US145 million.
In the UK there has also been a rapid growth in crowdfunding platforms. Sites like Wefund and Crowdfund support a wide range of projects from helping artists make their first album to funding theatre performances. One of the most interesting crowdfunder in the UK is Crowdcube. Crowdcube specialises in sourcing capital for business. They are the first crowdfunder I have come across which has sought to focus on a niche market.
In Australia this type of specialisation is difficult because of our corporate law. While the Corporations Act has a specific provision – section 708 – that exempts small-scale offerings from strict prospectus requirements for capital raising, it also restricts these activities to offerings of no more than $5 million in a 12-month period as long as 20 investors or fewer participate. This restriction makes it difficult for a business focused crowd funding venture like Crowdcube to get off the ground here.
So its interesting to see the launch of a niche crowdfund-like online platform Citiniche which is focused on matching property developers with potential buyers. Focused on the Melbourne property market, the site is looking to target "owner-occupiers who have a vested interest in getting what they want but who don't individually have the resources to get a multi-unit project, with its economies of scale, off the ground."
It will be interesting to see how Citiniche is received. In my experience there are many people that are interested in the idea of property development. The challenge however, is in not only finding and matching people with shared visions, but finding people that are committed to seeing a project through to completion. While many people are attracted by the idea of property development, accepting the risks and committing the time and money to executing on the idea is not for everyone.
Personally I hope that crowdfunding, crowd sourcing and initiatives like Citiniche will help not only raise awareness of alternative ways of doing business, but also educate people on how traditional models of property development and ways to property ownership are evolving...