This startup's using crowdfunding to democratise property investment for 'generation rent'

CrowdLords - The Investibles
CrowdLords
Christopher Goodfellow
Editor
Sift Media
In association with
KPMG
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CrowdLords was launched to help open up property investment to a new generation. Its founders leveraged their knowledge of crowdfunding and experience as landlords to build a platform that connects investors with property professionals. 

We spoke to founder Richard Bush about fundraising, building a brand when you're the first mover and when "the fog gently clears" for entrepreneurs as the latest profile in our The Investibles series.

Name: Richard Bush
Company: CrowdLords
Date established: March 2015
Website: www.crowdlords.com
Twitter: @crowdlordsrich

1. What is your investment status?

We raised £150,000 of seed money on Seedrs in our first year, which enabled us to get going and we will be looking to do a Series A round later this year.

2. Describe your business in one paragraph; what’s its vision and what problem does it solve?

We make property investment more accessible, easier and more productive for more people. As property prices continue to rise and bank lending criteria become more restrictive an increasing number of us are excluded from property investment.

Why is that a problem? Property has been the main source of wealth for the Baby Boomers and for Generation X. As Generation Y and Millennials resign themselves to being Generation Rent we should be aware as a country of how this will impact their future prosperity.

We believe that by using technology to enable people to pool their resources to invest in property we can help address this issue.

3. How did you come up with the idea for your business?

My co-founder had been a landlady since the age of 19, whereas I never felt I had the knowledge, time or necessary funds to do it myself. I had, however, been an avid follower of equity crowdfunding for startups. It soon became evident to us both that there was an opportunity to combine the security, verifiable values and opportunity for growth of property with the principles of crowdfunding.

We explored a number of business models and CrowdLords was born; the first, two-sided property crowdfunding platform in the UK. Two-sided in that we connect developers and landlords looking for capital with investors looking for income and growth. 

We should be achieving 100% growth per year, at least, for the next four or five years.

All our competitors at the time were funding their own portfolios using crowdfunding, but we believe that we should leave the development and the portfolio management to experts in those fields. Our job is to screen, pre-package, promote and administer the investments.

4. What’s your addressable market?

Our addressable market on the demand side consists of small to medium-sized developers, buy-to-let landlords and asset managers dealing with smaller commercial portfolios. We haven’t tried to value it, but it’s in the tens of billions.

On the other side, we have people with savings looking to make their money work harder for them than it does in the bank. Currently, due to the risks involved, we only allow those who understand the risks to purchase equity. We recognise though that to really help those excluded from property investment we need some simpler products and so we’ll be launching some debt-based offerings later this year.

5. What’s great about your team and do you have a mentor?

We’re a very small team with a good mix of skills and we’re committed to making this work. What’s great about them is that no matter what challenges we come across, and they are frequent and variable, the response is always “OK, so how do we solve this”. Whilst what we’re doing is no longer unique, there is no established way of doing things - and, so ‘agility’ is probably the most valued trait we have.

6. What key challenges have you faced and how have you overcome them?

You won’t be surprised if I say our main challenge has been ‘money’. We made some poor choices early on, which meant that we got through our funds way before the revenues started. We were and still are very undercapitalised. This has slowed our growth on the one hand, but it has also forced us to make every penny count. So that’s a good thing.

Our other main challenges are marketing challenges. We’re a new brand in a new market, with a new solution to an old problem- and we’re dealing with people’s hard earned cash. So we need to educate people and build familiarity with the concept of property crowdfunding whilst establishing trust in our brand.

It will take time. We need investors to go through the entire cycle and to realise the returns we are offering before they start telling all their friends. When that begins to happen then we’ll start to see the exponential growth that the peer-to-peer market has enjoyed.

7. How have you funded your startup and why did you choose this route?

We decided to use crowdfunding for seed equity because we are passionate about the idea of democratising investments of all kinds, and we wanted to expose our brand to people already familiar and comfortable with the concept of crowdfunding to help us recruit early users. We used Seedrs and it was a painless and rewarding process.

Everything is really still in the test and invest phase where we try new things, measure the impact and decide whether to roll it out or not.

However, as we’ve started to explore our next round of funding we have discovered that the decisions you make for your seed round can have a big impact on the options available for future rounds. With hindsight, we would use crowdfunding again, but we would have planned the second, third and even fourth rounds from the outset to avoid some of the complications.

8. How do you market your business and how successful has it been so far?

We both came from a marketing background and so this is the area we were most comfortable with when we started. Initially, pre-launch, we used PR to generate interest in the concept of property crowdfunding and it helped us build a database of potential users even before we had developed our platform.

Post launch we switched to mainly digital marketing. Google (and the others) are obviously important to us, we do some online advertising and social engagement, and we’re just developing a more robust approach to content marketing. Everything is really still in the test and invest phase where we try new things, measure the impact and decide whether to roll it out or not.

A really important part of the marketing mix for us is customer communications as word of mouth is a big source of new users. We’ve just launched a referral scheme and that helps encourage people to recommend us.

9. What are your plans for the future?

The simple answer is growth, growth and more growth. We should be achieving 100% growth per year, at least, for the next four or five years and at the same time we will enhance our platform to automate as much of the processes as we can to drive efficiency.

Having said that, because we believe the market itself will grow dramatically, with new entrants appearing almost monthly, we now need to start emphasising our points of difference. We don’t want to be the biggest crowdfunding platform, we want to be the most admired crowdfunding platform. So fairly soon our focus will switch to improving the quality of investments, the customer experience and then ultimately we’ll look at profitability.

10. If you started again, is there anything you would do differently?

If we started again, and there are times when we wish we could, we would probably do everything differently because we’d have the advantage of the experiences we’ve had. I think the main change would be the order in which we recruited. We would probably focus on our back-office first and have more processes nailed down even before we recruited our first user. But that’s with hindsight. 

We took an MVP approach, which is all about proving assumptions and most of our assumptions were about customer acquisition and people’s investment behaviour. However, that behaviour is heavily influenced by the experience.

11. What advice would you give to entrepreneurs that are starting a business?

Obviously, the rules about surrounding yourself with good people hold true. But, based on this experience, my advice to someone who is doing something new rather than copying someone else’s business model would be that if you truly feel that the business is going to work then just keep going. There are periods when entrepreneurs are tempted to give up and try something else, but by addressing each issue as it arises, over time, the fog gently clears and you begin to see a viable business. And, from that point onwards, it gets easier and easier (for a while).

If, like CrowdLords, you're a startup that needs an accounting firm that matches your ambitions and who can support your growth, then contact us at KPMG Small Business Accounting.

Click here to request a call with one of our dedicated accountants. They'll explain how we can help you and what your fixed monthly fee would be.

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