How Crowdfunding Could Reshape Real Estate Investing

Crowdfunding, a new way to raise capital, has been gaining traction lately and it’s clear (at least to me) the result will be far-reaching. Traditionally, entrepreneurs or inventors would self-fund ideas or seek out banks and professional or institutional investors to secure the capital they needed to take their ideas to the next level. With crowdfunding, on the other hand, entrepreneurs can raise capital from a group of smaller investors in a secure and automated way online. At a basic level, here’s how crowdfunding differs from the traditional fundraising model:
Traditional Fundraising Model (Simplified)
Idea –> Pitch Banks or Investors –> Funding –> Execute Idea
Non-traditional Crowdfunding Model (Also Simplified)
Idea –> Set Up Crowdfunding Initiative –> Funding Goal Reached –> Funding –> Execute Idea
This “democratizing” of fundraising allows people outside the traditional investor groups and lenders to join in on the process. Kickstarter is still leading the way when it comes to creative consumer products with over $900 million pledged to over 125,000 unique projects. So far, crowdfunding has had the most success with tangible consumer products. For example, there might be an engineer who is building a more efficient bike seat and needs $10,000 to get it to market. He can post the project on a crowdfunding website and immediately have access to thousands (if not millions) of people and customers who would like to support bringing the project to market. Once the funding goal is reached, the money is transferred and the project can start.

http://www.forbes.com/sites/rodebrahimi/2013/12/12/how-crowdfunding-will-impact-real-estate-investing-an-interview-with-realtyshares/