The Changing Face of Crowd Investment: Fundrise and Manayunk's First Coworking Space - Generocity Philly

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Oct. 23, 2013 5:03 pm

The Changing Face of Crowd Investment: Fundrise and Manayunk’s First Coworking Space

The coworking movement has accelerated in Philadelphia. In the past year, shared work spaces have opened up for writers, metalworkers, designers, game developers and sculptors, and more are on the horizon.

The Transfer Station, pictured here, is employing new ways of raising investment to open their coworking space in Manayunk. (Photo via The Transfer Station)

The coworking movement has accelerated in Philadelphia. In the past year, shared work spaces have opened up for writers, metalworkers, designers, game developers and sculptors, and more are on the horizon.

But while there is excitement from the communities using these spaces, coworking is still a tough sell for investors and banks, according to Brian Murray, principal at the development firm Shift Capital.

Murray learned this through Shift Capital’s partnership with the Transfer Station, a coworking and shared retail space located on Main Street in Manayunk that has been in development for the last six months. So far, banks have been hesitant to commit the necessary debt to the $3 million project.

“The challenge from a real estate perspective and a bank perspective is that, while you have a tenant in place, the Transfer Station has no operational history. So from their perspective it’s pretty risky,” Murray said.

But since Shift Capital got involved with the project new legal channels have opened up for developers to use crowd investment to measure community support and even fund projects.

Due to rule changes implemented in September by the Securities and Exchange Commission (SEC) — and legislated by the Jumpstart Our Business Startups (JOBS) Act, passed with bipartisan support in 2012 — private companies can advertise investment opportunities and solicit an unlimited number of accredited investors. Prior to this change investment was allowed only behind closed doors or within family networks.

As of today, October 23, the SEC is convening to discuss another rule change legislated in the JOBS Act that would allow companies to also solicit non-accredited investors.

In the meantime, a number of websites are taking a cue from popular platforms such as Kickstarter and Indiegogo and launching their own that allow companies and especially startups to solicit investment online. One of these, Fundrise, is bringing this service into the real estate sector.

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“Right now were gauging interest, almost like a pre-sale of concert tickets,” said Daniel Miller, co-founder of Fundrise.


The Washington DC-based Fundrise is helping real estate developers measure community support by allowing accredited and non-accredited investors to indicate how much money they would be willing to invest in a project.

This is exactly what the Transfer Station is doing now. Shift Capital has partnered with Fundrise to test the theory that communities are willing to invest in projects happening in their own backyards.

It is important to note that this is not an actual investment campaign  — as a number of Philadelphia news sources have incorrectly reported — but rather a way for the developers to measure community support and eventually return to those individuals who expressed support for real investment.

“Right now were gauging interest, almost like a pre-sale of concert tickets,” said Daniel Miller, co-founder of Fundrise.

Miller explained that there is a way to get actual investment from non-accredited investors — even without the impending rule change by the SEC — but it’s costly, time-intensive and limited to investors from the state where the project takes place.

The hope, he said, is that the SEC implements the rule change. But if not, Fundrise will continue with its model and take the more time-intensive route in cases where the community is ready to support a project. Fundrise already funded two projects in Washington D.C with non-accredited investors by this route.

“We started in July 2010 before there was even a discussion of the JOBS Act,” Miller said. He added that the rule change would allow Fundrise to scale up and to more easily find investment for smaller projects where the high costs would be prohibitive.

For now, the Transfer Station is more than halfway to its goal of $500,000 worth of indicated support. Murray noted that if the Transfer Station does decide to seek investment from the community it will start a new campaign and reach out to the people from the prior campaign.

Miller explained that some people who indicate support do not always end up actually investing, but that the conversion rate is still relatively high at around 60 to 70 percent.

“The main idea is giving everyone the opportunity to invest in local real estate,” Miller said.

“We think what will happen is more interesting, creative and impactful projects will get financed, things like the Transfer Station that will have a huge impact but that most institutional banks do not understand,” he added.

Correction: a prior version of this article stated that the project has been in development for two years, rather than six months. 

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