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Crowdfunding Platforms Are Not All Created Equal

Dewayne Lener is the Director of Business Development at Ascenergy, LLC.  Dewayne was one of many attendees that I interviewed at the IMN Real Estate Crowdfunding Forum in Santa Monica in September 2014.

Ascenergy is an oil and gas producer that is always on the lookout for investors in ways similar to real estate development companies.  However, while typical real estate companies focus development and revenue generation from the surface of the property, Ascenergy invests in the minerals and energy products below the surface.

It took a while for me to understand why an energy company would be at a “real estate” crowdfunding forum.

Wikipedia describes crowdfunding as

the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet. One early-stage equity expert described it as “the practice of raising funds from two or more people over the Internet towards a common Service, Project, Product, Investment, Cause, and Experience or SPPICE.” http://en.wikipedia.org/wiki/Crowdfunding

Let’s explore the similarities between a typical real estate development and a subsurface energy investment.

A shopping center developer “typically” might:

  • Find land;
  • Obtain investors who will contribute capital to help buy the land and develop the property;
  • Obtain entitlements;
  • Build the center;
  • Find tenants to generate revenue from the property and create a return on investment.

An energy company generates revenue and obtains the return for its investors in a similar fashion. The difference is that the energy company generates revenue from the extraction of oil, gas and other energy resources, not tenants.  In a fashion, this can be analogized to a pre-leased development.

Crowdfunding is a modern and potentially, highly efficient method of connecting investors with investment opportunities. Whether the opportunities reside on the surface or below the surface of the real estate, the need to connect the investor with the investment, remains the same.

What many attendees from this conference expressed to me and as Dewayne points out in this video, there are many, many flavors of crowdfunding platforms available, each of which may appeal to different investors and investments. For the purpose of this post, a “platform” is an Internet based or cloud based software system that introduces investors with the investment.

Note that at the time of the publication of this post and the creation of this video, on a national basis, crowdfunding is only available to accredited investors.


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