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"Why Should VCs Get All The Upside?"

This week we were thrilled to launch our online public offering, welcoming over 800 new shareholders in our company and adding another $2.5 million of capital to fund our ongoing expansion. With the launch, we’re now embarking on the third and final phase of this round of financing to accelerate our next steps on the audacious mission we set out upon five years ago. In case you missed it, here’s our official press release.

As we look forward to welcoming hundreds more shareholders, many have asked us about the backstory--why we’re financing the company this way and how it all came together.

First and foremost, it’s important to remember where Groundfloor started, and why.

Since Nick and I first met in October 2012, our vision has remained clear and consistent--a future in which capital markets are truly fair, accessible, decentralized, transparent, and therefore more efficient. One where all dollars are equal in opportunity and impact.

We believe radically open capital markets are not a fad, but emblematic and part of a substantive social, political and economic change. We believe people are smart enough to decide for themselves, and that when they are allowed to do so, everyone benefits (except perhaps the bankers and other old guard middlemen).

Already, on Groundfloor today, entrepreneurs like our borrowers get greater access to capital on better terms. Investors of that capital earn better returns for it. And we all get a financial system free of the concentrations of power that unnecessarily risk dislocations in liquidity like we all experienced in 2008-10.

So when we contemplated our next round of financing, and listened to customers asking for a piece of the pie, it was natural to ask: With Groundfloor itself, why should VCs get all the upside?

We started this process in October, soon after inking our first institutional capital relationship and as we launched our loan origination network. At the time, we targeted a total raise of $3 million. Little did we know about the investor enthusiasm and new opportunities that would emerge, and how quickly.

Securities law doesn’t make it easy to offer stock in just any company broadly to just anyone. Purposefully (and in our opinion beneficially) so. From our deep experience in this arena, we knew we were in for months of work to prepare and complete the requisite financial audit while filing and refining the necessary disclosures. To fuel the public offering initiative and kickstart our growth in parallel, we raised $2 million in bridge financing from a combination of existing shareholders and a subset of Groundfloor investors who qualify as “accredited investors” and could therefore participate early.

Just over half of that ($1.2 million of the $2.0 million) came from an online private financing of that was oversubscribed by 50% of our original target in just 48 hours. We’ve already started putting that capital to work. By the end of January, we had hired four new business development managers. This first phase of fundraising enabled our 2018 departmental budgets to expand to fill critical positions in our loan origination, asset management and investor relations teams in advance of corresponding revenue growth.

Then in January, we received news of our successful qualification to offer Groundfloor securities nationwide. That created even more reason to accelerate our loan origination as the waitlist to invest in our loans grew longer (but without compromising loan quality).

Meanwhile, we were bowled over by the level of interest indicated by investors who were invited to reserve shares in the upcoming public offering. With strong demand for not only our product, but also to own a piece of the company, we took the leap and expanded the round to $7 million total, with $5 million of that expected to come from the online public offering (of which $2.5 million is already in).

So here we are, on the vanguard of capital formation, grateful for the support we’ve received so far, and hopeful about the additional support to come. We already have enough financing to fund our plans for growth. That much has been accomplished already via the first two phases of financing this round. The question now is how much more quickly we’ll be able to accelerate them with this final phase of it.

For those of you who’ve already joined us to become a shareholder, thank you. For those considering it, we hope you will and would be happy to respond to your questions below in the comments or by emailing us at founders@groundfloor.us.

Brian Dally

Co-Founder & CEO of GROUNDFLOOR Finance

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