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What Doesn't Kill You Makes You Stronger

Brian Dally, co-founder & CEO of GROUNDFLOOREarlier this week, we sent out a communication to all of our investors regarding the effects of the federal government shutdown on our normal operations. Today we are pleased to announce a return to normal operations. This blog post provides the context of that announcement, why it matters, and how it has become possible.


The response we have received from customers, shareholders, and other supporters during the shutdown has been amazing. “What doesn’t kill you makes you stronger,” read one. “Keep on keeping on,” encouraged the subject line of another. We received compliments about how we’ve built the company and how we manage it, and about the meaning and value of what we’ve built. As founders, of course this was humbling. It also got us to thinking about our momentum as a startup, and how long it might take to regain it, and what that might mean for us and our many stakeholders.

We’re proud of how our team responded quickly and nimbly to this temporary external challenge over the past month by redirecting our loan origination flow to institutional partners, accredited investors, and Georgia residents via the Invest Georgia Exemption (IGE). These actions enabled us to continue to release loans to select groups of investors on our platform, but have left the vast majority of our investors out in the cold. That’s been discouraging, particularly because since our very beginning we’ve risked everything to ensure we can serve all investors, not just the accredited 4%. We’re all-in on that core purpose and our long-term vision, and always have been. 

Why It Matters

The shutdown has not only interfered with our investor mission. It has also harmed our borrowers, the neighborhoods where they work, and the brokers and GROUNDFLOOR staff who rely upon earning commissions for their livelihoods. Capital formation, the source, and thus the structure, matter. For almost one month now, reliant mostly upon institutional capital and without the ability to offer our broad-based product to all investors, we have also been unable to offer borrowers our popular deferred payment loans, unable to reward experienced borrowers with our typical amount of leverage, and unable to finance otherwise deserving projects brought to us by less experienced borrowers.

This hiatus, its compromise, and the ill effects therefrom end today. Our next batch of loans is currently previewing tonight, and will go live tomorrow. Effective immediately, we will begin accepting and processing loan applications for our full range of credit products.

While we are pleased that President Trump has today announced a deal to reopen the government for three weeks, it is unclear when SEC staff will actually return to work. When they do, there will almost certainly be a backlog of work for them to get through. Moreover, there is no guarantee that we will not end up in the same position should the temporary spending bill not pass or, heaven forbid, lapse. This uncertainty will not do for us, or our stakeholders.

The Way Forward 

After a detailed legal analysis, we have decided to change the way we add new investments to our qualified offering circular. Previously, we had adopted a method of amending new investments into our offering circular. This process required us to file the new investments on EDGAR (the SEC filing repository) and then await qualification of the filing by the staff. After assessing the Federal rules and regulations, going forward, we will be using a different method of supplementing new investments into our offering circular. This still requires us to file new investments on EDGAR, but does not require staff to take any action.

If you have invested with Prosper or Lending Club, then you already know how this works because that is exactly the same method of operation that those two issuers use when it comes to new investments. Here is an example of a Prosper supplement. Our supplements will look identical to the loan pages you have already been using for the last three years. Nothing else is changing with our underwriting standards, processes, procedures, or operations, as detailed in our qualified offering circular. This will allow us to include investments in our offering materials without relying on the amendment method, and should protect our customers from interruptions to the availability of investments, and also our borrowers from interruptions to the availability of credit products, in the event of another government shutdown.

Please feel free to reach out to me and Nick directly at founders@groundfloor.us, or submit a question to our Customer Success team about any of this at support@groundfloor.us. We appreciate everyone for bearing with us during these exigent circumstances. Among our core values at GROUNDFLOOR, we have put our Agility, Persistence, and Commitment on full display. Today, we are also demonstrating our Authenticity, Trustworthiness, and Accountability by sharing the drivers and implications of our most important decisions. We realize not every company would take these steps and invite your observations, concerns, critiques, or words of encouragement and support -- but we do, have, and always will.

Not killed, and certainly stronger, let’s go forward together!

Brian Dally

Co-Founder & CEO

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