Note: We're excited to extend you the opportunity to invest in the Fundrise iPO in just a couple weeks. While you may have seen some of this information before, we have opted to re-share particular details about the Fundrise iPO with you since it's such a unique investment opportunity. We hope this information prepares you for your upcoming window.
Technology inevitably disrupts every industry. We’ve seen it over and over again — in commerce, media, advertising, computing, communication, and even work itself. Today, there remain only a few great bastions still resisting this revolution — airlines, automobiles, energy, real estate, and finance to name a few. These industries have been more resistant to new technology because (as companies like Tesla have shown) they require enormous outlays of risk capital to achieve the scale necessary to deliver a truly disruptive product.
From the beginning, our mission has been to build a better financial system — one that works on behalf of individuals rather than at their expense. But the financial system itself is enormous, far too large to consume all at once. And it is complex, full of arcane regulation, which largely has not changed over the past century.
To succeed, we recognized that we would need two things:
- To attack the problem as one would eat an elephant, one step at a time
- A source of capital that was both patient and aligned with our long-term mission
Our solution to the second of these requirements has, of course, been the Fundrise iPO (internet public offering), a wholly unique ownership model whereby individual investors on Fundrise are given the opportunity to become investors in the company itself.
To understand how we attacked the first, i.e., how we are eating the elephant, it’s helpful to take a look back at how the business has evolved over the past decade.
Where we started
The financial system, at its most basic level, is made up of three component parts:
- Distribution
- Investment (aka Allocation)
- Production
And while the glory may lie in the “investment or allocation” function, the power is actually arguably in the “distribution” and the “production” functions.
We started out by focusing on rebuilding the distribution phase because, at the time, we believed it was the most ripe for disruption. The internet had created a new channel by which to communicate and interact with customers, and through our app and web platform, we unlocked an entirely new asset class for individual investors (aka private real estate). We then paired this customer interface with our own backend infrastructure, leveraging software, to drive down the marginal cost of investment to nearly zero. As a result, we were able to bring the minimum investment down from the traditional hundreds of thousands to only $10. And for the first time (in our opinion) truly democratize access to the private real estate market.
This process of opening up private markets to individuals is, on its own, a big business.
Distribution (aka fundraising) is powerful because ultimately the person who writes the checks makes the decisions. And unlike most investment managers who distribute their investments through an army of salespeople, we have formed direct relationships with hundreds of thousands of individuals.
And “hundreds of thousands” is just a start. There are tens of millions of investors who will need access to private markets over the next several decades and we intend to be the platform that provides it.
But “distribution” is still only part of our broader vision. As we’ve said before, the mission of Fundrise — and its true, deeper potential — lies in disrupting not only one step of the chain but the entire system.
Where we’re going
Over the past several years, our energy and attention has increasingly expanded to redesigning and rebuilding both the “investment/allocation” and the “production/operation” functions. And while we still have a lot left to do, we have at this point created (to our knowledge) the first and only software enabled end-to-end platform, connecting the dollars entrusted to us by our investors directly to the assets we are investing in and operating on their behalf.
And while the benefits are numerous, two simple measures of the value we’ve created come in the form of (i) greater overall efficiency and lower overall fees; and (ii) alignment of the decisions made at each step of the chain, with what is in the best interest of our investors.
It’s become clear to us that we are building a much different company than most in the financial industry appreciate (something we think is a good thing). This is probably because most fintech companies to date have been more hype than substance.
Case in point, nearly every traditional investment manager we’ve talked to over the years has suggested the “brilliant” idea that we simply hand over to them, the money our investors have entrusted to us, so that they could put it into their own intermediated funds or investments — and, of course, charge a healthy markup and fee load along the way. These institutions see our investors as unsophisticated easy prey, someone that can be taken advantage of because (they believe) our investors wouldn’t know any better.
This is largely why we never raised growth equity from traditional financial organizations. The ring of power is too great a temptation.
And again why we created the Fundrise iPO, giving that opportunity instead to our investors, so that we could align the interests of investors on the platform with shareholders in the company (because they are largely one and the same).
--
In case you missed it, we hope you’ll take the time to read our most recent end of quarter letter to investors. These letters provide the best, most in-depth perspective on how we feel the company and portfolio are positioned, as well as the challenges and opportunities ahead of us. As mentioned, the continued high-interest rate environment will likely act as a head wind for real estate values, however, we continue to believe that there remains a larger downturn on the horizon, which will provide uniquely attractive opportunities for those patient and resilient enough to withstand some pain in the near term.
As always, if you have any questions or feedback, please feel free to reach out to investments@fundrise.com or simply reply to this email.
Onward,
The Fundrise Team