I got to know homegrown during their pitch at seedrs a while ago. I took the opportunity to ask them some questions. By the way, minimum investment is GBP 500. (I will provide a referral link which pays new sign ups GBP 50 after their first investments in a few days).
1) Could you tell me a little bit about the story behind Homegrown? When and by whom was the idea born to create a crowdfunding platform?
We are a property development crowdfunding platform, focused on investments in large-scale, UK construction projects by established developers who have a successful track record of delivering on time and budget.
After a number of years of working in & around the real estate sector, I founded Homegrown in 2015 to address a fundamental imbalance in the UK residential development market. That is:
We need to build more homes in the UK
SME developers want to build more homes but don’t have enough equity to fund the developments; and
Investors are actively looking for ways to invest their money to access better returns
We are completely focused on getting the best return for our clients and target returns of up to 16% p.a. with a typical project turnaround of 2 years. To date we have funded 4 developments in London in 6 rounds, with a total gross development value (GDV) of more than £130m.
Despite having only launched last year, we were finalists for the 2017 Crowdfunding Platform of the Year Award. This was fantastic recognition of our innovative model and early growth as a platform.
Prior to founding Homegrown I was formerly a Chartered Accountant and Associate Director at PwC and I have spent more than 10 years working in Real Estate and Advisory and actively investing in property.
2) The crowdfunding market has gained traction during the last couple of years, do you think this will persist? Do you think there will be a consolidation amongst platforms?
Yes, I believe you will see the crowdfunding market continue to grow as the platforms increase in size and experience which in turn will attract a more mainstream investor. The property development model is still relatively new in the UK, although well established in other markets like the US, but is growing rapidly. We recognised the need in the UK and were the first crowdfunding platform specialised in property development. I expect the market to see some consolidation in future but probably not in the next few years.
3) You have raised some capital on Seedrs. Will this be the last round, or can interested investors expect more rounds in the future?
We were delighted with the success of our Seedrs campaign which was oversubscribed and reached nearly 200% of its original funding target with over 1 month to go. We have no plans to raise additional funding at the moment, but it is of course difficult to predict what might happen beyond this timeframe, we are completely focused on scaling up the success of the business. If we find the circumstances and opportunity presented in future, of course we would consider additional investment if required to propel us further.
4) There are already many other crowdfunding platforms in the real estate segment. Why is Homegrown better or how is it different? Maybe you could elaborate a little bit about your business model.
Homegrown is the first crowdfunding platform in the UK specialised in property development investment. This means that for the first time, investors have access to exceptional property development projects, at a low entry price and have the potential to make attractive returns generated from construction, rather than speculating on future house price growth. This is particularly attractive currently in a relatively flat housing market and with political support for housebuilding. These opportunities were previously only available to high net worth investors.
Homegrown is an independent, FCA regulated platform which offers pre-vetted investment opportunities in residential and mixed-use developments, in areas with a high demand for housing, predominately in London and the South-East. Only projects that meet the strict investment criteria are made available on the platform and projects are often structured so that investments are made alongside banks and other professional investors for added assurance.
5) What can we expect in the next weeks from Homegrown? What are your short-term goals?
We have some fantastic projects in our pipeline so we are currently very focused on launching these projects on to the site over the next few months. We have experienced a huge increase in registrations because of positive PR coverage and we expect to see that continue.
We are seeing buy-to-let investors moving out of the market in 2017 and seeking alternative real estate investments, following weaker rental yields, after a long period of house price inflation and the UK government’s recent buy-to-let tax changes. But, fundamentally we are still not building enough homes in the UK and the supply/demand imbalance, particularly in areas like London and the South East remains. Homegrown is perfectly positioned to address that problem.
We strongly believe that a lack of equity finance is one of the biggest reasons that mid-sized developers are not able to build more homes and property development crowdfunding has the potential to make a positive contribution to the availability and affordability of housing in the UK. This provides the impetus for us the ramp up our efforts to grow our business in the short term.
6) When do you expect break even?
We expect to breakeven and be cash generative by the start of year 2. Given the backgrounds of the founding team, we pride ourselves on prudent financial management and operational control.
7) Is there anything else you would like to let know my readers?
We have really gone from strength to strength, since launch we focused on obtaining direct authorisation from the FCA and building a market-leading platform. Since then we have been focused securing the funding the business needs to grow.
Our last development project in Hackney Downs, was sold out the day after it was launched. This was our largest and fastest raise to date and is clearly positive affirmation of our model from investors, so watch this space…