Property crowdfunding platform for large-scale residential development projects
Homegrown (www.homegrown.co.uk) is a property crowdfunding platform that gives investors the opportunity to invest in large-scale residential development projects, from established UK property developers.
We offer investors an alternative, hassle-free way to invest in property, by making equity investments in residential development projects, in return for a share of the profits. Historically, these investment opportunities were only available to a small minority of investors, that typically had a connection with a developer and were prepared to invest a sizeable amount of money.
Our platform enables everyday investors to access the same investment opportunities from as little as £500. As a result, our investors can build a diversified property portfolio and we aim to target the highest asset-backed returns in the UK online alternative finance market.
Our business model offers small and medium-sized property developers an alternative way to raise funds in a reliable & straightforward way, enabling them to build more homes.
After a number of years working in & around the real estate sector, our founding team identified & set up Homegrown to address a fundamental imbalance in the residential development market. That is;
1) We need to build more homes in the UK.
2) SME developers want to build more homes but don’t have enough equity to fund the developments.
3) Investors are looking for ways to invest their money to access better returns.
“Small housebuilders want to build more homes but they don’t have the equity to fill the gap" (Anthony Codling, Jefferies Managing Director).
Homegrown aims to match everyday investors with SME developers with the intended benefits being:
- Access to large-scale development projects, with leading developers in areas with high demand for housing.
- Attractive target returns.
- £500 starting investment.
- Co-investment alongside professional investors.
- Robust & independent review process.
- FCA regulated.
The platform also aims to provide developers with a simple and reliable way to raise equity finance that will enable them to build homes & make a positive impact on the availability & affordability of housing in the UK.
Substantial accomplishments to date
We launched the Homegrown website in October 2016 after receiving authorisation from the Financial Conduct Authority (FCA). It took 12 months of planning to transform the business from an initial idea to its launch. Over the 12 months we designed & developed the platform, created a robust legal & compliance framework, established the relationships to build a sustainable supply network and recruited a world class team.
Since launch & with limited marketing, we have successfully funded five projects. Today we have more than 300 registered users on the platform, and more than 1,000 email subscribers. At the end of 2016, we successfully completed a programme with Accelerator Academy, one of the UK’s leading accelerators.
This year we are also fortunate enough to have added Nick Kingsbury to the team as an Advisor to the business. Nick was formerly Global Sector Head of Software for the Venture Capital firm 3i.
Homegrown was also recently named Runner Up for the 2017 Crowdfunding Platform of the Year Award (Property Wire).
Homegrown operates a straightforward & fair fee structure. We charge fees of 5% on funds invested through the platform & we take a 15% share of investor profits, so our interests are aligned with investors.
Example Project - Kilburn, London
> Mixed use development of 60 flats & 3 commercial units.
> Located in the popular area of Kilburn, North West London.
> A short walk to the station, which is 10 minutes from Central London.
> Projected gross development value of £46.5m.
> The project raised finance of £34.6m, funded by senior bank debt (£25.6m), developer equity (£0.85m), & equity investors (£8.2m).
> Homegrown funded a small part of the equity investment on the platform & the rest of the equity investment was raised by professional investors offline.
Use of proceeds
The funds will be used to support our customer acquisition strategy. It will also be invested in the website, primarily to optimise the site for international investors & to create a secondary market for investors to trade their shareholdings.
Our target market are the 1.1 million people who have invested in UK online alternative finance (2015). These are primarily peer-to-peer lending & crowdfunding investors (Source: Nesta & University of Cambridge, February 2016). We also anticipate substantial demand from the estimated 1.4 million landlords in the UK (HMRC, 2014).
For our target audience, sustained, low interest rates are driving them to look for alternative ways to make money. They are typically attracted to property as an asset class because of its strong historical performance, but high prices, the hassle of ownership & sometimes a lack of experience are all barriers to buying an investment property directly. In addition, buy-to-let investment has become less attractive following recent tax changes & lower forecast house price growth.
We believe there is a significant opportunity on the supply side of the business from small to medium-sized property developers seeking equity finance for development projects.
We find that the property developers within our target audience will typically raise up to 70% of development costs (land & build costs) through finance (debt) from the bank and the remaining 30% tends to be funded through equity from the developer and/or high net-worth individuals. Currently, the disaggregated nature of the equity finance market can be a barrier to scale for many developers.
Characteristics of target market
At a global level, the alternative finance addressable market is estimated at around US$3.3 trillion (Source: Deal Index, 2015). In the UK, an estimated £3.2 billion was raised by the UK alternative finance market in 2015, which grew by 84% compared to 2014 (Source: Nesta & University of Cambridge, February 2016).
Within the UK online alternative finance investments and loans market, equity crowdfunding is estimated to be one of the fastest growing markets (up by 295% to £332m in 2015). Property was the most popular sector in 2015, accounting for £696m between debt (£609m) & equity (£87m) platforms & more than 10,500 investors had participated in property crowdfunding alone (Source: Nesta & University of Cambridge, February 2016).
In addition to the potential growth of the UK online alternative finance market, we also see huge potential for future growth from UK property investors. It is estimated that the private rental sector in the UK is worth £1.29tn. However, a recent survey by the Residential Landlords Association revealed that 25% of landlords have sold or are planning to sell their buy-to-let properties as a result of recent tax changes (Source: Residential Landlords Association, 2016).
Early traction & data has helped us to understand our customers better including the channels & messages which engage with them & therefore provide the best return on our marketing spend. We consider our marketing strategy in four stages based on the customer's journey; Awareness, Conversion, Investment, & Loyalty.
> Awareness: We aim to generate awareness primarily through a combination of digital advertising (including Google, Facebook & LinkedIn), search engine optimisation supported by content marketing, customer & third party/affiliate referrals & PR.
> Conversion: We capture users’ contact information through social media, their registration on the site, or their subscription to our newsletter. We aim to convert users by providing relevant, interesting, and topical content through email newsletters, social media & regular blogs. We hope that this will serve to better educate the user about our product & investment proposition, and position us as thought leaders in our market. We also look to use calls, webinars, and promotions to increase conversion rates.
> Investment: We continually analyse & optimise the performance of the website to ensure that the process of making an investment with Homegrown is as fast, simple, and intuitive as possible.
> Loyalty: To maximise loyalty, build brand ambassadors and increase referrals we provide investors with a personalised dashboard on the site & provide regular updates on their investment. We also plan to start hosting quarterly investor events.
We expect our marketing plan will evolve as we continue to grow & analyse the performance of our marketing campaigns.
Our competitive landscape includes other accessible (low-entry investment) savings & investment products, such as Savings & ISAs & the key sectors within the UK online alternative finance market (primarily peer to peer lending & crowdfunding).
We see our largest direct competitors as Property Partner, The House Crowd, and Property Moose. These companies have been successful in making buy-to-let investments more accessible. However, we strongly believe there is a gap in the market for a platform that offers investors a better way to invest in property, by making equity investments in property development projects.
We see Homegrown’s proposition as unique in the UK, although it thrives in other markets like the US. We specialise in offering equity investments in quality residential development projects with established developers and we aim to target the highest asset-backed returns in the UK online alternative finance market.