Propnology is an innovative, property crowdfunding platform, allowing individuals to invest, from as little as £500, into a range of residential and commercial property investment opportunities, throughout the UK.
Each property is held within its own private limited company and retained for a pre-defined period of between 3 and 10 years, depending on the specific opportunity. Throughout the investment term, income is paid to investors in the form of monthly or quarterly dividends.
The platform removes the barriers to entry, previously associated with buy-to-let and, in the wake of the recent legislative changes, provides a realistic and viable alternative form of property investment.
The company was launched at the end of 2015, following approval from the Financial Conduct Authority (FCA) to offer investment arranging services. As only the second, property-based equity crowdfunding platform to have secured this status, Propnology sets itself apart from its competitors by providing increased levels of trust and transparency to its investors.
Propnology brings a fresh approach to property crowdfunding and, in contrast to our competitors, we are the first platform to have adopted a bi-lateral model - similar to the way in which traditional equity crowdfunding platforms have successfully operated. Rather than self-sourcing each individual investment opportunity, we are developing a growing network of professional property partners who introduce and submit potential properties to the platform. These opportunities are then assessed, by our team, for their investment suitability, and subjected to rigorous internal due diligence, before being offered to our network of investors.
Our approach not only enables us to have full coverage of the UK property market, but also recognises that property crowdfunding will continue to become a realistic and viable alternative sales and marketing channel, for real estate companies worldwide. We believe this strategy, and its early adoption, will ensure that we form strong relationships with key partners, at an early stage, helping us to secure our position in the market, as it continues to develop.
Together with our residential and commercial investment opportunities, we will be introducing a range of new products to attract a wider-audience of investors to property crowdfunding.
These will include products with reduced acquisition costs – and therefore higher income and yields - a social investment product, which provides stable returns whilst also having a positive impact on the community - an opportunity aimed at the prime and super-prime real estate markets, and an offering that enables individuals to co-invest in a property with their friends, family and colleagues, as opposed to strangers.
Propnology has huge potential for development, by deploying the brand and technology, in global markets, and by encouraging overseas clients to use crowdfunding as a means of investing in UK property.
Substantial accomplishments to date
• Achieved FCA authorisation following a 9-month application process
• Bootstrapped the company to date, through the maximisation of existing resources
• Developed what we feel is a lean and effective business model
• Developed a comprehensive compliance and due diligence framework
• Established a growing network of retail, sophisticated, high net worth and institutional investors
• Established 3rd-party relationships with Mangopay (for payment service provision and escrow services) and Joi Media (software)
• Developed, tested and launched a fully automated platform
• Created what we feel is a unique brand and design identity
• Achieved Page 1 ranking on Google's organic search for key term
• In the process of developing a growing network of strategic partnerships with property companies throughout the UK
• Initiated and received industry press coverage and provided input to industry research reports
• Developed the company's digital marketing strategy; paid search, social media profiles and blog site
The Propnology platform generates income from four distinct revenue streams.
CROWDFUNDING FEES - Variable between 0% and 5% of project cost, one-off fee.
A funding fee is added to the total value of each project, and paid upon legal exchange/completion of each offering. This fee includes the hard costs associated with payment processing, escrow services and ID verification. Propnology has the potential to negotiate incentives to offset all or part of the crowdfunding fees. i.e. New build sales commissions are typically 1% - 5% of the purchase price, and are deducted from the 5% crowdfunding fee.
ASSET MANAGEMENT FEES - 0.5% of project cost, annually.
A fee is payable for the administration of the SPV, on behalf of the shareholders, to ensure compliance and for acting as a single point of contact for all investors.
PARTNER ADVERTISING - Variable.
Partners are charged for providing additional exposure of their properties/developments on the homepage of the platform.
UNIT SALES COMMISSIONS - Variable.
Commissions are paid for the sale of 'whole units' sold to investor who wish to purchase an entire property, as a separate transaction which is not managed by the platform.
Use of proceeds
Fundamentally, the intention of this funding round is to increase awareness of the Propnology brand, and grow our community of investors, in preparation for a more substantial round that will enable us to underwrite acquisitions.
The net proceeds of this fundraise will be used as follows;
• Sales and Marketing Strategy
• Product Enhancement (New Features and Technologies)
BRAND AMBASSADOR PROGRAMME
We are pleased to announce the Propnology Brand Ambassador programme, designed to foster strong and loyal relationships with ‘crowd' investors participating in Propnology’s first-ever funding round.
Our target audience is broad, ranging from individuals in their late teens, to mid-lifers, looking to speculate, in property, as part of an investment strategy or longer term pension plan while still in the workforce - to those investors approaching retirement, looking to diversify their portfolio and create an income stream which offers a return higher than the banks.
• Single Family Offices (SFO)
• Corporates (Limited Companies)
INVESTOR GEOGRAPHIC PROFILE
Our target market consists of local, national and international investors.
Characteristics of target market
Propnology is operating in a large and rapidly growing market; the most recent figures, from innovation charity NESTA, show that equity-based crowdfunding is one of the fastest growing models of the alternative finance sector. Since 2014, it has grown by 295% to £332m.
According to industry researchers, Massolution, property crowdfunding has expanded globally by more than 150%. The market is predicted to grow from £1.6 billion in 2015 to £2.3 billion in 2016. This represents the fastest growing segment of the crowdfunding market.
The company’s sales and marketing strategy is an evolutionary process, and is being updated, adapted and changed as our customers, competitors, services and industry evolve.
We have developed a strategy to promote awareness of the Propnology brand with the objective of driving traffic to the platform to increase our investor base and grow our partner network.
As our strategic partner network grows, we will look to leverage their credibility and customer base to accelerate our market entry. We will seek to develop brand affinity with key partners such as property developers and investment companies to generate awareness of the Propnology brand and to promote the concept of property crowdfunding.
A multi-channel marketing approach, encompassing both digital and offline advertising has been adopted; this includes:
• Partner Network
• Paid Search
• Cold Calling
• Email Marketing
• Monthly Newsletter
• Annual Meet-ups and events
• Social Media Posting and Advertising
• Out of Home Media
• Newspaper and Press Advertising
• Press and PR Distribution
• Property Investment Exhibitions
We have identified 4 key differentiators which set our business apart from our current competitors and provide a first-mover advantage over future competitors entering the market.
To maximise investor returns, Propnology charge an annual asset management fee as opposed to taking a share of profits upon sale.
In addition, we have the potential to offer some of the lowest crowdfunding fees in the industry (between 0% and 5%) depending on the financial incentives offered by the partner.
Property crowdfunding operators are required to obtain either direct authorisation, from the FCA, or become an Appointed Representative (AR) of a principal firm, which is itself, authorised by the FCA. Financial regulation, therefore, provides a natural barrier to entry to new entrants wishing to operate a property crowdfunding platform. Applying for direct authorisation is both a time consuming and cash intensive operation, involving legal and compliance professionals, and may take as long as 12 months before a formal decision is reached by the regulator. During this time, a platform is unable to carry out regulated activities unless they employ the costly umbrella services of a principal firm.
BI-LATERAL BUSINESS MODEL
Propnology has adopted a bi-lateral business model, allowing a range of professional property partners - who understand their local market and the value that crowdfunding brings - to introduce property investment opportunities to the platform. Our strong relationships with developers, estate agents, sourcing and investment companies provide unique access to opportunities that would otherwise be inaccessible, and provides a greater opportunity to scale up the business, while maintaining a lean cost base.
Propnology has developed an 18-month product road map for an innovative range of products for both existing and new market segments. We believe that bringing these new products to market should create a first-mover advantage and enable us to increase market share and brand loyalty.