03 May May 3, 2019 – Groundfloor Brian Dally and 6 Figure Coach Roberta Ross
“The audio file was removed when we switched hosts. Sorry. The cost was prohibitive. If you need the file, contact us and we will send it.”
Brian Dally – CEO and Co-founder of Groundfloor – Read interview highlights here
For the first two years, nobody in the company earned any salary.
We invested every dollar we could get into building out the product
and building the investor base.
Brian Dally is a co-founder and director of Groundfloor and serves as their CEO. He is responsible for marketing as well as setting long term direction and goals for the company. Brian’s 15 year career building disruptive technology startups spans stints in Silicon Valley, Boston, London and the North Carolina Triangle region. Previously, he led the launch of Republic Wireless to take on the big four cellphone carriers to international acclaim. As a result, millions more Americans can now afford a smartphone. Brian has a JD from Harvard Law School, an MBA from Harvard Business School, and a BA with Highest Distinction from the University of Virginia.
Roberta Ross – President of Six Figure Real Estate Coach, Inc
When you don’t have as much overhead, you don’t have to produce as
much business, and everything becomes much easier.
Roberta Ross is President of Six Figure Real Estate Coach, Inc. and the creator of the Six Figure Real Estate Coach’s System for Success. She has been an entrepreneur for over 20 years and in the real estate business since 1995. She is an author, speaker, and coach who travels extensively speaking to agents and entrepreneurs in the areas of business strategy, lead generation, and more specifically, how to rise above your competition and become the obvious choice in your market. Her work includes the inspirational Seven Keys to Six Figures, Motivation for the Mind for Real Estate Agents, The Biggest Prospecting Mistakes Real Estate Agents Make and How to Avoid Them, Positioning Power: How to Attract Your Ideal Client Again and Again!, Blueprint for Agent Success, and Free Yourself to Success Monthly! Roberta is also host of Success Series, an audio series program in which she interviews highly successful people from around the world.
Highlights from Brian’s Interview
Groundfloor does two things. One, we finance real estate trainers who are developing real estate where they live. Some people call them house flips, other people refer to them as renovation projects. One of the things we do is we finance those projects for real estate entrepreneurs. On the other side of the business, we’ve taken those loans that we make, and we have created a radically transparent, radically high yield, lucrative investment security out of them. That’s available to everyone for the entry point of $10. We make it possible for individual investors to come to our website, and build a portfolio of real estate loans that pay back in 8, 10, sometimes 12 months, where you earn 10 to 12% yields. And you get to do for $10 at a time. It’s possible to have a portfolio of hundreds of loans by investing with us.
Now that we’re six years in, I don’t know if I get to claim that I’m not a real estate guy anymore, but I wasn’t when I started. My previous company was a wireless company. And what I noticed was that consumers are smarter today than they’ve ever been. They’re definitely smart enough to make their own, well-informed choices. I saw how that was true in the wireless industry, where we did things quite differently, and disrupted the smartphone business in a really important way. And I theorized that it was true in finance.
I’ve been an investor since I was about 15 years old, when I bought my first mutual fund, thanks to good parenting on the part of my dad, and I’ve always been interested in personal investing. What I’ve noticed is that some of the most lucrative investments of the wealthiest 2,3, or 4 percent, who are known as accredited investors, those investments are not available to the rest of us. And those investments are very attractive. We started Ground Floor with an idea of how we could use web technology, this internet sensibility, where we all can do it ourselves, to give everybody the same power and control that you would have if you were a client of Goldman Sachs, in their private wealth management group with $10 million under management. Most of us don’t even have $10,000 under management. But we deserve to make high yields at low risk, just like the wealthy do. And that’s what our product was created to do.
I was trying to figure out which industry to go to, and looking for the same sort of factors, where people were getting something valuable. I wanted to find where people didn’t like the experience they were getting, where technology could make it a lot better, and a lot more accessible. And I looked at a lot of different industries. What kept coming up for me was people after 2008, 2009 were pretty frustrated with Wall Street and the banks. It was pretty obvious that some change was going to come to finance, so I started looking at different opportunities in the finance industry. I met my co-founder, who was one of the key people who worked on something that a lot of people know about called the JOBS Act in 2012, which was some legislation that really opened up and liberalized some of these private securities offerings and made it possible to offer them to more people. Once I got to know him, we went through a process of customer discovery, and customer development. Through that, we found our way into real estate.
Once we found our way into real estate, we found our way through customer development into financing house flips. We were just listening to what individual investors wanted. They want us to think short term, in an asset class that they could understand, because everybody can understand single family housing, and they wanted something that was high yield. So we listened to customers, and iterated our way over the course of about a year and a half before we found that product market fit.
For the first year or two, nobody in the company earned any salaries. We invested every dollar we could get into building out the product and building up the investor base who would become the customer base. The first capital that we raised from angel investors was about $150,000 on a convertible note. That was in September or October of 2013. From there, we found it a little easier to raise capital, and we found our first customers on Facebook. We tried a lot of different things; we held parties to try to get people interested in this. We advertised on Facebook, we did podcasts like yours, we did a lot of things to try to find our early customers, and every entrepreneur knows that’s always a trench warfare battle. In the very beginning, who’s going to buy an unknown product from an unknown company in an unknown category, right? It’s a miracle when it happens.
We had a couple failures our first year; it wasn’t successful right away. But the first success was February of 2014, a year after we started the company. We had locked on to this customer, he became our first successful customer to raise money on our platform, who had a $40,000 loan for a house flip in southwest Atlanta. He had the vision, he said, “I think this platform would be a great way to finance this project.” And he was right; we put it out on our website. And unlike a previous project that we tried to finance, it was a lot larger, and a lot more complex. The simplicity of it really sold. Within five days, we had funded the project. We were off to the races the next weekend, and we posted another one that was funded in 48 hours. Once you find that product market fit, you just start running. It feels great as an entrepreneur, and that’s when it happened for us.
Most flippers don’t have access to traditional finance. Before 2008, community banks would finance some of these projects. But for the most part, if you’re an experienced flipper or a first time flipper, it’s pretty hard to find money for your projects. In fact, two-thirds of flippers are real estate entrepreneurs who don’t even borrow for their projects. They’ll use their own home equity line or equity contributions from friends. Now, this sector of lending is starting to professionalize. But as it does, most of it is being professionalized with money that ultimately comes from Wall Street or from private equity funds. The problem was that that money can be very restrictive. For example, those of us who watch Shark Tank always see Kevin O’Leary, Mr. Wonderful, wants to put a royalty on a deal. And Mark Cuban always fights against them. He says you should never take that deal, because Cuban would tell you, all of the money should be going into the project. And we feel the same way. We’re the only lender that will lend money on these projects, but not require that payments are made during the term of the loan, because we know that all of that money should be going into the success of the project. That’s pretty unique in the market, and that’s just because we don’t source our capital from Wall Street or from private equity funds, we source our capital from individual investors, who are more flexible, and don’t have the same requirements as some of these big funds. They know that there aren’t going to be any payments; that’s all part of the transparency. If they know that going in to the pie, that some are doing payments, but 80% of our loans don’t feature monthly payments, and our investors are fine with that. Because at a $10 minimum, you can build up a portfolio and ladder your returns to get the liquidity that you need to peel off yield whenever you want to. You have a lot of control as an investor. So we really have approached this in a radically different way from what most people would. The minimum is radically lower, the terms of the loans are lower, it’s a very different value proposition compared to what’s out there today.
We pick and choose markets. At the moment, I think we’re serving about 30 markets, but that changes. Different states have different licensing requirements, different regulations. We like certain markets better than others. But it’s always up to date on our website for anybody that’s interested in borrowing from us or working with us. We are always looking at new markets.
Unfortunately, public markets, although they’re very accessible, aren’t very trusted. In order to access public markets, you usually have to pay some kind of middleman even if you’re going it alone through a discount broker, and trading your own stocks. That’s a game that a lot of people feel is rigged. Not only that, it’s not a suitable investment vehicle for the goals that most people have. In order to make sure that you’re going to make money in the stock market, you really do have to have a long hold period, seven to 10 years for equities, is what most financial advisors would tell you. And so people end up with this very bad set of choices. They’ve got to take inappropriate risks, hand their money over to a middleman, or play a game that they feel is rigged against them. It’s just not a compelling equation. And the implication is that most people don’t even bother investing. It’s not an attractive game for most people. But we all need to save and invest. We’ve created a product that makes it compelling and kind of fun to save and invest. You can come, and you pick and choose the loans that you’re investing in. The loans are graded A through G, based on their risk. You can choose to have a whole bunch of high risk stuff if you want to roll the dice, or you can choose to balance your risk or be very conservative. It’s up to you, and you can change your mind over time. You can build your portfolio however you want it, because it’s $10 per year minimum investment per loan, which is about 100 times less than the best competing alternatives. Even if you only have $1,000 to invest, you can still have portfolios diversified into 100 loans, which means that even if a couple go bad, you’re not going to lose all your money. If you’re investing a thousand dollars in one loan, I hope that one loan goes well. We built a product that’s built for the investor who wants control, and wants to make a good return on his money for the risk. That product, five years in, is delivering on that promise very, very well.
We now have about 50 employees. Back when I talked to you the first time, I think we were still at four employees. So we’re up to 50 employees, and we’ve raised almost $15 million in venture capital. All of your listeners have the opportunity to become an owner in our company, because we’re now crowdfunding the equity of the company. The company is now about 16% owned by US customers via our online public offering. Now you can buy as little as 10 shares for $150, and have a venture capital company in your portfolio. So we’ve come a long, long way. Last year, we did close to $3 million in revenue. We’re selling about $8 million with the securities and thousands of investors. So the scale has become much more than it was in the early days. And it continues to grow. We’re doubling year after year.
Come on over to groundfloor.com on the web. If you’re on Twitter, we’re groundfloor_com. And you can find me on Twitter, Brian_Dally.