With the economy heading toward a potential slowdown investors are looking for alternatives to stocks and bonds and are turning to real estate as a result.
That’s benefiting PeerStreet and financial technology startups like it.
Since 2013 Los Angeles-based PeerStreet has been operating an investment platform that makes it easy for investors to purchase real estate debt. The startup purchases loans from private lenders around the country, aggregates them and creates a pool of loans that investors on the platform buy shares in.
Most of the loans are short term ranging from six to twenty four months and are underwritten with LTVs of under 75%. Lenders on the platform use the investors capital to lend to people who buy real estate investment property to flip or generate income.
Growing interest in these types of investments is one of the reasons PeerStreet just closed a $60 million Series C round of venture funding led by Colchis Capital and a consortium of institutional investors. Existing investors Andreessen Horowitz, World Innovation Lab and Thomvest Ventures also participated.
Brett Crosby, PeerStreet’s co-founder said he was excited about this round because of the type of investors PeerStreet is bringing on. “We had multiple term sheets and opportunities,” said Crosby. “In this round we went with investors who can expand our business and bring on people who are in the debt buying space.” Colchis Capital has been a strategic partner of PeerStreet for years as an investor and also offering loans on the marketplace.
Crosby wouldn’t say what’s PeerStreet’s valuation is following the Series C round of fundraising, but he did say PeerStreet surpassed $3 billion in loan volume and is growing at a rapid pace. It took the fintech about five years to hit $2 billion and only six months to grow an additional $1 billion. “We have an asset class that is very desirable to both individual investors as well as institutional ones,” said Crosby. “The growth ramp is accelerating and moving quickly.”
To further its growth, the real estate investment platform operator also secured $4.25 billion in new capital commitments from institutions to purchase loans through PeerStreet’s platform. The commitments will bolster its short-term bridge loan products and grow the recently launched 30-year buy to rent loan program. All of the investments on the PeerStreet platform are reviewed by the company manually and via its technology.
PeerStreet is going after an area of the investment market that had long been closed off to scores of investors. Real estate is complicated with a lot of the deal making going on in country clubs across America. That keeps most retail investors out of the market. With the platform accredited investors can purchase shares of real estate loans, diversifying their investment portfolio ahead of what may be a tumultuous time for stocks and bonds.
PeerStreet isn’t alone in democratizing real estate investing. Roofstock is another fast growing real estate fintech, reporting a 126% year-over-year increase in users as of July. It provides accredited investors with access to investment properties.
PeerStreet plans to use proceeds from the Series C round of funding to hire more employees and scale its marketplace. That means adding more lenders, expanding the number of investors and continuing to build out the technology and automation for lenders. It’s also working on technology aimed at improving the entire process. “Our vision is to open the asset class to as many people as possible,” said Crosby. “Historically it was quite complicated and complex.”