Phil Siarri talks to Jean-Sébastien Drolet who, along with Do Nguyen, founded RealStarter, a Montreal and Quebec City-based real estate crowdfunding platform.
Hi Jean-Sébastien, can you tell me about your background and your new venture RealStarter?
I grew up on the south shore of Montreal and studied law in Quebec City. I’m now a lawyer on a part-time basis at the Caisse de dépôt et placement du Québec (Quebec Deposit and Investment Fund), where I work on various investment transactions. Last year, I was a 24-year-old starting to have a little bit of money to invest, and I was interested by real estate. However, I found that as a small investor, I was lacking capital to access interesting real estate projects in my area. Exploring various ways to invest my small amount of money in real estate, I came across crowdfunding with my business partner Do Nguyen last year. That’s when we decided to launch RealStarter.ca.
RealStarter is a crowdfunding portal for real estate. The goal is to allow retail investors to invest in real estate projects alongside experienced developers. It works like a traditional crowdfunding platform. Experienced developers can raise funds from the crowd through our web platform. The deals are displayed online, and people can make a monetary contribution in the projects they like. In exchange for their contributions, crowdfunders receive debt titles or shares from the developer’s company. On RealStarter, the developer has 90 days to reach his fundraising target, if the target isn’t reached, the money is returned to the investors. Ultimately, the objective is to use technology to provide cheaper capital to the developer and a better real estate investment to the investor.
What are the main challenges to educate prospective users/investors on crowdfunding?
Equity crowdfunding for real estate started around 2011 in the US and in Europe, but only in 2015 in Canada due to regulatory constraints. Therefore, since it’s brand new in Canada, we really have to put effort into educative content. We have to educate people on crowdfunding in general and show them it’s a new and viable alternative for investing their money. Thankfully, we now have positive statistics from more mature markets around the globe.
I think another big challenge for any crowdfunding portal is to build trust with their prospective users. The only way to do that is to show it works from day one by selecting good deals and experienced real estate developers with a good track record.
Despite the recent legalisation of real estate crowdfunding in Quebec, what regulatory challenges are you still facing?
Well, I would say the lack of flexibility from the Canadian regulators. The regulations for crowdfunding aren’t really flexible, and the regulators will not accommodate easily if your business model doesn’t quite fit in the regulation, contrary to other jurisdictions such as the UK. However, we’ve seen recent developments from the Ontario regulator. It recently launched the OSC LaunchPad, a client team dedicated entirely to helping fintech companies navigate securities regulation. The initiative is designed to make the province’s regulatory regime more flexible and responsive to the needs of early-stage and emerging fintech companies. It would be great if the AMF (the regulator in Quebec) would do something similar.