LEX, a marketplace offering commercial real estate stakes for small investors, just raised seed funding from Greycroft and Thor Equities
LEX, a startup building a securities marketplace for commercial real estate, just nabbed $4 million in seed funding co-led by Greycroft and Thor Equities.
- The marketplace will connect landlords looking to recapitalize commercial properties with a mix of accredited and non-accredited investors.
Greycroft, the venture firm that has invested in micro-investing app Acorns and alternative investment company YieldStreet, has already invested in commercial real estate investing platform Biproxi.
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LEX, a securities marketplace for commercial real estate, just announced $4 million in seed funding co-led by Greycroft and real estate owner and developer Thor Equities.
The startup is building an SEC-regulated alternative trading system for real estate that gives a way for both accredited and non-accredited investors to invest in the equity of a building.
Greycroft, the venture firm that has invested in micro-investing app Acorns and alternative investment company YieldStreet, has recently also invested in commercial real estate investing marketplace Biproxi.
The marketplace will connect landlords looking to recapitalize commercial properties with a mix of bigger investors and non-accredited retail investors who don't have the minimum assets to typically invest in commercial property. The idea came from cofounder and CEO Drew Sterrett's experience in private equity.
"How do you have the largest asset in the world and there is no liquid and transparent market behind it?" Sterrett said.
Commercial real estate is seen as a relatively illiquid investment, as properties usually have to be sold in full for the owner to recoup any cash. LEX instead is looking to securitize the equity in the building into partnership interests priced at $100 each that can be traded on its market.
The marketplace, by bringing real estate investment to non-accredited investors, drastically increases the reporting and regulatory load that LEX has to burden before opening it up. Sterrett said that it has looked to avoid startup tech's famous "move fast and break things" motto.
"We don't believe in fixing it later," Sterrett said.
Sterrett said that the decision to open up LEX to non-accredited investors is intended to increase the liquidity of the equity in a building.
He used the example of a traditional partnership with five partners. If one were to leave, they'd need to find another partner or outside investors to buy their share. If there are hundreds of partners with different-sized stakes in the property, it becomes easier to unload those shares to a larger field of potential investors, which Sterrett hopes includes traditional institutional and high-net worth investors as well as non-accredited investors.
Smaller investors are often not as well-versed in real estate investing, but Sterrett says that LEX has "tried to diminish as much risk as possible." LEX says it will only recapitalize "stabilized commercial real estate" and has no plans at this time to delve into the riskier world of debt-financing acquisitions or new developments.