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237 Lynn Smith, Founder, CEO Buy the Block

I've been in a crowdfunding space now for a little over 10 years. So, transitioning to Buy the Block was just a natural transition. I run a crowdfunding platform now for 10 years plus. It is BBnomics. It's available for the community, so they can raise funds for different projects, community causes, businesses, nonprofit, et cetera. So, upon being in the crowdfunding space, always knew that this was something that was going to be able to pass at some point and be available to the community, basically, crowd investing.

So, always, I paid attention to the laws, making sure that I understand what's going on. And when it passed, I wanted to make sure that that this opportunity was available to other communities as well, so they can be able to invest with each other, so they can support each other, so they can develop their community, and having a say. Having a say if they want to leave a neighborhood, or having a say if they don't want to leave it. So, being able to say that, "Okay, if this building is up for sale, we can actually pull our moneys together, and be able to purchase the property, and have it as part of the keepsake of the community." So, having that option is why Buy the Block exists. And this is how I got here.

Community Investment

Pre-JOBS Act, GoFundMe, Kickstarter, that's the pre-JOBS Act. The crowdfunding itself has been around longer than the Regulation CF. So, it basically piggybacked that idea. Back in 2009, that's when crowdfunding online got very popular. The Kickstarters, GoFundMe, Indiegogo of the world started these portals basically where you can raise money to do anything. Basically, you go to these sites, you set up a campaign, and you can allow the crowd to put money in it. So, that's what I've been in. That's the space that I've been in. And I've been in it for a while managing my own platform that allows people to actually raise money using crowdfunding.

The purpose of that, specifically, is to be able to allow people in the community to crowdfund and crowd invest the properties in their community. Gentrification has been a huge issue in predominantly black communities. So, I wanted to be able to provide an avenue for our community to be able to say, "We're either going to play a role in it, or we're actually going to be the ones that are actually building this community, as opposed to watching everyone come in, take the properties, sell them off, and redevelop it, and then relocate the people that live in the neighborhood."

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Sense of Urgency

So, the neighborhood that I grew up in has experienced a lot of gentrification. And neighborhoods that I've lived in, I mean, I've seen it, I've been a part of it. So, wanting to be able to provide a resource for our community to be able to have access or be able to actually obtain the money to get those buildings, be able to obtain those properties, and purchase those properties, and be able to keep those buildings in the community, and keep the ownership of those buildings in the community. That's how Buy the Block exists.

Being that I am a woman of color, and I have lived in these neighborhoods, I've seen it firsthand, and being able to actually witness what happens, seeing or being displaced, being moved, being not part of the development process, but just being on the outside looking in. So, this definitely put a sense of urgency for our community or to be able to have a solution for our community.

There's a lot of people that when these things happen, they may not be able to have the -- they don't have the capital. They don't necessarily have the -- They may have the skills, but they don't necessarily have the capital.They don't necessarily have the circle of people around them, or the group of financiers to make sure that their deal can close and be able to develop that specific building or that project.

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Opening Doors

So, this is what Buy the Block is about, being able to, one, provide access to capital for these developers that, a lot of times, the doors are closed on them. The banks don't really lend to them. VCs don't don't always extend a hand to them. So, we want to make sure that we are there. They have an alternative source to be able to purchase or acquire those buildings, get the funding, and then close on them. And then, of course, keep that in the neighborhood and keep that ownership in the neighborhood because, like I said, a lot of times, we're on the outside looking in, or we're on the inside, and we're getting shut out of these developments.

The reason for Reg CF is because we wanted to be able to open it up to everyone. And that's what Reg CF does for Buy the Block, allow anyone in the community to invest with as little as $100 to be able to actually be a part of a development. Accredited investors opening it up only to accredited investors was a very small pool in the black community. I'm not saying that they don't exist, but it's a very small pool. So, we wanted to make sure that we can open it up to a much larger audience, a much larger group of people.

Crowd-Investing vs. Crowdfunding

We are open to everyone, but we do have a niche market. And that niche market is to serve our community. And our community can be of any color. I mean, we're open to anyone. Sponsors can come from any area, and they can also come from any -- They can be any color. We're not closing our doors to anyone. Absolutely not.

There's still a lot of education to go around. We definitely want to make sure that everyone know what they're participating, understand the rules, and the regulations, and so on. But so far so good. It's been very receptive. It's been very receptive. The community has been very receptive. Just as anything, because it's fairly new, it still requires a lot of education for the investors, for the sponsors to make sure that they know that they're following all the rules that are required to be able to do this one. But so far so good, yeah.

The biggest challenge, I think, is the confusion between crowd investing and crowdfunding. Everyone knows what crowdfunding is and how to do that. I mean, I think, right? Crowdfunding is donation reward-based. So, for example, you put up a campaign, and I donate $100 to it. And for donating $100, I get a t-shirt, and a plaque, or something like that. But part of the proceeds, you still get towards your business, or being able to create a model or a prototype of something because a lot of crowdfunding is used for the prototype. So, I have this great idea for a watch, and here's how I can get it developed. People can pre-purchase it. It's an idea. It's a mock-up, but when it does produce, here are the people that actually get the the actual watch because they were the first people to buy into the concept.

Solving Problems

Crowd investing is slightly different. Instead of getting the watch, or the T-shirt, or the plaque, you're actually owning shares in the actual project itself. So, at some point, once the project becomes fruitful, or, actually, it earns a profit, and it generates revenue, you can be an actual shareholder and earn dividends from it. So, that's the difference between crowdfunding and crowd investing. And I think that's where there's a little bit of confusion that people think crowdfunding is still, or you're crowdfunding basically. "I'm putting money, so that means I'm donating." But no, you're not. You're actually investing.

The deals are very community-oriented. So, for example, if it's something that actually solves the problem or, for example, grocery stores solving food desert issues, for example redeveloping land to provide affordable housing. So, these are the type of deals that come to Buy the Block, and these are the type of deals that we actually are supporting through the network.

The screening process is very, very long and tedious. We have to work through all the documents, make sure that it is a legitimate company. We do all the required checks and form that one FINRA requires and the SEC requires us to do. And then, we have an underwriting process where we actually go over every deal and make sure that it can be profitable for the investors as well. And then, from there, once it gets through the underwriting process, then we can determine if it will actually be a deal that we can host or not.

Range of Deal Types

Our deal sizes range from under 100,000 to millions. I mean, it really depends on the project. Some require more capital than others. I mean, building a single-family development, it's in the millions as opposed to in the hundred thousands. So, the range is very, very wide. It really is, but we have some really great sponsors and developers out there that are definitely using this model to be able to acquire properties and be able to develop their communities. So, it's a wide range.

They're coming from all over. There's not a specific geographical location. They're coming from, oh god, I mean, Texas, to Florida, to Washington. I mean, they're coming from all over. So, I mean, I think that's a good thing. Our reach is very, very far and wide.

We've had sponsors that come to us that are not African-American, and they found us through whether they've found us on online, or they found out about us through other networks that either shared our story at some point. But we've managed to get quite a few very ranging, and the Hispanic community, African-American community, everyone. Everyone has been moved. We've been able to get people from all over, all over walks of life.

Marketing

Marketing is really is up to the sponsor. Honestly, it takes a lot of work from the sponsor to be able to put themselves out there, and talk about what they're doing, and get people excited about what they're doing. So, that's what gets the most attention. So, we really stress to our sponsors to be out there. Get people knowing what you're doing, how you're doing it, and let them know that there is an opportunity available. Just get yourself out there, get what you're doing out there. That seems to work better than anything.

Nobody can explain what you're doing better than you. I mean, I could talk about it, and I can say, but the only person that can really explain what you're doing is the person that actually came up with the idea, the CEO, the president of the company. So, that's something that I really encourage the sponsors to do is get themselves out there and let the community fall in love with them.

They'll put up all whether it'd be -- They talk about it through an interview or any platform that it's open to. There were some sort of shared linked program. And then, they'll point to and they'll say, for more information, like you said, visit Buy the Block. And that's how they drive investors to it because once investors get there, they read the information, they download all the documents, then they get an idea, get a better sense of what's being offered to them.

An Eye to the Future

The good sponsors are not afraid to put themselves out there. They're not afraid to talk about what they're doing. They're not afraid to get people to understand what they're doing. If they are building an office complex, they're not afraid to explain, "Okay. Well, this is the history I have. This is what I've been doing. This is the work that I've done before. And here's the next project I'm taking on." So, that's the difference between a sponsor that really gets the word out there and one that don't. The ones that don't do very well are the ones that don't talk about it at all. They don't really let the people in on what they're doing, or they're not comfortable putting themselves out there and talking openly about what they're doing.

Five years from now, I would hope we are spending millions of dollars worth of development, and being able to make sure that sponsors are holding their end of the bargain, and the investors are actually seeing the reward for taking risk, basically. So, yeah. I mean, that's pretty much what I would like to see five years from now. Just being able to make sure that everything that the sponsors say that they would do, they're holding up their end of the bargain, and investors are seeing the reward for taking the risk on the sponsors.

Right now, the state of the real estate market is a little undetermined. It's hard to say where it's going. I have seen some updates about some slowing down in some areas. But, I think, for the most part, it's still pretty steady. It's hard to tell. It's really hard to determine which way it's going because there's a bit of --What's the word I'm looking for? There's still a lot of hope. There's still a lot of people that are in the market that are that are buying, and selling, and still able to generate revenue, and be able to do what they want to do in the real estate market. But it's hard to determine right now. I think we have to wait and see. I really do. I think we have to wait and see.