Shadow Ventures launches crowdfunding for proptech startups

The latest in real estate crowdfunding: an accelerator aimed at helping early-stage proptech startups.

Shadow Ventures, an Atlanta-based venture capital firm focused on real estate and construction tech, is raising money from individual investors for a new accelerator program that would help companies that are just starting out.

Founder and CEO K.P. Reddy said his goal is to be “the Robinhood of VC,” referring to the stock-trading app.

The crowdfunding aspect is rooted in his belief that not all investment decisions should be made at the C-suite level. “I want everyone to be able to access these investments,” he said, envisioning a scenario in which a property manager who ordinarily wouldn’t be qualified as an investor could participate.

“If the most you can afford is $1,000, cool,” he said, referring to the minimum investment for the fund. “You should.”

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Established in 2017, Shadow Ventures focuses on pre-seed and seed-stage companies, and also runs Shadow Labs, an incubator with 70 pre-seed companies. Reddy declined to share the size of its fund.

For the accelerator, Shadow Ventures will introduce a new cohort every four weeks. Each group will have four or five startups focused on a specific sector of the market. The first will focus on multifamily, followed by design, construction and commercial real estate tech.

The goal is to invest $1 million in each cohort, Reddy said. Each startup will get $100,000 at the beginning of the 20-week session, and as they progress, the ones that acquire the most customers will get additional funding. Reddy said Shadow Ventures has recruited venture partners to mentor companies in each cohort and invest $5,000 personally.

Reddy said the idea for an accelerator predated Covid, but the pandemic accelerated plans s funding dried up for pre-seed stage companies. Shadow Ventures ultimately aims to invest in companies that graduate from its accelerator.

Real estate crowdfunding startups first emerged in 2011. Since then, companies like CrowdStreet and Fundrise have raised billions of dollars in equity and debt to invest in hard assets. Earlier this year, CrowdStreet said it surpassed $1 billion raised for real estate deals. In August, PeerStreet launched a distressed-debt investment fund.

Not ever fund has been successful. RealtyShares folded in 2018 and Prodigy Network has been dogged by lawsuits from investors claiming that they lost money. (Founder Roberto Niño died in May.)

And Robinhood, the popular stock-trading app that Reddy referenced as an inspiration, came under scrutiny this year for allowing unsophisticated investors to place risky bets.

Reddy acknowledged the concern but said Shadow Ventures will vet startups before accepting them into its accelerator. “VC is high risk by its very nature, but it’s not like playing roulette,” Reddy said. “You still have to do the work.”
On its website, Shadow Ventures said it is targeting a 50.39 percent internal rate of return after 18 months.

By investing in cohorts, investors will also broaden their bet to four or five companies instead of one. “There is a mortality rate of startups, no matter how great a job we do,” he said.