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.
What’s your opinion of the Canadian fintech ecosystem?
Fintech has been gaining more momentum in Canada lately. It’s a good thing – I believe fintech businesses need to collaborate in order to create sufficient presence and awareness in the Canadian public. A lot of the services offered by fintech companies are complementary, and collaboration among companies can enhance their client offering. Also, collaboration will help open a dialogue with the traditional lenders and financial institutions.
In Canada, there’s less competition among financial institutions than in the US. It helps make the market more stable in case of financial turbulence (such as in 2008), but it also prevents and lessens innovation. In the US and in Europe, financial institutions are more inclined to innovate and partner up with fintech companies. For example, in France, the public investing in real estate through crowdfunding can invest alongside financial institutions.
Last summer, RealStarter joined the FCP studio, which acts as a hub for Montreal fintech startups. How did this partnership come about, and how is FCP supporting your mission?
Last summer, we attended the StartupFest in Montreal and made T-shirts with our logo. People from FCP saw us in the crowd and contacted us afterwards to see if we would be interested in joining the Studio. They introduced us to the fintech community and offered us a space to work, as well as support, which is important when you start a company. Moreover, the way the FCP Studio is designed allows Studio’s companies to share knowledge and experience. It’s useful when we face the same challenges, for example from a regulatory standpoint.
The FCP Studio also hosts events to promote the fintech industry. Not only do the events give great visibility to fintech startups working at the Studio, they’re helping to grow our network and creating business opportunities.
Currently, you’re focusing on the Quebec market. Down the line, do you plan to expand to other markets?
Our goal is to offer real estate investment opportunities to all Canadians as soon as possible. Actually, we have the licenses to operate in four provinces (British Columbia, Nova Scotia, New Brunswick, Quebec), but our first deal will be in Quebec in the Charlevoix region. Our priority is to make it right in our own backyard before expanding to other markets. Also, the Canadian market has drawn a lot of interest from foreign investors lately. We would eventually like to offer them the possibility to invest in our market via our platform.
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