We’re often asked, “How’s Groundfloor doing as a company?” Looking back on 2016, we’ve prepared a graphical summary to answer that, and thought some additional commentary might help put the data into context.
Growing a startup often requires facing down tradeoffs that tempt a management team to drift off-course and off-mission. Four years after our founding, at Groundfloor we remain steadfast in our commitment to restructure the capital formation status quo, even though delivering equal access and opportunity to invest has come at a price. In particular, although we’re proud of having grown origination volume 621% to $16.5 million in 2016 (among other 2016 growth stats), we could’ve chosen to grow faster, sooner. Indeed, while we stood pat to maintain a broad and inclusive base of capital, many peers in “real estate crowdfunding” made Faustian bargains with institutional capital to achieve even higher growth rates. We haven’t, and won’t.
Controlling growth has been a practical effect of staying true to our company mission. It has also helped us to maintain loan quality. Comparing year-over-year loan originations, we tripled our quarterly unit volume in Q4 2015 and Q1 2016. Yet, looking back at the performance one year later, still only one loan out of 108 repaid to date has returned less than 100% of the principal due back to our investors. This performance looks even stronger in the context of delivering loans with an average annualized return of 14.16% in 2016, a figure that towers over returns for the S&P 500 and REITs as a category. Thanks to the rich industry experience of our expanded team, we’ve become not only a bigger lender with more loans to offer for investment, but a better one, too.
Seeing that our underwriting and asset management teams and processes were ready, in Q4 of 2016 we increased our year-over-year loan production rate to 5X. We originated 30 loans for $4.5 million in December alone. Even though that’s the largest monthly cohort of loans we’ve ever originated, we also expect it to be our best. But with Groundfloor, unlike our peers, you don’t have to take just our word on that. Submitting to a higher standard, we report our performance every month to the U.S. Securities and Exchange Commission (here’s our latest filing). Throughout 2017, you can see for yourself how the quality of our lending changes as we grow.
Optimizing structure and principle over achieving mass has not only led us to grow more conservatively. It also leads us to operate differently from the mass of startups in our space that were built for and by institutional capital and the accredited 3%. These differences matter to discerning investors. For example, our transparency and accountability stand out in an industry that reportedly sweeps mistakes and failures under the rug. Not only do we report our performance monthly via public regulatory disclosures, we also publicly shared our post mortem of our first loan not to return full interest, as well as one detailing the circumstances of our first loan not to return full principal.
In summary, there’s never been a better time to be an investor or a borrower with Groundfloor. Having delivered on our promise of more loans in more places in 2016, we have big plans for 2017 as well. Whether you’re just now joining us, have been with us since the outset, or tuned in somewhere in between, we’re glad you’re here and feel fortunate to serve you. Let us know how we’re doing in the comments below or send feedback to firstname.lastname@example.org.