Crowdfunding

This Hard Rock Hotel Just Raised $1.5 Million Through Crowdfunding

Senior Entrepreneurship Writer at CNBC
3 min read

If you haven’t been paying attention, you might be under the impression that crowdfunding is just a vehicle for artists to raise money for their indie film ideas. Well, crowdfunding has grown up over the past few years. It might be time for another look.

As of today, a swank hotel has used crowdfunding to raise some serious, seven-figure capital.

Realty Mogul, an online platform for that connects accredited investors with real-estate investments, announced that the Hard Rock Hotel in downtown Palm Springs, Calif., has raised $1.5 million from 85 investors around the country, completing the sale of crowdfunding shares the hotel made available. What this means is that 85 people have become part-owners in a hotel together.

This Hard Rock Hotel Just Raised $1.5 Million Through Crowdfunding

The Hard Rock Hotel in downtown Palm Springs, Calif.
Image credit: Warren Curtis (Realty Mogul)

Related: Crowdfunding's Next Hot Frontier: Real Estate

To be sure, this type of transaction is not the same variety of crowdfunding that happens on donation-based crowdfunding platform Kickstarter, where those who contribute money to a project receive a tote bag or some other non-monetary benefit. Instead, this is equity crowdfunding, whereby each contributor to the project gets shares or equity in the project, becoming a part-owner.

Currently, equity crowdfunding in the United States is only legal among accredited investors, or those investors who meet sufficient levels of wealth, as specified by the Securities and Exchange Commission. However, lawmakers are in negotiations to open crowdfunding up to unaccredited investors, too. Those rules are not yet final.

“Hospitality makes so much sense coupled with crowdfunding, " said Jilliene Helman, CEO of Realty Mogul, in a statement. Investors in the hotel get VIP benefits at the hotel, including free use of the hotel owner poolside cabana, 25-percent discounts off of the best available room rates and free room upgrades.

This Hard Rock Hotel Just Raised $1.5 Million Through Crowdfunding

The Hard Rock Hotel in downtown Palm Springs, Calif.
Image credit: Warren Curtis (Realty Mogul)

Related: Who Should Be Deemed 'Sophisticated' Enough to Be an Investor?

For the hotel, having a network of high net-worth investors staying at the hotel and bringing their friends to the hotel is a boon for business, too. “Not only can hotel owners raise capital for their projects, but they can drive bottom line results through a network of investors that are staying at the property, touting the property and encouraging their friends and relatives to frequent the property," said Helman.

Real-estate crowdfunding platforms have recently seen a burst of activity as the industry finds they help streamline the deal process and investors have warmed to online transactions. Realty Mogul itself closed a $9 million funding round in March led by Canaan Partners.

This Hard Rock Hotel Just Raised $1.5 Million Through Crowdfunding

The Hard Rock Hotel in downtown Palm Springs, Calif.
Image credit: Warren Curtis (Realty Mogul)

Related: Is 'Crypto-Equity' the Next Big Thing in Raising Money for Your Business?

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