Milwaukee-based blockchain platform e-States aims to democratize investment in real estate development projects
The blockchain-based platform, which launched last September, found its first partner in Madison-based developer The Neutral Project. The firm’s 32-story The Edison apartment tower planned in downtown Milwaukee became the first listing on e-States in December.
Through the e-States platform, anybody can go online, create an account, go through a streamlined screening process and purchase however many shares they’d like for a specific development project. They will then have a digital wallet connected to the platform where their digital shares are housed. The startup charges a technology fee to real estate companies for each property that is listed on its platform, but the technology is free for users.
“Things that real estate developers are usually burdened with, they no longer have to worry about because it’s being automated on the blockchain,” said Matthew Schneider, co-founder and chief executive officer of e-States.
A Waukesha native, Schneider had been working at a stock market analysis company before co-founding e-States.
It was his cousin, Sean Schneider, who initially approached him with the idea of lowering the “super steep” entry barriers everyday people face if they want to invest in commercial real estate.
At age 10, Sean had been training to become a professional cyclist, but a vehicle crash left him severely injured and unable to continue competing. A decade later, he was awarded a multi-million-dollar settlement stemming from the crash, which he immediately started re-investing into the community. That was his entrance into the world of commercial real estate.
“He had been investing for a while and has been a part of major developments in Milwaukee, particularly with F Street,” said Matthew Schneider.
Sean spent six and a half years investing $100,000 at a time into different commercial real estate projects. With most real estate developers not accepting anything less than a $100,000 investment at a time, he realized a sizable chunk of people were being left out from investment opportunities. That’s when he brought Matthew on board.
“That’s when tokenization and the possibilities of digital assets was starting to pick up,” said Matthew Schneider. “We figured out this was a really cool was to fractionalize ownership, provide liquidity and transparency, get rid of all the back office work, and help people invest into real estate projects.”
Between $400,000 and $500,000 has been raised through e-States for The Edison apartment tower so far. The project has an e-States funding target of $2 million. Investors can purchase a share for $1,000.
When choosing which developers to partner with, Matthew said the startup looks to support projects that will have a positive impact on the community.
He believes the Midwest is an underserved region not only for younger, emerging real estate developers, but also when it comes to the adoption of new technologies.
“There’s tons of real estate projects, but how many are actually done with heart and initiative?” he said. “When we learned about a mass timber structure and the initiative to become carbon neutral, I said let’s figure out how we can build this partnership.”
The second property e-States plans to list in the coming weeks is a multi-family complex that has rent-reduced units for adults with disabilities.
There are currently four people who make up the startup’s C-suite, along with one remote employee. Due to high demand from real estate developers, Matthew said the startup will be adding several positions in the coming months.
Aside from a $50,000 friends and family fundraising round, the launch of e-States has primarily been bootstrapped.
“Based on current projections, if we ended the year with a dozen grade-A properties, we would be doing really well,” said Matthew Schneider. “The youthfulness and ambition of the teams behind this…we’re really looking at the next generation of commercial real estate.”