YieldTalk news and links - 09 January 2022

✨ New Platform Review: Supervest – Invest in Merchant Cash Advances

Supervest is an automated alternative investment platform, currently focused on Merchant Cash Advances, where businesses pay a portion of their future income in exchange for an up-front cash advance. The total market for Merchant Cash Advances is more than $20B, and established players such as American Express, PayPal, and Square have their own MCA offerings.

Supervest’s co-founders have experience in mortgage lending, merchant cash advances, and consumer and business payment technology. They previously ran their own MCA company, and as with many online alternative investment providers, have built a technology platform to bring a novel asset class to a broader pool of investors.

(Supervest previously raised more than $500K in capital themselves through equity crowdfunding on SeedInvest.)

MCA returns will of course very depending on an investor’s specific portfolio, but Supervest says annualized returns of 15-25% are common among its users. Open to accredited investors. Our rating: Excellent. Go to Supervest.👈

Notable offerings

Masterworks (read our review) is offering fractional shares in the 1976 Helen Frankenthaler painting “Mineral Kingdom”. Frankenthaler was a leading artist of the American Abstract Expressionist and Color Field movements in the mid-20th century. According to Masterworks, “the Painting is an excellent large format example of the artist’s mid to late 1970s abstract work, which features colorful brushstrokes as well as her signature stain technique.” Masterworks offerings are open to all investors. Find out more at Masterworks. 👈

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Diversyfund’s (read our review) Growth REIT is now available, offering an easy way to invest in a portfolio of multi-family (apartment) buildings with a minimum investment of just $500. Open to all investors. Find out more at Diversyfund. 👈

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YieldStreet (read our review) has launched Single Family Rental Diversified Fund I, which will own a portfolio of single family rental (SFR) properties primarily located in key U.S. geographies including Atlanta, GA, Dallas, TX and Charlotte, NC, among others, with a target annualized return of 12-14% and a 30-month term. Open only to accredited investors. Find out more at YieldStreet. 👈

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BabyQuip is a baby gear rental service led by the co-founder of Match.com for families traveling with small children. They have a managed marketplace and platform that provides its community of over 800 independent contractors, called Quality Providers (QPs), the opportunity to build a business renting baby gear. Prospective QPs, mostly moms, undergo an application process, interview, background check, and extensive training on safety, cleaning, and hospitality. They are able to start delivering baby gear to families within days of setting up their profile. Quality Providers determine their inventory (gear they own), operating hours, delivery radius, prices and more. Open to all investors. Find out more at SeedInvest. 👈

Worth Reading this Week

A roundup of insights and interesting links from around the investment crowdfunding ecosystem.

Does it matter what time of day you make investment decisions? A new study published in the Journal of Business Venturing says yes – and that time varies by individual:

“What we found was when individuals evaluated an investment opportunity at a time that conflicted with their body’s natural internal clock – for example, a morning person or lark making a decision late in the day or evening – they tended to make poor choices,” said Cristiano Guarana, assistant professor of management and entrepreneurship at the IU Kelley School of Business and a co-author.

Real Estate

Like spotting a neighbor quoted in the local newspaper, it was fun to read this article on grocery-anchored commercial real estate and find a mention of Milford Plaza in Milford, Connecticut, where I lived for 2 years – and where I started YieldTalk, as an example of some of the challenging dynamics of grocery-anchored development (if by chance you find yourself there, the food across the street at Goodies is top notch). Also featured in the same piece was insight from the folks at First National Realty Partners (read our review), which offers investments in similar grocery-anchored developments:

“Sometimes, properties are marketed as value-add where the upside is unlikely to ever be achieved,” says Matt Annibale, senior director of acquisitions with First National Realty Partners (FNRP), a Red Bank, N.J.-based investment firm that focuses almost exclusively on grocery-anchored centers. “We see this often arise in situations where a center might be 85 percent leased, but 10 percent of the remaining vacancy will be nearly impossible to lease.”

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It’s no surprise that the word “capital” comes up a lot in the context of alternative investing, often just as a shorthand way of referring to money used for investment purposes. But this piece from Noah Smith offers a more nuanced look at the different things “capital” can mean (yes money, but also a business or even your home!), and why it’s important to remember that in one way or another, most Americans own capital, even if some don’t usually think about it that way:

Now let’s think about the most important part of capital ownership: Housing. Every government and intergovernmental organization counts houses — including owner-occupied houses — in a country’s capital stock. The rationale for this is that your house is part of the means of production — it produces “housing services” by giving you a place to live. Sure, living in your house doesn’t provide you with cash income, but it does let you keep a lot more of the cash you get from your job or other sources — because you don’t have to spend it on paying rent!

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According to the S&P Corelogic Case-Shiller Index, US housing prices were up 19.1% as of October 2021, with growth slowing slightly from the 19.7% one month earlier:

Phoenix, Tampa, and Miami reported the highest year-over-year gains among the 20 cities in October. Phoenix led the way with a 32.3% year-over-year price increase, followed by Tampa with a 28.1% increase and Miami with a 25.7% increase. Six of the 20 cities reported higher price increases in the year ending October 2021 versus the year ending September 2021.

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Connecting the dots between those previous two items (housing represents a huge portion of the “capital” accumulated by middle-class Americans, and housing prices continue their double-digit increase), it shouldn’t be a surprise that the pandemic has actually made nearly everyone richer. But humans are hard-wired to pay a lot of attention to relative gains (“Did my neighbor get even richer than I did?”) in the context of fairness (“and if she did, are the reasons for that fair?”), and a simmering sense of unfairness is weighing down consumer sentiment:

It wasn’t hard to predict the rich would get richer when this thing got underway. I’m not sure anyone expected the people on the low end of the wealth scale to benefit so much. It turns out giving people money and paying them more is good for their bottom line. … But an interesting dynamic is playing out in the middle class. Those households are slowly but surely seeing their share of the overall pie shrink. … This cohort made up 37% of the country’s wealth in 2003. It’s now under 28% of the total. Meanwhile, the share of wealth owned by the top 1% has gone from 25% in 2003 to more than 32% as of the latest reading.

(The optimistic read on that is that investment crowdfunding is opening up new ways to participate in wealth-building investments previously available only to the top 1%; the cynical read is that even so, it doesn’t matter as more and more wealth concentrates at the top…)

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This one isn’t technically about real estate, but speaking of Robert Shiller, he gets a shoutout in this HBR piece on the questionable narrative about “skyrocketing” wages for low-level workers:

Simply put, Shiller describes how a strong narrative, true or false, can catch on like wildfire and compel most people to ignore fundamental facts when making economic decisions. The power of the narrative can be so strong that it can compel people to hold on to a seemingly illogical beliefs for years — think the housing bubble or the dot-com boom.

Startups

Crowdfund Capital Advisors is gearing up to publish a report with findings from their annual industry survey (primarily covering Reg CF investments). According to CCA, since launching in 2016 over $1.1B has been invested into 4,850 startups and small businesses by 1.3M investors. Issuers were present in over 1,300 cities across the USA and in all 50 states. Notably half of all Reg CF investments made in the past 5 years were made in 2021, a sign of the strong growth in the sector.

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The strong growth in equity crowdfunding mirrors record-breaking global venture funding for startups of all kinds, as reported by TechCrunch:

Venture funding in 2021 broke records across the board, Crunchbase data shows, with investment last year up more than 10x what it was a decade earlier. … The figures underscore a dramatic change in the startup funding environment in the past year. Consider that at the end of 2020, almost a year into the pandemic, global venture investment had grown around 4 percent year over year.

Crypto/Web3

I’ve previously talked about how a lot of what’s happening now in crypto (blockchain, NFTs, etc.) is laying the foundation for future innovation, irrespective of whether today’s specific uses end up mattering at all. One can still believe that while acknowledging that the same crypto ecosystem is rife with charlatans and outright scams, just as most of the stocks on offer in the 1720 British stock market (before the South Sea Company bubble deflated) were terrible investments – if not outright scams – yet still portended the future of the public equities market as we know it today.

So in the spirit of tempering techno-optimism, here’s three contrarian pieces on the present and future of what many are calling “Web3”:

💩 First up, Stephen Diehl calls bullshit on Web3:

At its core web3 is a vapid marketing campaign that attempts to reframe the public’s negative associations of crypto assets into a false narrative about disruption of legacy tech company hegemony. It is a distraction in the pursuit of selling more coins and continuing the gravy train of evading securities regulation. We see this manifest in the circularity in which the crypto and web3 movement talks about itself. It’s not about solving real consumer problems. The only problem to be solved by web3 is how to post-hoc rationalize its own existence.

In his piece, Diehl references investor and futurist Tim O’Reilly (of the eponymous publishing company), for whom I worked for more than a decade. Tim has his own (insightful as always) take on Web3:

Repeat after me: neither venture capital investment nor easy access to risky, highly inflated assets predicts lasting success and impact for a particular company or technology. Remember the dot-com boom and the subsequent bust? Legendary investor Charlie Munger of Berkshire Hathaway recently noted that we’re in an “even crazier era than the dot-com era.”

(As an aside, I was tickled to see Tim reference the amazing work of Carlota Perez, whose writing on technology revolutions profoundly shaped my own understanding of the interplay among technology, history, and finance.)

Finally, James Grimmelman explains why from a legal and copyright perspective, NFTs aren’t (yet) doing what many of their proponents believe they are – nor are they (yet) necessary to in fact do many of those things:

Sometimes, NFT advocates avoid dealing with the inconvenient fact that the physical world doesn’t run on a blockchain by shifting to a future in online spaces that do. They propose a blockchain-based metaverse, or online games with NFT-based economies, etc. The thing is that we’ve had digital property in those virtual spaces for decades. None of them needed a blockchain to work.

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📉 Bitcoin is down nearly a third from its all-time high earlier this year, which could actually be good news from a tax perspective if you’re sitting on a loss but still want to “hodl” in the expectation of future gains:

One advantage crypto has over stocks is that the wash sale rule doesn’t apply to it. A wash sale is when a security is sold at a loss and repurchased shortly after. When this is done with securities, any losses incurred are not deductible. Some seasoned crypto traders purposely sell their digital assets below the purchase price and then buy them back at the same or similar price to take advantage of this tax-loss harvesting rule.

Odds & Ends

• For a limited time Personal Capital is offering 6 months of free wealth management services
• Real Estate investment platform Roofstock (read our review) has launched a new short-term rentals marketplace for investors looking to buy vacation or seasonal rentals (open to all investors)