YieldTalk news and links - 08 October 2021
This week: A platform for financing small-business inventory; massive capital flows into startups in Q3 (see also: Q2); the taxman cometh for crypto.
New/Updated Platform Reviews
📦 Kickfurther is a novel marketplace where brands who sell physical products can find backers to finance inventory, which is sold on consignment. The repayment period can be relatively short (often a few months) with very attractive returns, but prospective investors should be sure to understand they are purchasing physical product inventory, not an investment security. Our rating: Outstanding.
- 🎶 Republic (our review) has launched what they’re calling the “S-NFT” (or “Security Non-Fungible Token”) for investing in future music royalties. According to Republic “Now, fans can invest in an artists’ next song or album and get paid royalties as a result. Using NFT and blockchain technology gives the investors and the artists complete transparency and a simple mechanism to pay out returns.” More at Republic
- Crowdstreet (our review) has launched their Opportunity Zone Fund II, which is “an actively managed Qualified Opportunity Zone Fund that targets diversification across ~4-6 projects with potential to defer, reduce, and eliminate eligible capital gains taxes for investors.” Minimum investment is a hefty $150K, though it may offer significant tax advantages. More at Crowdstreet.
Worth Reading this Week
Crunchbase published their Q3 venture funding report and it’s a doozy: nearly $80B of venture capital flowed into startups in Q3, following on the $80B invested in Q2, which was the second highest quarter on record:
North American venture capital investment held up at near-record-setting levels in the third quarter, as both early- and late-stage dealmaking remained on fire and big exits accumulated. Overall, investors put $79.6 billion to work across all stages from seed through technology growth, according to Crunchbase estimates. That’s just a hair shy of the $80 billion total for the prior quarter, and the second-highest total on record.
Speaking of startups and growth, the always-insightful MicroVentures (our review) blog has a great (and concise!) piece on working out apples-to-apples comparisons of growth rates and revenue multiples (for example, 1.1X annual growth is roughly equivalent to 1% monthly growth):
Startup growth rates, especially, can often be dressed up by founders to present the business’ best side. An example of this could be presenting the company’s monthly growth rate instead of the annual growth rate. Naturally, founders will select the metric that looks the best. For investors, a helpful tool to deploy when assessing metrics such as these is standardization. This makes it easy to distill these numbers down and compare them against other potential investment opportunities. This is especially handy when looking at top-line growth rates, which is a metric that can be commonly overstated by startups.
After quite a summer slump, Bitcoin has shot up past $55K in the wake of news that financier George Soros’s investment firm has been buying BTC:
“Investor interest in cryptocurrency and demand from our fund services clients have grown strongly over the last few years,” said Gunjan Kedia, vice chair of U.S. Bank’s wealth management and investment services in a recent news release. “Our fund and institutional custody clients have accelerated their plans to offer cryptocurrency.”
A lot of attention in the Crypto space is (understandably!) paid to the super weird stuff, like DogeCoin. But just as behind the Webvan and Pets.com sideshows of the late-90s dot-com crash were the seeds of massive disruption from the likes of Google and Amazon, pay attention to the less glitzy “plumbing” innovation happening on top of blockchains and smart contracts, like this fascinating “game mechanic” innovation (courtesy of Fred Wilson at Union Square Ventures):
Users need a $WRITE token to publish on Mirror and the best way to get $WRITE tokens is to join the Write Race that happens every Wednesday 5pm eastern. Anyone who holds a $WRITE token can vote for new users in the Write Race. The top ten vote getters are airdropped a $WRITE token and can publish on Mirror.
A few weeks ago we talked about how changes to current “self-directed” IRA rules were in the works as part of the infrastructure legislation making its way through the DC sausage factory, and it looks like some major changes to tax rules around cryptocurrencies are also on the table:
Legislators are hashing through a $1 trillion bipartisan infrastructure bill that would expand the definition of a “broker” to include any entity that effectuates “transfers of digital assets”—like Bitcoin—”on behalf of another person.” Pretty soon, many more 1099 forms will be flying.
A recent theme in this newsletter has been an increase in large institutional investors buying up single-family rentals (though they still make up a very tiny percentage of overall ownership). Home ownership rates are much higher in the US than in most peer countries in Europe, and the Economist puts forth a cautionary tale about what can happen if tenants feel squeezed by big-investors-as-landlords.
Real-estate investment trusts (reits), private-equity firms, insurance companies and pension funds see the single-family rental housing market as a relatively high-yielding hedge against inflation that has been spared the impact of pandemic-related lockdowns on offices and shops. But housing affordability has high political sensitivity. In Berlin, rents have roughly doubled in a decade. Across Europe their rise has outpaced wage increases. In America, where a quarter of renters pay more than half of their income to landlords, rents in June were up 7.5% compared with last year, when they rose by 1.4%. The highest increases were in Phoenix and Las Vegas, up by 16.5% and 12.9%, respectively over the same time period. Nationally it is hard to lay the blame for the rent rises on institutional investors. But in some cities where they concentrate their portfolios, faceless megacorps are increasingly being seen as part of the problem.
But just as tech-driven efficiencies have made it easier for big investors to buy up SFRs, it’s also getting easier for individuals to buy single-family rentals. Following on the success of firms like Roofstock (our review), a “proptech” firm named Awning has raised nearly $10M to build out their own SFR marketplace targeting individual investors:
Each Awning customer is paired with one of Awning’s full-time agents who acts as an advisor to determine their investment strategy, review properties that meet their requirements. Awning can also help investors secure financing and connect buyers with vetted property managers.
And while there are plenty of flame wars online between real estate and stock investors, it’s notable that Warren Buffett’s longtime #2 Charlie Munger has at least some of his (um, sizable) portfolio in apartment buildings.
Odds and Ends
- Art-investing platform Masterworks (our review) has officially hit unicorn status 🦄, topping a $1B valuation in their latest funding round
- Eve Picker, founder of mission-driven real estate platform Small Change (our review) announced she’s updated the domain for her podcast and related content
- Real estate platform Groundfloor (our review) has formally launched their mobile app “Stairs”: “All Stairs deposits qualify for 4% interest, and now you can earn an additional 2% interest by setting up Recurring Transfers (+1%) and by turning on Round Ups (+1%)”
- Commercial Real Estate investment platform EquityMultiple (our review) announced the launch of Short Term Notes, offering short-term liquidity (the first series has a 180-day term)
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