New/Updated Platform Reviews
Hedonova is a recently launched hedge fund offering accredited investors exposure to a wide range of alternative asset classes such as real estate, art, fine wine, litigation finance, and startups – often investing through the same platforms we cover here at YieldTalk – with a very low $1,000 minimum investment. The fund has a short track record and prospective investors should be sure to understand the hedge fund fee model, but Hedonova represents an attractive way to gain exposure to a diverse pool of alternative assets with an exceptionally low investment minimum. Our rating: Excellent.
Worth Reading this Week
A roundup of insights and interesting links from around the investment crowdfunding ecosystem.
As expected, the SEC has approved the first Bitcoin Futures ETF, marking the first time ordinary investors can get exposure to investor via their regular brokerage account:
After years of campaigning from crypto enthusiasts and industry leaders, ProShares will be the first ETF provider to offer investors exposure to Bitcoin through an ordinary brokerage account, without having to hold the cryptocurrency directly. The SEC is now considering additional proposals made by Valkyrie Investments and Vaneck – who are also expected to receive the green light to sell Bitcoin ETFs to investors in the coming months.
Also as expected, Bitcoin’s price has continued moving up on the news, hitting all-time highs. It’s worth noting that multiple previous “catalysts” that were supposed to herald new mainstream adoption of Bitcoin ultimately ended up marking near-term price tops – though also worth noting that in the long-term, adoption did continue growing (along with the price).
During Bitcoin’s last run-up (wow, 2017 feels like a looooong time ago!) I wrote about how even if Bitcoin is just a speculative price bubble, speculative bubbles play a really important role in rapidly diffusing important innovations:
To put it another way, the only way a genuinely revolutionary technology (the telegraph, railroads, the computer, the internet…) can actually produce a revolution is if it’s deployed systemically. And because that’s incredibly expensive to do, one way our economy seems to marshal sufficient capital for the job of quick diffusion of innovation is through the promise of great wealth at the heart of any speculative bubble.
One of the reasons there’s so much enthusiasm about Bitcoin isn’t about Bitcoin per se, it’s about the potential of the underlying technology of distributed ledgers, which are the foundation of nearly every cryptocurrency (and of the related technology known as “non-fungible tokens” or NFTs), which are here to stay irrespective of whether Bitcoin’s ultimately goes to zero. As I put it back in 2017:
For all the hype, Bitcoin (or more properly the underlying set of technologies and mechanisms it represents) is just another in a long line of technological and financial innovations stretching back to language through writing, the barter system, then printing and the telegraph, paper currency, the lightbulb, the joint stock company, the steam engine, the mutual fund, and so on. My children will find it as difficult to imagine a world without distributed ledgers as I do a world without the telephone or a credit card.
Pulling on a similar thread, Chris Dixon at Andreesen Horowitz (a16z) put together a compelling and digestible case for digital tokens (especially NFTs) as critical “primitives” of a massive new wave of use cases that we’ve barely scratched the surface on, the same way the early Web was almost entirely just “documents on a screen”:
A lot of today’s NFTs are adaptations from the offline world of art and collectibles. This leads people to think that NFTs are limited to those domains, in the same way people once thought the web was limited to brochures and magazines.
We’ve been talking for a while now about the influx of institutional money into the single-family rental (SFR) market, including the related trend of building (or buying) entire neighborhoods of SFRs to be managed as a single community. As a sign of how seriously institutional investors are taking this opportunity, there’s now advice coming out for those investors on how to apply their experience with the scale of large multi-family developments to the SFR community model:
For developers of SFRs, there are some factors that are unique to the subsector that should be considered. For one, a particularly negative impact of the pandemic has been an extraordinary increase in lumber prices, which has added thousands of dollars to the bottom line for each home being constructed. Another challenge has been persuading title companies and lenders to view SFR communities in a manner that is more akin to multifamily apartments than hundreds of individual homes. If title companies and surveyors were to view the communities as hundreds of individual homes and price out hundreds of individual title policies and surveys, the title and survey costs would be prohibitive. Instead, when viewed as a commercial investment in the single community more similar to a multifamily apartment building or garden apartments, title and survey costs can be appropriately managed.
Speaking of multi-family housing, Wealth Management magazine has published their list of the top 25 growth markets for multi-family rent growth.
👋 Just a friendly reminder that the other side of the strong “rent growth” coin (yay!) is “inflation” (boo!), the same kind of duality we’ve talked about before when it comes to the recent surge in home prices – great news for household wealth if you own, but not so great news if you’re trying to buy…
Lastly on the Real Estate front, Visual Capitalist published a handy visualization of the world’s largest current real estate bubbles (I admit I did not expect Frankfurt 🇩🇪 at the top of that list).
Amid the news that they’ve raised a $150M Series B investment, Republic (our review), CEO Kendrick Nguyen told TechCrunch that if an exchange suitable for secondary trading of digital securities doesn’t emerge soon, Republic is prepared to build one:
Nguyen said Republic would be willing to “partner right now” with an exchange “that is capable, that delivers good customer service, and that can facilitate secondary active trading of securities and digital securities” in the U.S. But it doesn’t exist, he maintains, so “if in another year, we do not see a solution out there, Republic will look to invest or build directly through an affiliate, a secondary exchange for digital securities.”
As many investors (both individuals and institutions) remain flush with cash, 2021 has already shattered all records for capital raised for startups, and notably it’s non-traditional VC sources that have the most cash on hand to continue deploying:
Much of the funding in 2021 has gone to tech startups. During the pandemic, investors have been eager to put their money behind the companies that are building software that helps people work, shop, connect with loved ones, and stave off boredom at home. Tech is one of the few sectors still delivering massive returns amid inflation fears, supply-chain chaos, and economic disruptions from the extra-contagious delta variant of covid-19.
Jeremy Liew of Lightspeed Capital says that the “fake-it-til-you-make-it” culture endemic among startups (a close cousin of “hustleporn”) bears a strong resemblance to the kind of unhealthy expectations and self-image problems seen among many social media users, most notably on Instagram:
How are you doing? “Oh we’re killing it. Everything is awesome. We just raised another round of capital. Business is booming.” You can’t actually answer anything but that because everyone’s expectation is that if you don’t say that, you’re a loser. There is a real pressure.
When people think about equity crowdfunding, they often think about flashy tech startups, but one of the goals from the beginning with Reg CF was to open up new capital sources to more traditional “main street” businesses, and there’s evidence emerging that when the SEC raised the cap on how much a company can raise in a year via Reg CF to $5M (up from $1.07M) it helped drive more adoption from emerging beverage brands in particular:
Raising money from the masses can also come with fewer conditions, [Driscoll Ugarte, a partner at law firm Duane Morris] said. Pitching to VCs and other larger investors can yield bigger checks, but those investors usually expect a say in the startup’s operations. “My advice to clients is ‘Let’s use Regulation CF in the beginning,’ because once you have reached an inflection point, the VC and angel groups will have less leverage over you,” he said.
Odds and Ends
- Sherwood Neiss from Crowdfund Capital Advisors produced a handy 8-minute video recap of Q3 in Reg CF fundraising
- “Exotic” alternatives platform YieldStreet (read our review here) announced it’s now offering VC investments in private companies.
- Crypto lending platform Blockfi (read our review here) announced support for buying crypto via ACH.
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