YieldStreet

Summary

YieldStreet stands out among crowdfunding investment platforms by offering a wide range of asset-backed debt investments with relatively short hold times, from litigation financing to commercial real estate to more exotic investments like a loan backed by the contract of an NBA player.

  • Website: https://yieldstreet.com
  • Investment Types: Litigation Finance and Real Estate
  • Security Types: Debt
  • Sectors: Commercial Real Estate, Exotic Assets, and Litigation
  • Minimum Investment: 5000
  • Advertised Returns: 8-20%
  • Must be accredited

Pros

  • Most investments are cash-flowing and all are secured with assets
  • Short and medium hold-terms (usually 12-26 months)
  • Many offerings are "pre-funded", which means less time waiting for interest payments to start

Cons

  • Limited to accredited investors
  • Relatively high minimum investment ($5,000)
  • Typically only one active investment available at a time

YieldStreet logo

Overview

Most of the new crowdfunding investment platforms focus on a particular type of investment (eg, Prosper in consumer debt; Fundrise in Real Estate; FundersClub for startups). And even within each category, there’s often further specialization — for example, among real estate sites, some focus on residential, others commercial. Understandably, the goal seems to be to clearly define a niche in order to stake out territory within the broader market.

YieldStreet seems to be taking a different approach, and it’s become one of my favorites to watch in terms of new opportunities. Their focus isn’t on a particular asset class, but instead they look at a wide range of secured investments with relatively short hold times.

Types of investments YieldStreet offers

The offering types available at any given time vary quite a bit, but all of YieldStreet’s investments are asset-backed debt offerings. A few recent investments include:

  • Accounts Receivable financing
  • A loan to an NBA player (secured by his multi-million-dollar contract)
  • “Hard money” lending (short-term loans to real estate investors)
  • Loans to fund ridesharing fleets (secured by the cars)
  • A range of litigation financing (secured by the expected judgment, kinda like a Receivable)

Investments on YieldStreet typically have hold times of 1-3 years.

What do you get when investing with YieldStreet?

As with many of the Reg D investment platforms, an SPV (special purpose vehicle) is created for each investment, typically an LLC. Investors receive a membership interest in the LLC equivalent to their proportional investment. For example, if you invest $5,000 out of a $100,000 total raise, you would receive a 5% ownership interest in the LLC created for the investment.

You are also then entitled to a proportional share of the interest payments as well – in that example, you’d receive 5% of the interest payments made by the borrower in a given period.

YieldStreet fee structure

Fees vary per offering. In some cases, a flat fee is charged to the offering sponsor (and if so that is disclosed on the offering page). YieldStreet also collects a management fee on all offerings, which varies from 1-4% annually. All advertised returns are shown net of fees.

Potential returns and cashflow

Most investments on YieldStreet pay regular monthly or quarterly interest payments (and some also include principal payments), which are automatically deposited back into your bank account. Investments are usually between 12-36 months.

Some of the investments (particularly in litigation finance) have what are known as “event-based” payments. For example, you would receive payments as cases are settled through the civil court system.

Regulatory framework and due diligence expectations

YieldStreet is affiliated with YieldStreet Management, LLC, which is a Registered Investment Advisor registered with the SEC. Investments are offered under SEC Reg D, and are only available to accredited investors.

According to their website, YieldStreet “carefully selects each and every originator who posts deals on our platform”, and they have a rather interesting “anti-investments” section, where they provide some detail about deals they [em]didn’t[/em] choose. While it is of course fundamentally content marketing, it’s useful to hear them explain their reasoning, and helps provide some additional context for evaluating the active investments. While a platform’s own efforts should ever be a substitute for your own due diligence, that curatorial approach is different from some other platforms offering similar investments, which function more like straight marketplaces.



YieldStreet in the news

YieldStreet Eyes Credit Facility Making Alternatives Available to Main Street | Finance Magnates

YieldStreet preps to scale as plans are unveiled for its alternative asset platform.

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YieldStreet Receives $3.7 Million in Seed Funding | Crowdfund Insider

Online marketplace for asset-backed investments YieldStreet has raised $3.7 million in seed funding led by Expansion Venture Capital, Saturn Venture Partners, and other "strategic fintech angels."  YieldStreet is operating under Title II of the JOBS Act that allows platforms to "generally solicit" their offers.

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