YieldStreet brings new opportunities to smaller investors

Milind Mehere knows what it’s like to be close to a solid investment opportunity and not be allowed to take part, so he and his cofounders set out to make those great opportunities available to other investors like them. Mr. Mehere is co-founder and the CEO of YieldStreet, an asset-based investment platform making previously unavailable investments an option for more people.

Mr. Mehere said he has always been interested in technology. In 2006 he cofounded Yodle, a local online marketing company that he helped scale to $235 million in revenue before it was acquired by Web.com for $342 million. Earlier in his career he worked in enterprise software.

As he became more successful Mr. Mehere knew he was becoming overexposed to the stock market, something the 2008 crisis and the dot com crash warned him to avoid.

Milind Mehere

“I was very passionate about trying to find non-correlated assets,” he recalled. “The challenge was it was hard to access them.”

Mr. Mehere was drawn to real estate and beginning in 2010 he began spending weekends looking at different properties in the Northeast, an experience that confirmed how hard it was to gain access to the best ones.

“If the deal was good they expected a lot of money up front and as a passive investor that made me very uncomfortable,” Mr. Mehere said.

Rather than cut a $20,000 check to access one opportunity, what if you could use that amount to diversify across 30 deals? Mr. Mehere asked himself that question back in 2014 when consumer P2Ps, small business financing platforms and real estate companies were gaining footholds online.

What those sectors all had in common and what Mr. Mehere didn’t like, was they were very correlated to the stock market.

“We wanted to change how people create and preserve wealth,” Mr. Mehere said of him and cofounders Dennis Shields and Michael Weisz, whose collective experience included technology, data, investing, alternative lending, risk management and compliance.

While Mr. Mehere experienced inefficiencies in his early real estate investment days, Mr. Weisz and Mr. Shields were turning away smaller investors from their fixed income fund because they couldn’t operationally support a large volume of investors.

They got together to create YieldStreet, a company that made previously unavailable investments an option for a wider base. YieldStreet launched in April 2015 with 80 investments across various asset classes. The idea has proven attractive to retail investors, from whom they have raised $240 million.

YieldStreet has invested in a variety of real estate portfolios, the financing of companies including law firms, pre-settlement plaintiff advances and even a loan to a professional athlete. Participants can opt in at a minimum of $5,000.

When deciding which opportunities to pursue, Mr. Mehere said YieldStreet follows a five-point thesis. The asset is not correlated to a broader market, while the asset base is backed by strong collateral, almost always senior secured debt. It should be originated and managed by experienced asset managers with their own skin in the game. The expected yield range should be between eight and 20 per cent and the time span must be less than 36 months in duration.

YieldStreet’s results have been strong so far, Mr. Mehere said. They have returned more than 100,000 individual payments and in excess of $80 million in principal and interest to investors. 15 of the original 80 investments have fully matured without a loss.

Litigation financing is an interesting area with plenty of growth potential, Mr. Mehere said. When plaintiffs get injured, the initial settlement offer is likely no more than 20 per cent of their claim, but if they can pursue the case they can get a much higher amount. Some plaintiffs choose to obtain litigation financing, which may help them increase their final settlement.  YieldStreet works with litigation finance originators to create diversified portfolios of cases for investment on their platform.”

 

 

 

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