Real Estate and Equity Crowdfunding

This learning series on Modern Commercial Real Estate Investing first appeared on the EquityMultiple blog. Please check in there for updates and additions to this series.

Since the JOBS Act of 2012, the number of real estate crowdfunding platforms and startup equity crowdfunding portals has skyrocketed. The rapidly evolving ecosystem can be overwhelming for individual investors managing their own portfolios and seeking exposure to new asset classes while avoiding risky and insufficiently-vetted securities.

This panel discussion — hosted by Andrew Savikas of YieldTalk — was arranged with the intent of educating investors, and providing valuable insight from an expert panel reflecting diverse viewpoints on the real estate and equity crowdfunding landscape.

Full Transcript

Thanks everybody for joining us today. My name is Jonathan, I’m an investment manager at EquityMultiple. I’m going to do a quick minute or two of intro remarks.

We do a lot of stuff around investor education, mainly through our deals as well as through the Learning Series on our blog, but we figure the best way to do investor education is to have experts from the investment community in this nascent space of equity crowdfunding come in and have some face time with folks who are interested in the space. So, we’ve put together a very knowledgeable panel here, and I’ll turn it over to Andy Savikas, who’s the founder of YieldTalk and has a lot of experience in the space.

Andrew Savikas: Thank you, and thank you all for joining us for a conversation about investment crowdfunding and online alternative investing. I’m joined here by four guests who also with a diverse set of experiences in the ecosystem. And we also look forward to hearing from you. We’re going to make sure that we provide some time as part of the conversation for all of you to ask your questions and to make it somewhat of a discussion. Before I begin I do want to thanks EquityMultiple for the space and hosting us for the event on what is such a beautiful fall weekend. I didn’t anticipate competing with a baseball game, so you can duck out if you need to take a peek I suppose.

So our panel tonight includes next to me Georgia Quinn, she’s a securities attorney, and the CEO and founder of iDisclose, a legal tech firm operating in the crowdfunding ecosystem. Next to Georgia is Bill Harrigan, the founder of Batteleur Advisors, he’s a career professional in financial services, and also an active real estate investor. Ben Cooper is the Senior Managing Director of Cushman and Wakefield, he’s certainly a veteran of the real estate industry, and also a real estate investor himself. Next to him is Nico Leeper, an analyst with SeedInvest, an equity crowdfunding also in New York that focuses on early-stage startups. So thank you all for joining us.

A lot of the information is currently coming from the platforms themselves. A lot of the material, the blogs or investor education is coming from investment platforms, which is great to have those resources. At the same time, I think there’s a lack of places for investors to hear from each other; to share and understand and learn first-hand what works and what doesn’t. And I think that’s why events like this are so important. To have a chance to network and learn from some of the people who have done these kinds of investments before. And so as a way to kick off the conversation what I’d like to do is hear from some of our panelists. In addition to their own perspective from their professional lives, their own personal experience and perspective as crowdfund investors. So I’d like to ask the panelists what was their first crowdfunded investment. What it was and what they’d do differently if they were to do it again. So Georgia I’ll ask you to kick it off.

Georgia Quinn: SO I’m going to be pretty quick because at this stage of my company I’m conflicted out of being able to participate in most crowdfunded opportunities we service. A large portion of the crowdfunded raises that are being conducted so obviously it doesn’t look good if I invest with some customers and not other customers. So when crowdfunding initially started what I looked for, which is what a lot of non-professional investors look for is something that had meaning to me, something that resonated and I felt like I understand. Whether it was a product that i enjoyed using and i wanted to support that company. So one company was a woman that produced mosquito-repellant clothing for women that lived in zika-infested areas. So for me as a mother that had a resonance and was something that I believed in and wanted to be a part of. It was much less about making a return and more something that I felt was a social responsibility. Now I know that that’s not what most of you are here for but that for me was something that was very important. And again, I wouldn’t change anything about what I did, but it’s something really important about this movement and the new laws — it allowed a person like me to participate

Bill Harrigan: So i take a little different approach. I spent 11 years in financial services, private equity before starting Batteleur at the beginning of this year. Where i was spending most of my time was in specialty lending platforms, emerging alternative lenders and commercial and residential real estate. So i came from being a direct investor in real estate, managing properties with kind of this viewpoint that real estate requires an underwriting expertise and the ability to actually go in and diligence the properties, understand the market you are in and I had seen just over 300 types of alternative lenders in the marketplace if you wanted to do different types of loans, different types of alternatives or real estate you kind of have to sit back and say who is underwriting the property, the sponsor. I am about to make my first, with Equity Multiple and I have looked at 50+ deals in the past year. You have to get comfortable with the people doing the underwriting, the people pushing the deal forward and ultimately you have to have some understanding of the risk you are willing to take in the real estate. I have talked to Marious and I am probably going to do one soon but I have seen a number of platforms trying to take advantage of the crowdfunding space.

Ben Cooper: I have invested with EquityMultiple in about 8 deals at this point. My very first one was a bridge loan deal in San Francisco. Which i bought into and then a month and a half later there was a takeout and the deal was over. So i was like I wanted to see these deals go full cycle I want to make sure you are actually going to get your money back and it was pretty much amazing that one ended up being such a quick return. It was 10% but since we were only there for a month we got 1% which is what you get in a full year with a bank. That was a pretty interesting experience and the led me to think well I don’t need to do every deal but as they put these out there’s still a whole bunch of them that makes sense and I like which has led me to be a pretty loyal user of the platform.

Andrew: That is interesting. My own experience has been discovering how many normal real estate deals take longer than you think so it’s interesting to hear one go so much shorter than you think.
Nico Leeper: I think I am in a similar position to Georgia where because i am vetting companies that are raising capital with seed invest it would look terrible if I was deploying capital into some of the deals but not others. So I haven’t made any crowdfunding investments to date but we have been very active in some of these offering types since the get go. The way that we ran some of our fundraisers, I think hindsight is 20–20.When were were running some of these campaigns it was the first time that any issuer had been raising out of these securities exemptions. So, it was a bold new world, it was a wild west. With hindsight, with the things that we have learned,over the past year and a half as we have opened up these investments to non accredited investors, as far as how we can structure them in terms of what is fair for the founders and being steadfast to make sure investors have the right protections. Over the past year and half we have learned to do that in a much better way. So I wouldn’t necessarily change anything from how we were doing things previously but as we have gotten more data and taken a deep dive into the regulations we have been able to do these fundraises much better than say a year and a half ago.

Andrew: I know that a lot of investors like myself did not have much experience investing in real estate. I would like to hear from some folks who have been in the industry loner what has changed as a result of crowdfunding options from the perspective of the real estate industry in general.

Bill: Well i think one of the biggest things that crowdfunding and technology broadly being applied to alternative investing and real estate has been the accessibility to the asset class and that’s an asset class that unless you are a high net worth investor or part of a platform, it is hard to build a diverse portfolio with real estate holdings purely because it’s expensive. And so as we have seen in this adoption of technology through investing and the rise of the Betterments of the world on wealth fronts in terms of our ability to invest in a diversified portfolio of stocks and bonds, real estate is a huge asset class, that if you apply the same logic of to create a diversified portfolio and asset allocation strategy for your own holdings, real estate should be a part of that. And i think through crowdfunding, through the accessibility of information and it was also an asset class that was inefficient with not a lot of transparency, the adoption of technology, the adoption of a more efficient marketplace where people can actually look at properties and see what they can invest in and understand their own risk tolerance levels, has created the ability for more people to participate in real estate as an asset class.

Ben: What i focus on my day job is, as a broker, are properties that are more net leased on a long-term basis so a lot of these deals that we are for REITS that buy these net leased deals. And so I would see the disconnect between we would say we would see properties at a 6.5% yield and they’re going to lever and it that will get the yield to 8–9%, and if you look at the stock that we just sold the property to and that stock yield is 4–5%. So what is going on? Stocks get bid up because people are ravenous for income, and so people are willing to take a lower yield then what is actually happening at the property level in most cases and then you have that one manager versus being able to have a bunch of different sponsors that you are actually able to have diversity in that respect, in addition to having a lot of properties, having a lot of geographies, having apartments and industrial and office. So it was something that resonated with me that if I wanted to have a fixed income part of my own portfolio, so I feel comfortable investing in these deals directly through a syndication like EquityMultiple, and not having that liquidity, I feel comfortable knowing I am not going to see that money again for five years.Versus actually going out in the public market and having liquidity but not necessarily having what I would consider an equivalent return or the private REITs who I would consider as the worst of both worlds where you don’t have liquidity and it also has all of the same layers. So I would say it is still relatively newer to the investor universe, still relatively new to me but given the knowledge I have of being able to underwrite deals and what makes sense from a real estate perspective, it made a lot of sense for me to be able to invest directly in this way without having to put all my eggs in one basket.

Bill: I think that is a key element, diversification that you can create on your own portfolio through crowdfunding, through being able to take a piece of a deal verse having to take an entire piece of the capital structure down or an entire asset down, I mean real estate is the most capital intensive of all asset classes. There is $15 Trillion of real estate out there in the U.S alone. It is highly funded by debt, you need a lot of capital to own a property. The crowdfunding platforms actually give you a mechanism to say I can actually hold a diverse real estate portfolio by property type, by sponsor type, by where it is positioned in the capital structure and actually have this diverse real estate pool where before you could buy one building with the amount of money that you actually put to work in multiple offerings which ultimately should diversify the risk and potentially generate a better return, not having all of your eggs in one basket.

Andrew: The scale of the industry and the sector was certainly an education for someone like me who is not from the space to learn that U.S. residential real estate is bigger than the capitalization of the entire stock market. It is a phenomenally large part of the economy. So Ben, you mentioned private REITS and in the past few months we have seen an increase in the number of news about crowdfunded REITS. You know Fundrise might be the most popular, there is also Rich Uncles, American Homeowners Preservation is another that’s not quite a REIT but uses the same regulatory framework, Streetwise is one that recently launched and realty mobile has their mobile REIT. What should investors know about these types of REITS in relation to normal private REITS or traditional if you can say that in this space crowdfunding like an EquityMultiple have been providing.

Ben: So I havent gone into any of these online REITS or whatever you want to call them. In my perspective, they are pretty much the same as private REIts because it is so early in the cycle for them. They are not being offered on the same scale as private REITs which have a much bigger portfolio, much larger management capabilities, a history of managing the asset class. So, my general view is that when I am investing in Equity Multiple it is not just because I want exposure, it is because I see a deal, I can underwrite and say I like this specific deal versus having it chosen by whoever is running the REIT. Not that they are doing a bad job, I am sure they have a lot of experience and are doing a great job but I am just a little bit of a control freak with my portfolio.

Andrew: Fair enough. So the crowdfunding REITS are using a regulation called Reg A+, there are actually 3 main FTC regulations that came about as a result of the 2012 jobs act that is the framework through which many of these crowdfunding sites including EquityMultiple operate under. There is regulation D, which allowed for the first time public solicitation of private placements. More recently, regulation A+ which is often referred to as a mini IPO which is being used for REITS and also there is regulation crowdfunding or reg CF is another one. Reg A+ and CF were in large part intended to open up the investor pool broadly beyond what the SEC just qualifies as an accredited investor. EquityMultiple is a platform operating under regulation D, you must be an accredited investor to participate. There are others now emerging where anyone can invest although there are some restrictions there. I would be curious and Georgia, with you in particular, since you have been involved with REG CF since the beginning, do you think regulation CF in particular and Regulation A+ in general as well are working as intended in bringing in that wider pool of investors?

Georgia: I definitely think that they are and a lot of people are probably hoping for growth and more deals getting done by now but it certainly has surpassed my expectations and I am curious to hear Nico’s thoughts on this. But to date we have had 162 successful deals, raised over $50 Million and had over 50,000 unique investors and so to me that’s 50,000 people that probably would have been able to invest without these regulation. So to me I feel pretty good about that. If we look to other markets such as the UK legalized crowdfunding, the first year they were under operation they had 8 deals. So 162 is pretty good by comparison. If you look again at the types of companies that are being financed these are companies throughout the United States not just in New York, California but these are companies that are in some financial deserts where it is really tough to get financing. One of the reasons these regulations came into play was that following the financial crisis and Dodd-Frank, a lot of capital that was being provided by your typical local bank or community lender had been dried up due to reasons we won’t get into but we really do see this new type of financing filling that void and the financing is going to a lot of smaller startup companies that otherwise would not be able to get off the ground but for this type of financing. Its hard to talk about reg CF in the scope of real estate because it is very hard to structure a real estate deal using reg CF because you can’t use a special purpose vehicle, so you have to take direct title to the property and that doesn’t really make sense. So that hasn't really taken off yet but when you talk about title 2, and just the general solicitation rules and how that is changed real estate financing from the way Bill kind of nicely described and what I might call country club financing. In the past by operation of law you could not discuss your deals publicly . So all of these transactions took place in back rooms and in country clubs where you had to have very regulated access. Now they take place in a very open manner where you can solicit anybody that has a newspaper or a computer or whatever media you choose will be able to view your deal and decide whether they want to invest. So when I look at it, I don’t just look at the stats. I look at what has happened from an accessibility point its really a watershed moment from a securities standpoint to think you can do a securities offering without a registration from the SEC. But you can now. I really look forward to seeing what is going to happen and I am really optimistic.

Nico: I know, on our end, historically SeedInvest, which was founded in 2012, was just open to accredited investors taking advantage of the FTC security exemptions. But within the last few years we have been able to open up this asset class to non accredited investors. Which is really exciting because if you take a look at the return of the asset class as a whole, it’s something like 30% per year. So it is by the numbers, one of the best performing asset classes out there. So it is shocking that up until a few years a ago that was only really open to the wealthiest 2 percent of Americans. So I think that as we have opened up the asset class, taking advantage of these new security exemptions, for non accredited investors. Probably the number one biggest hurdle is investor education because these aren’t public stocks. So it is really going back to square one with investors and teaching them how to create a diversified portfolio because these are illiquid assets.So their investments are going to be tied up for at least 4–7 years until there is some kind of liquidity event. It has been really encouraging to see that education come to fruition and its one of the most exciting growth areas that we see at seed invest. Last week we closed a $20 Million investment to an early stage robotics company where a lot of this capital raise did come from non-accredited investors. So we are starting to see a lot more traction now on companies that are raising under reg a and reg cf. From our perspective raising under just Reg CF is something that we no longer do.There are a lot of restrictions that come into play as far as income that you can invest per year. Even if you are Warren Buffet, you can only invest $100,000 dollars under reg CF over 12 months in companies that raise under REG CF. From a company standpoint, that significantly limits the amount of capital that they can raise, from an investor standpoint, those most traditional accredited investors who are used to deploying a large amount of capital under CF, they simply can’t do it. What we actually do now for all of our raises is run a reg CF campaign in tandem with the traditional 506C regulation D offering. So all of the non accredited investors will go in through reg CF and all the accredited investors who invest 20k and above go through regulation D. So it gives investors much more flexibility as to how much capital they want to allocate to the asset class and it is easier for founders because they can go out there and raise large amounts of capital for their companies.

Georgia: Just on that note from a regulatory standpoint, the SEC really likes this structure because it allows the less sophisticated accredited investors to invest side by side with the accredited investors. So they are getting the same terms, the same deal and they get to kind of follow a more experienced investor and they if that person has done the diligence and things they know this is a good investment so they want to put their money in as well.

Andrew: So speaking of investor experience, investor relations which I think are very important topics which is one of the things that people new to this ecosystem discover is the broad range of security types. It is not just stocks bonds and debt and equity, there is preferred equity, there’s revenue shares, in the startup model there is the simple agreement for future equity, on the real estate side there are these borrower dependent payment notes, what are some of these most common asset types and what are things that investors should really understand about them and what are things they should be thinking about some of these asset types.

Georgia: One thing that is so weird about Reg CF is that it put all these restrictions on how people could invest and what they could do but it absolutely no restrictions on the type of security that you can issue. So you can issue some crazy synthetic, exotic instrument about your company that no one can understand to this non accredited investor which makes no sense. What we are seeing happen in the marketplace is really all over the map, in one way it is great because it allows a company to tailor the security to their business. If they are a revenue-generating business why not just do a rev share because that way it can give the investor something, they can get that return, that liquidity, but the company can cap it and it is a knowable expenditure in the future but don’t have to give up equity in the company. Safe has become increasingly popular- it is very similar to a convertible note, except it has no maturity and everything is based on the next round of financing but it doesn’t have to convert. So most convertible notes will automatically convert on the next round of financing but these can stay unconverted in perpetuity until some sort of exit event like the sale of the company or an IPO or something of that nature. Its great for a company because if you are getting 500 crowdfunding investors you don’t want to have 500 individuals sitting on your cap table, because these instruments don’t really convert and they are just a contract, you don’t necessarily have to put them on your cap table they are just a contingent liability that’s outstanding. It is definitely more company friendly. I think for the most part many or most of the people investing in these instruments don’t really understand them. That is an issue that is part of the investor education that needs to be taking place. It is funny because they are called simple agreements and they aren’t that simple but to play devil’s advocate they are no more complicated than a convertible note, which is what startup financing has been historically. So I do not think they are the devil and I don’t think there is a problem with it. We just need to have an education, an explanation of these instruments. Whats far more frightening to me is actually borrower dependent notes that are being issued, that are not issued by the underlying revenue generating asset but simply an SPV that you have created that has no security or collateral. There’s absolutely nothing. The only recourse that you might have for that SPV might be the parent company which is the platform itself. So what would happen in a doomsday senior is the borrower dependent notes would tank, but someone would try to make a legal claim against the platform itself which would then get tied up in legal fees and go under which would then cause this chain reaction of every single SPV they set up to then fold. So that would be bad. A lot of the real estate platforms are moving away from that structure. Buyer dependent notes I would just look very very carefully at because you have no recourse and you are so far down the food chain when it comes to being compensated in any kind of bankruptcy event.

Nico: Well I can talk more specifically about the startup asset side. I think that rev-share is extremely interesting and it is something that we are looking at. We have only done two security types. Either traditional convertible notes or preferred equity. Taking a look at the price rounds, the equity raises something that is frankly pretty upsetting is how many platforms are facilitating raises in common equity. This kind of comes back again to investor education. Investing in common equity in a public company, that is completely okay but if you are a savvy investor investing in a private company you are not going to invest in common equity at all. It does not have any of the protections that frankly the asset class necessitates in order for you to be getting the returns that you want when you are investing in such a risky asset class. When you are making these startup investments, 1 make sure it is preferred equity, make sure these are more or less vanilla preferred equity docs. The equity docs that we use are based on the series C docs, which are widely used in the traditional VC space. And then on the flip side, I am probably a little bit in disagreement with Georgia on this one, we do not facilitate investments into safe notes. Or some of these quite frankly frankenstein safe notes that we have seen pop up with some of these other equity crowdfunding platforms. For example, SafeNotes often times won’t have any protections against exit. For example, the company exists and the notes convert, the investors will just get their money back. We insist at the very least that they will get 2.0x back. You see a lot of really scary provisions in some of these safe notes where the company has an option at a subsequent round to buyout all of the investors that came in on the safe note. If you are a company that is a rising star, that is doing very well, being very successful, you as an investor have a very strong possibility of not being able to capture any of that upside. Some of these note structures make absolutely no sense from an investment standpoint as an asset class you don’t want to be touching how some of these deal are structured. And to that point, something that we have been doing a lot of thinking of is one of the reasons why you see so many of these strained safe notes is that cap table situation where issuers don’t really want to have hundreds of investors such as investors who invested $500 listed individually on your cap table and you don’t want to accidentally trigger any public recording requirements. What we have done on that front given that you cannot use SPVs given the regulation here, all of our investors coming in at under $50,000, actually having their shares trusted to a trust company. We work with new direction IRA and rather than having all these individuals on the cap table, ND IRA holds all of their shares at street name, they go in as one line item on the cap table and it constitutes one shareholder of record. So you can still have the standard rights and protections that you want as an investor while still keeping the company happy and keeping the cap table clean.

Andrew: So Bill and Ben you’ve had a lot of experience doing diligence on real estate deals, and certainly something that stands out to me is the diversity of diligence offered by the different platforms in this space. There are some platforms that tout the thoroughness of their diligence how much they review a deal before investment and yet we’re seeing others where the platform is saying let’s let the market itself decide. We are going to put the deal out there and if investors are interested they will subscribe and it is not always easy as an investor or a first time customer to tell the difference. What are some things investors should be aware of and understand when trying to navigate the level of diligence provided by a crowdfunding investor platform?

Ben: Very good question. My thought on that is pretty simple which is you should go with whoever is going to diligence it for you. As someone in real estate, I have a day job and the amount of time I can spend actually doing the amount of diligence the buyer of the entire thing, he diligences the deal in a much more serious way than I am going to for 1% of the deal. So, I think EquityMultiple is one of the platforms that does a lot more due diligence than some of the other ones, is a huge benefit to me as an investor. Even if there is an asset management fee that equity multiple is charging, it is worth it because they are saving you a lot of time on diligence and they are finding the best deals for you because I am sure Jonathan will tell you less than 5% of deals actually make it onto the website that they see. There is a huge amount of time being spent under the radar that is hard to appreciate. There are the ones that they just throw it up there and if people invest they invest. It seems like there is only one way for that to end and it is badly. Who knows how long it will last and it could last forever but I don’t see a reason to do it on a blind basis.

Bill: I think the blind pool nature that you see with a lot of these E-REITS who are better at just raising capital and saying we will go do a bunch of investments for you and give you a certain level of return, that is a hard sell for any investor, accredited or otherwise. I would actually simplify it down to explain the structure that you are investing in, they are giving you something more than is actually saying we have underwritten this, we are showing you the property, we are giving you details about the sponsor because at the end of the day with real estate you cant just sit on it. You can for some investors who aren’t going to sell for a little while, but if you are investing for income or yield or executing a business plan, you got to know the money putting with that sponsor has a track record of doing so. And unless the platform like an equity multiple or others that are actually doing an underwriting and the diligence as we touched on earlier, give you some fundamental information about the property that says you guys can do this. Giving you all the transparency, all the information we have so you know we wouldn’t be offering it to you unless they actually did the work. The difference where you see companies that are crowdfunding or raising in an alternative structure or a blind pool, trust us we are going to generate a 6.5% return for you and pay you out in cash flow monthly, take that with a load of skepticism when you can actually have a platform that diligences, underwrites, does a background on the sponsor who is actually asking for the money. They can actually place you in terms of your risk tolerance, you may want to be in a senior debt position, mezzanine debt, you may like equity and get a higher return and have a higher risk tolerance. You should be able to sit there and say, I can pick where I want to be in the capital structure and I understand by putting myself in this investment, this is what i should realize knowing full well that anytime you make an investment you can also lose it.

Andrew: Well, no one likes to talk about losing investments but I think that is something that is an inevitable part of the ecosystem. What are some of the things investors should be looking for and asking questions about what happens when things go wrong?

Georgia: I just want to make one quick point about the diligence across of different platforms because, this is also something that the market is taking care of, what happens is the companies that do not do any diligence, their deals eventually blow up or their deals don’t get funded. Other issuers do not want to go to their platforms because a quality issuer wants like a 100% success rate. For example, Seed invest has a very high success rate so the quality issuers are going to go to a platform where they are pretty much guaranteed financing.So if you are going to these platforms that have a 50 percent or less than that success rate, because they are letting the crowd decide, are not getting quality issuers and it is totally self-reinforcing.

Nico: To quickly tack onto that, it is really unfair especially in the startup space for a platform to go out there and say we are going to let the crowd decide, because a lot of these investors this is the first time they are investing in this asset class, they don’t yet have the skill set to take a look at 100 vetted deals and pick out the 1, that is actually going to be worth deploying their capital into. So i think besides looking at the fundamentals of the company, looking at the offering docs and seeing if these are the kind of docs that an investor seasoned in the space would be investing in, take a look at the co-investors, if there is other VCs that are in the round if there are other season angels that are coming into the round on the same term on the same docs, that probably a better indicator that thats a deal that has been vetted and that it is a deal worth putting your capital into.

Andrew: So you mentioned startups as an asset class, and obviously there are a lot of folks here that are in real estate but obviously now there are hundreds of these platforms covering a range of these asset classes, from peer to peer loans, oil and natural gas drilling, there are music royalties, there are business loans, are there other asset classes that have emerged here that you think investors should take a closer look at? Obviously startups are one and you talked about the historical returns, what are other ones that panelists have encountered that may be worth having investors take a look at?

Georgia: I really like the small business, like your typically main street. It is not even going to have this hockey stick thing but you just need some return year over year and some decent liquidity. Like these are rev share type companies or they can do a nice straight note and they are great fun business. You can sometimes get some perks like these hotels and other neighborhood places that can offer local residents perks at their restaurants or free nights and thing so you get a chance to build a sense of community around these companies. But all that happy mumbo-jumbo stuff aside, I really do think that these main-street businesses that are starved for capital because their local lender doesn’t exist anymore are a really great opportunity for some nice and steady returns.

Nico: I think a new asset class that I am following that is incredibly risky is probably not ready for most investors to be deploying capital into that is the ICO space. It is incredibly nascent, I think the risk there is even more than the traditional startup investment but the potential is fascinating and there are people that are becoming overnight millionaires that is not going to continue forever but I think the underlying technology there as far as streamlining the the issue of securities is really interesting as far as something that investors should be following, maybe not deploying capital yet but following.

Andrew: Just to clarify, an ICO is an initial coin offering, a new investment vehicle built on blockchain technology.

Georgia: Nico is right that it will not last forever because the SEC has issued several warnings that these are now securities and they must follow regular security regulation procedures.

Bill: It also may not last forever because if it is a giant bubble, it could crash and people would lose a lot of money. Well, let the actual bankers talk about that. There has been plenty said about bitcoin and what is going on. It is a very interesting technology and in terms of the application it’s really a wild west of tulip bulb mania and seeing an asset class that is hard to describe as an asset class, but when you have that kind of volatility in daily pricing, that is a high risk, potentially very painful experience. I will stick with real estate and companies that you can actually touch and feel that don’t exist in the ether.

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