Finance Platform YieldStreet Trying to Democratize Asset-Based Lending
Everyone wants to see their money grow, but relying on the whims of the stock market is not the only way to build wealth these days.
Milind Mehere says his company’s alternative lending marketplace and finance platform aims to create access to different types of investment opportunities.
New York-based YieldStreet lets accredited investors, as defined by federal regulators, put their money into collateral-backed investments such as loans secured by real estate portfolios or litigation finance. These investments could even include a loan to an NBA player secured by their contract.
This sort of model for alternative investing was once the province of hedge funds and high-net-worth individuals and companies. However, after federal regulators set standards on private equity investments, numerous fintech companies, such as Darcmatter, Quire, and FundersClub, have developed ways for more people to get in on the action.
YieldStreet is diving into this market, with Mehere, who was a co-founder of Yodle, as CEO and Michael Weisz, a veteran Wall Street asset manager, as president. For Mehere, launching YieldStreet is another chance to nurture a company from the ground up. Yodle was acquired in February by Web.com for some $342 million.
So far YieldStreet has raised $3.7 million in seed funding from Expansion Venture Capital, Saturn Venture Partners, and angel investors.
Mehere says he and Weisz developed YieldStreet to give accredited private investors options outside of the stock market to earn returns on their money. He had personally tried to invest in asset classes such as real estate, hotels, student housing, gas stations, and chains of quick service restaurants, but he ran into the same roadblock.
The problem was that if he wanted to invest $10,000 or $20,000 in such assets, the money was deemed to be too small. “People didn’t want that money because it was too cumbersome to manage a lot of small investors,” Mehere says.
With the advent of the JOBS Act to help fund small businesses, and the rise of online lending, he and Weisz saw a way to resolve that issue. As OnDeck and its peers emerged, Weisz says it became evident that technology could be used to manage transactions at scale. Thus far YieldStreet, founded in 2015, has seen some $35 million in loans funded through its platform.
Mehere says his company may be a way to help people sort out their wealth management and financial planning issues. “Consumers are too much into debt,” he says. “Our mission is to democratize access to asset-based lending and to make sure that people have options to invest and be secure about their finances.”
Weisz says it is hard for fund managers to accept investments smaller than $1 million because their time is focused on much larger sums. “You can imagine deciding whether to sit with someone for $50,000 or you can use the time to sit with a multi-family office, which could be a multimillion investment,” he says.
Folks who want to use YieldStreet must first meet the regulatory criteria of an accredited investor, earning at least $200,000 annually—at least for now. “The intent is to bring this to Main Street,” Weisz says. “To make this available to union workers, to everybody out there.” The current minimum for each investment with YieldStreet is $5,000.