Disintermediation in Esoteric Assets (Part 2)

Consumer lending is all over the place - if you ask me that market is getting crowded in the US (no pun intended). LC, Prosper, Upstart, Earnest, Peerform, etc. etc. Real Estate Lending is getting big with RealtyShares and Fundrise all taking 10's of millions of investment dollars and key properties on their sites. Payday lenders, small business, etc. Lots of your big "core banking" products are starting to move to the web. As a millennial (I think), the movement of these core businesses to the web from traditional brick and mortar just seems like commonsense, evolution, not revolution. A slightly out of date chart can be found here

There are however, some asset classes I'm seeing pop up that are interesting, mostly becuase they are asset classes that very few people even realize exist or think much about.

Red Rock Assets

Mining and energy products - they launched at the LendIt conference in 2014, and their website was still a bit under construction. They have since fully launched. It's a little different product - 7.5% + profit sharing, secured by the assets of the mining or energy project. Key Capital will step in and attempt to salvage projects that are failing, selling off the assets and project in case they can't run it profitably.

This is very different from most other platforms. Red Rock Assets was formed in cooperation with Key Capital (their owners are the same people). They are also only raising a very small portion of the capital required for these projects, so it's not clear to me what they are gaining by offering up a slice to the accredited investor community directly via the web.

Fundrise's strategy is to have local community members invest in larger projects so that the builders have local support - useful for those city hearings. I'm not sure that really makes sense in Red Rocks case - but maybe.

In any case, I'm excited to see a very different type of asset come online.

Energy Funders

Oil and Gas projects - with a good looking website.

I'm not kidding, just a really well put together website, their layouts are clean, FAQ very informative and covered most of my basic questions. A huge suite of documents to download on each deal that pretty much covers everything you'd want to know (of course most of it is required for an investor to understand the deals).

Their deals are a bit more complicated than what most people are used to. Royalties, Working Interest, Revenue Interest - there a lot to know. Thankfully they have a helpful blog post

Here's a question I asked:

When I invest in a well (looking at Archer County atm), I'm not clear, does my WI and NRI terminate after a specific period of time or do I continue to hold my investment - making returns in future years?

Your WI and NRI do not terminate after any specific period of time. You can continue to hold your investment, making returns for years to come as long as the wells produce oil.

Under certain circumstances--you make 300% return of your capital or after two years, the production becomes marginal--EnergyFunders can sell the entire total investment and distribute the sale proceeds to the investors.

Sales of producing oil wells are typically valued at 60 months projected production or more. For instance, if you had received 300% return of capital and the project was returning your capital every year, a sale of the investment might generate another 5X your capital invested. There are no guarantees, but this is a possible scenario.

Also, they accept Bitcoin

Future Alternative Asset Platforms

If anyone is looking to create a platform that would serve as a general purpose "marketplace" for all kinds of esoteric asset backed offerings - I'm interested in learning more. Full disclosure my securities firm handles small to mid-sized asset backed securitizations.