SaaS Interviews with CEOs, Startups, Founders
1174 Planning a $50m ICO for Property Investing, 55% Unlevered IRR Historically
11 Oct 2018
Chapter 1: What is the main topic discussed in this episode?
founded aperture he's trying to basically bring real estate investing to the masses in an anonymized way using blockchain technology it is a securitized token they are getting ready right now to do an ico targeting 50 million bucks they're kind of they've got their white paper out you can check it out at the site uh again invest in the property uh they make money not by liquidating a huge chunk of the ico but actually earning profits for you they take profits while they make money for you
which is great. And you don't actually have to you don't actually have to reveal kind of who you are until they pay the money out so you can take advantage of the appreciation. This is the top entrepreneurs podcast where founders share how they started their companies and got filthy rich or crash and burn.
Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company. It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers.
With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode.
Chapter 2: How is Aperture leveraging blockchain technology in real estate?
Good morning, everyone. My guest today is Andrew Jewett. He's the co-CEO of Aperture, a real estate tech and investment company that has systemized the acquisition, rehabilitation, and sale of distressed residential real estate across the US and is producing unlevered IRRs in excess of 50%.
The company is launching its property coin ICO, a security token, the first professionally managed portfolio of real estate assets and loans available via the blockchain to help fund the growth of its current business. Andrew, are you ready to take us to the top? I am. Yeah. Thanks so much for having me. All right.
So tell us more about this because you have some background in kind of typical commercial markets and now you're going, okay, we're going to go into property and we're going to do blockchain-based tech. So why the switch? Well, I think when we saw what was going on with ICOs, you know, kind of mid-2017, you know, one of my backgrounds is traditional investment banking and
more specifically asset-backed investment banking. So we saw this opportunity to really bring the best aspects of traditional finance to blockchain because we saw the market shifting towards security tokens. And so we had what we thought was the kind of the perfect opportunity of experience in issuing asset-backed securities.
a market that clearly had some demand for it, but also we had an operating company that needed growth capital. And what better way to grow our business than grow it into a new and exciting and interesting market that is the blockchain and tokens. When you say a security token, you mean these are actually securitized. These are real, people are owning equity, et cetera. Correct. Yeah.
So our token is a Reg D offering in the US and a Reg S offering outside of the US. So each property coin holder owns a fractionalized piece of our real estate portfolio that we're going to be constantly managing for them. So we like to think of this as kind of like a turnkey access to the fixed market in the U.S. for both U.S. and non-U.S. investors.
So give an example of how a consumer or someone listening right now that's kind of a passive investor that wants something specific to real estate. How might they actually use this? I mean, what website do they go to? How do they give you money? How do they get money back? So the way we've structured it is, well, first of all, go to propertycoin.re. That's where you can sign up.
We're in a whitelisting and private phase mode right now. So go in, give us your information. We'll run a background. We'll just kind of make sure you're not a terrorist and not giving us laundered money. So you do that at propertycoin.re. By the way, how do you check that? You kind of glance over that, but I mean, that seems pretty serious. Yeah, so we've worked with some third parties who...
So first of all, our process was designed by Denton's, which is the largest law firm in the world. And we've had the good fortune of knowing those guys for 15 years. And when we told them about our project, they're interested in working on it. And so we've engaged with them.
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Chapter 3: What is the structure of the Property Coin ICO?
And really, there's only two large scale operations in the country that are doing this on a national basis. And my, you know, both of my partners and I were part of the senior management team of one of them. And so, We had some interesting ideas on how to utilize data and technology to increase returns and make the process much more efficient. And so we left to do that.
And that's what Aperture is. We started in 2016 to basically spend all of last year building out our tech, building out our team. So are you pre-revenue at this point? No, we have revenue. We're pre-profit just because we've been spending a ton of money on tech and building up staff. But part of what property coins are going to allow us to do is to really grow into the company's profitable state.
The trades we make are all profitable. We have zero loss rate and we have 55% unlevered IRRs. What's the sample size on that? How much money, like transaction volume total? We've done about... we think we've got 30 properties across the country right now. So it's, it's small. But look, we, we see over 3,500 properties a day through our system.
And then we run our, our analytics on those properties and try to get to the best five to 10% of those a day. And, you know, even if we had, even if we bought the very best one of those a day, it would still require $20 million of capital. You know, part of the beauty of buying houses is they're expensive, but they do, you know, on a dollar volume, they produce a large profit.
So it's, um, it's 30 to just to be clear, sorry, you're not buying $20 million mansions. You're saying like of the 30 deals you've done so far on average, what's the price point on those that you're paying? 200, $250,000. Yeah. Yeah. So there, you know, our, our goal is to be in the most liquid price point of any given market that we operate. Um, and so that varies depending on the market, but
it's kind of anywhere in that $100,000 to $250,000, $300,000 house. Got it. So you've deployed today between, call it kind of $4.5 to $7 million total, and that's kind of what you've earned these returns on so far? Yep. Got it. And with our current capital base, we have the ability to buy about $15 million, and we're just adding on some additional capital sources, so that's going to grow.
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Chapter 4: How does the investment process work for Property Coin holders?
That would only be like thirty thousand dollars. That's not enough to cover a team of 14. So really, I mean, you're that's covering like basic costs to do a deal where you actually use money to fund the operation part of the company, the tech, the team, health care, et cetera, is coming from the 50 percent profit. Correct. Yeah. Interesting. How much do you hope to raise in the ICO?
So we're looking for $50 million. When we first started this thing, and honestly, we could spend $100, $200 million that we see so much opportunity right now in this market. But we want to be thoughtful and reasonable about our growth and making sure that we do this in a measured way. So we said, let's shoot for $50 million. Let's try and raise that from the community.
I think that's a totally reasonable ask. And just given where we've seen some of the recent ICOs close. Obviously, we're in a tough market right now, but we're getting great feedback. We're in private sale mode, so we're just kind of negotiating with some larger institutional investors right now.
I was just going to say, if I was doing this, I would do it much like I would do a Kickstarter campaign, which is set my goal for raising 50 million. But before I even go live, I already have the relationships and soft commitments for 50 million. So I hit my goal on day one and then it's a great press story. Right. Yeah. And that's that's the hope.
I mean, we're so part of why we're in New York is for some big institutional meetings with some family offices right now. So we hope that that's that's exactly the play. Last question here. What do you think about block one?
Um, you know, I don't know those guys very well, so I don't want to, I don't, I can't really speak super intelligently on them, but, um, look, any, anybody who's doing anything that's innovative in this space, I'm, I'm a supporter of, uh, I, I, I like, I, I, I'm a little bit of a, um, evangelist on this thing.
I think we've tapped into something here that's going to change the traditional finance market and it's going to change the crypto world too from a securities token side of things.
And just to be clear, like a lot of people, the complaints early on with these ICOs are our founders would do an ICO and then they'd immediately liquidate into fiat 60, 70, 80% of what they raise and just take it to whatever and go spend it on vacations. If you raise 50 million, you won't be able to get returns.
You're not going to liquidate any of that until you actually put in a property, earn profits, and you're going to take 50%. Exactly. Yeah. So that's a good point. We are retaining zero tokens. We don't own anything.
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Chapter 5: How does Aperture ensure compliance with regulations?
We only make money if we produce profitable trades. And, you know, We get that question a lot. It's like, well, what's stopping you from just taking the money and running? And honestly, we live in the US. I like living in the US. I want to stay here. My family here. My wife's here. I don't want the regulators pounding on my door. So we're trying to go about this the right way.
And I think if you look into our backgrounds, you'll see we're honest guys who are real and have a um, a track record of, of, um, operations, but also, you know, being in the securities markets. So we understand that, that market and the risks involved. All right, Andrew, let's wrap up with the famous five quick answers here. Number one, what's the last business book you read?
Oh, it was, uh, one of Jack Welch's. Uh, I forget which one of them, but, uh, okay. I love it. Number two, is there, besides Jack Welch, is there a CEO you're following or studying? Um, Hmm. I've been watching some of the tech industry and how they're handling some of the recent pushback on data, but just kind of watching that industry in general.
Number three, what's your favorite online tool for building a business? We love the Google Lab, Google Suite offering. Number four, Andrew, how many hours of sleep do you get every night? I try to get eight, but it's usually around six. Okay, and what's your situation? You mentioned wife, so you're married, and how many kids do you have? Married, no kids.
Actually, it's a pretty cool announcement. We are going to start raising a service animal. We're going to raise a golden retriever for use. You raise it for 18 months and then you give it to either a veteran or somebody who has special needs about that. So that's going to be our child for the next 18 months. That's so cool. And how old are you? I'm 35. 35. All right. Last question.
What do you wish your 20-year-old self knew? That this is hard, but you should go do it right now. I wish I'd done this a lot earlier in my career. I could have slept a lot less. There you guys have it from Andrew, founded Aperture. He's trying to basically bring real estate investing to the masses in an anonymized way using blockchain technology. It is a securitized token.
They are getting ready right now to do an ICO targeting $50 million. They've got their white paper out. You can check it out at the site. Again, invest in the property. They make money not by liquidating a huge chunk of the ICO, but actually earning profits for you. They take profits while they make money for you, which is great.
And you don't actually have to reveal kind of who you are until they pay the money out so you can take advantage of the appreciation. Andrew, thank you so much for taking us to the top. Thanks so much.
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