crowdfunding for alternative assets similar to CrowdStreet

[Steve A.]

Hello all,

Mods feel free to move if this is in the wrong forum.

Thanks to Jay Hinrichs I discovered the beauty of syndication deals for passive income, diversification, and heavy hitting returns. I’m addicted. Shortly thereafter I found CrowdStreet and RealCrowd and I’ve done several deals on each. For those who don’t know, these are crowd funding platforms that allow accredited investors (like myself) to invest in syndication deals. They provide a nice centralized marketplace for syndications, which could otherwise be tougher to find.

Now that I know this exists, and due to the fact I’m accredited (so I can invest in all kinds of fun stuff more directly than ownership of a public equity) I am wondering if there are other reputable platforms that facilitate direct investment in other alternative asset classes. I’m particularly interested in hard assets like natural resources.

I found Reef Oil and Gas, and then read some negative news reports about them and crossed them off the list. Continuing my search for oil and gas direct investment, I found Crudefunders and this also appeared to have some negative sentiment, although the negative reviewers seem inexperienced and not the type of people who should be making these investments. I then found EnergyFunders, which seems to be the biggest name in the energy crowdfunding space, as far as I can tell. Seems to have a clean record, and they only offer to accredited investors so you don’t have people badmouthing them because their payment on their $5000 investment came a month late. Anyone have any experience here? I also have geologist friends in the field and considered throwing them some cash and letting them do their thing, but drilling can cost millions and wouldn’t provide diversification, so i am not on that level.

For mining operations, the only one I could find was Klondike Strike by Red Cloud. Red Cloud is a big, legitimate company. Anyone have any experience with them or similar mining related direct investments?

For timber I have no idea...I hear you can get a piece of a TIMCO but the minimum is usually a million bucks. Looking for something more in the 100k minimum range for diversification.

I found YieldStreet which is interesting. They have investments in Marine and Legal. Basically related to large tanker/shipping vessels and legal settlements. I imagine these would provide some nice uncorrelated returns.

Also looked into quantitative hedge funds like Renaissance, Two Sigma, AQR....but these appear to be for multibillionaires and Ivy League endowments. There are hedge funds that accept smaller investment minimums but I am a bit skeptical of them.

All of this is of course in addition to regular old investments like mutual funds. Even have some crypto currency. And my main income comes from ecommerce businesses so I’m pretty well diversified in that sense.

Does anyone have experience or advice in this area, or have any other ideas for crowdfunding platforms through which I can invest in alternatives?

[John Nachtigall]

i have invested in several deals with EnergyFunders as well as investing in the site itself (through an founder round of equity).   My experience so far

Pro:

1.  The people who run the site are honest and forthright.   They call right back and give accurate information even when it is bad news.   if you indicate you want to invest they will call you and you can have a conversation about their philosophy etc.   

2.   I like that the way they make money is to get a piece of the investment.   So the better the deal, the better they get paid.   Good alignment.

3.  About a year ago they made a conscious choice to go for higher quality sponsors.   They hired some in-house technical talent to evaluate deals.   As a result the more recent deals are paying off better.   

4.   Low minimums getting lower.   As you mentioned the minimum is $5000 which is 20-25% of a Crowstreet minimum.   They have registered and received Reg A (or is it CF?) approval so they can now offer deals with $100 min if they want to unaccredited investors.   I have not seen one of those yet.  

Con:

1.  They have still not mastered how to report results.   They give a lot of information, but still lack a basic way to communicate current results vs pro forma.   You can figure it out by looking at past pro forma, but it is not really that easy to understand how your investment is doing.

2.   Drilling is a crapshoot.   There is not a single deal on the site I have invested in or read about that has not had moderate to major issues.   From weather, getting land rights, lack of rigs, to just a dry hole there is always something going wrong.   I would not put that on the site, but this is not a stable asset class

3.  As a result there are a lot of capital calls.   It is the opposite of a set it and forget it investment

4.   The failure rate of deals (not getting capital back) is high and the track record is thin (only been around for a few years)

5. They are not profitable, and the investment is actually a bundled interest as an LLC, so if they go out of business they it will be a nighmare to clear up.

Overall, this is my "flyer" investment.   I skipped 2 trips to Vegas on vacation and invested the money with this, it is entertainment in addition to investment for me.   I would not invest money that you are not willing to lose.   It is not gambling per se, there are real wells with real chances of finding oil, but it is not another class B multifamily value play for sure.   Some people invest in bitcoins (I would never) but this is my high risk investment.   I love the fact I own an oil well (or at least a small part of a few wells).   I also think the site itself has a 1st mover advantage in the niche.   As you found they could be the preeminent energy crowdfunder, making them a temping takeover target for other sites that want to branch out from real estate.   

Anyway, those are my thoughts.   Good Luck.