January’s Startup Spotlight: Yielders!
What it is
A very interesting company that’s what. It’s an equity property crowdfunding platform.
How does it work?
Properties are placed on the platform. These aren’t ‘opportunities’ or speculative high risk crowdfunding startups. These are bricks and mortar properties that already exist and crucially, are already generating, or contracted to generate, rental income.
Each property has its own SPV. That’s a Special Purpose Vehicle. Which is in practice a Limited Company. And it’s the shares in theses limited company SPV’s that investors buy. They then own a percentage of that property, as an equity shareholding in it, and receive a share of the rental income accordingly.
The tech is not necessarily groundbreaking, but what is very interesting about this business model is the structure of the investment. It’s designed to be end to end transacted across the platform, from investing in the property, through to contractual completion, shareholders agreements, shareholders voting, and so on. The platform is the process entire. The implications of this are profound, it simplifies what would be otherwise prohibitively complicated, and in doing so, opens up a new type of investment to the mass market.
From an investment perspective, on the up-side there’s the appreciation of the property and the revenue from the rental. The risk side is the property might depreciate, which is possible, but in any event, the rental is fixed, and there’s no ‘mortgage’ to pay. The rental agreements are with housing associations, which means tier one level reliability, with a probably achievable target of zero voids, ie un-rented down time. The rental returns are anticipated to be around 6%.
Another interesting fact about Yielders is that it’s based on Islamic banking principles, it’s Sharia compliant, which means it’s not based on interest charged for lending money. It’s a financial return for a commercial service, in this instance, rented housing.
However, it’s not an Islamic opportunity, it’s open to anyone with £5000 or more to invest, an amount they plan to lower to £1000 in time. These Islamic banking practices are interesting. It opens up a whole new way of looking at investment, some models of which will be more efficient, better returning, than conventional interest based ones. Forget the religious consideration, from a purely commercial perspective, there’s opportunity here, a whole range of investment products are waiting to be interpreted into digitised platforms.
Irfan and Zeeshan are well aware of this. The Yielders platform, with a little white label re branding, could be used to crowd invest in all manner of sectors. Wine. Vintage cars. Art. It’s all about the end to end integration of the mechanics of the process, the digital paperwork. Compliance. Definitely one to watch. But then in Level39, aren’t they all.
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