reAlpha, a digital real estate investing platform focused on the short-term rental (STR) market, has secured a $200MM financing facility from Churchill Real Estate. The company assesses the quality of STR investment by looking at rental income quantitatively. The company’s AI engine identifies properties with the highest rental potential by scoring them on 25+ factors. After this analysis, the platform gets freelance analysts to score the property on the same factors, such as neighborhood appeal and renovations. Those scores are then used to train the machine learning model for improved accuracy.
reAlpha recently launched an in-house brokerage, reAlpha Realty, to expand the Company's pipeline through referral programs with outside brokerages and developers. This will eventually help investors buy equity in specific properties. For context, home equity wealthtech Nada, which raised $8.1MM in funding in July, allows retail investors to buy and sell fractions of the real estate market via its Cityfunds (e.g., Miami).
The real estate asset class, and the financing around it, is a large revenue generator for consumer banks, and we are excited to see more fintech companies enter the space in novel ways. There are few comparable deals to reAlpha's $200MM investment, but some warning signs do exit — real estate tech brokerage Compass raised $1.5B from VCs (of course, SoftBank was involved), and went public with a valuation of about $8B.
Digital discount brokerage eToro acquired portfolio management provider Bullsheet for an undisclosed amount. The deal comes just a few months after its recent acquisition of options trading platform Gatsby, which we covered back in August. Instead of dealing with the public markets, eToro is rightly going shopping.
Developed in 2020 for eToro users only, Bullsheet offers additional automated features for users when analyzing their portfolio. Some of the current features, or “additional superpowers” as they call them, are (1) monitoring portfolios after trading hours; (2) tracking earnings and dividend payment dates via a calendar feature; (3) getting the latest articles for stocks you hold on a news dashboard; and (4) tracking what other traders are buying/selling in real-time. These are a good phsychographic fit for eToro customers.
Self-directed investors tends to lean towards digital brokerage platforms that offer investing autonomy and affordable features. However, that can sometimes have devastating effects, especially for momentum based / meme trend investors (we’re looking at you, $AMC). And, at times when investor confidence is low, many brokerages have a hard time motivating anyone to trade, regardless of what user-friendly features exist. This translates to lower volume and lower valuations. In a year with eToro cutting 6% of their workforce and getting their valuation cut in half after abandoning plans to go public, it’s still encouraging to see the firm investing in future growth.
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Invite-only wealthtech Dezerv has announced that it has achieved a milestone of $120MM (Rs 1000 crore) in clients AUM on its platform within a year of launch. In August, Deserve raised $20.7MM in a Series A round led by Accel Partners. The startup also raised $7MM in a seed round, bringing total funding to $28MM since its launch last year.
Dezerv provides advisory and investment services, mainly targeting senior working professionals and HNWIs, across assets such as large-cap index funds, fixed-income securities (e.g. high yield bonds), and alternatives (e.g. private equity). The platform asks various questions to gauge an investor's risk appetite and financial position. Questions range from age and post-tax income, to how much of a temporary drop in portfolio value the user could handle. The usual roboadvisor stuff, about a decade later.
The 5-year aggressive option targets a 16% return per year by allocating 55% into actively managed equity funds, 30% into index funds, 12% into high fixed return credit funds, and 2% into gold. Note that the balanced portfolio, which is the safest of the lot, still suggests a 13% return per year. Within the app, portfolio managers create a personalized mutual fund recommendation for the client using the Integrated Portfolio Approach™ (IPA), which blends Markowitz's Modern Portfolio Theory, the Black-Litterman Model, and aspects of behavioural finance.
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