Evaluating And Vetting Potential Sponsors With Lance Pederson
In this episode of the Invest Like a Billionaire podcast, co‑hosts Ben Frazier and Jim Maffuccio interview Lance Peterson, founder and managing partner of Verivest, a platform that provides end‑to‑end transparency for middle‑market real‑estate investments. The conversation explores the challenges faced by high‑net‑worth investors when evaluating private‑placement real‑estate offerings, especially the difficulty of conducting thorough due‑diligence on sponsors who are often sub‑institutional and lack a track record of large‑scale deals. Peterson outlines Verivest’s due‑diligence workflow: background checks on principals, verification of marketing claims, deep dive into offering documents (PPM, operating agreement), and ongoing quarterly monitoring. He highlights common investor misconceptions—over‑reliance on quoted target returns, misunderstanding of “skin‑in‑the‑game,” and failure to assess portfolio diversification. The discussion moves to fee structures, exposing hidden fees such as unexpected refinance profit splits, and stresses the need to match fees to the effort required by the sponsor. Alignment of interests is examined through preferred returns, hurdles, and waterfall distributions, with emphasis on ensuring that downside risk is protected and upside is fairly shared. Peterson contrasts Verivest’s neutral, referee‑like model with broker‑dealer platforms that may have built‑in incentives, positioning Verivest as “crowdfunding 2.0” that adds reputation, education, and broader access while remaining independent of sponsor compensation. Finally, they look ahead to the evolution of real‑estate crowdfunding: lower minimum investments, broader public solicitation under Rule 506, and the creation of a secondary market that could provide liquidity for private‑placement positions. Listeners are directed to Verivest’s free e‑book, the Real Estate Risk Report podcast, and contact information for further learning.
Chapters
This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and and interview successful investors. Welcome back to the Invest Like a Billionaire podcast. I am your co-host Ben Frazier, and I'm joined by co-host Jim Maffuccio. And today we are really excited. We've got Lance Peterson of VeraVest joining us on this podcast talking about how to do due diligence. So I've never met someone more passionate about doing due diligence on your investments and something we're really excited to dive in. So before we dive in, I want to just give a little background on Lance. He's got a, got a pretty impressive resume. He's, he's worked in the middle market real estate space for more than 13 years. He's helped over 180 entrepreneurs architect different investment funds. He's passionate about the power of transparency and building trust between sponsors and investors. And he is the founder and managing partner of Verivest, which is an end-to-end real estate investment platform. Designed to Bring Transparency to Middle Market Investing. He's a principal of Fairway America, a private equity real estate company based out of Oregon, and he is the host of a really great podcast called The Real Estate Risk Report, where he features conversations with real estate sponsors on the topic of risk mitigation. So Lance, thanks for coming on the show.
Yeah, my pleasure, guys. Thanks, thanks for having me.
Yes, let's just jump right in. If Lance, you can give some context just for your background. I know you've kind of been in this space, um, of private equity real estate for a long time, and obviously working at Fairway America, and you guys have your own offerings. And then just kind of the path that led you to really start Varivest, um, actually pretty fairly recently. So it's something I'm really excited about, and I know you are as well.
Yeah, no, um, I think so. For us, the, the path was— I mean, what we realized, and, you know, having been in the business a really long time, for deal sponsors and fund managers the most challenging component of what we do is raising capital. And, you know, for, for many of the people we work with, I'd call them sort of sub-institutional, right? So these are not institutional quality people. It's mainly because their strategies, you know, they're, they're acquiring assets and investments that are, you know, as far as institutional investors are concerned, are very, very, very small, like tiny, microscopic, right? And so That means that they really, as much as they probably would like a given strategy, they need to put money out $20, $50, $100 million at a time. Right? And so that means that you're left really with raising money from high net worth individuals, people who are worth $1 million, $3, $5, $20, $50 million bucks or something. Right? And so now you're talking about people that on the spectrum of sophistication, aren't very sophisticated, maybe very bright people, very good at what they do, right? But you know, much of this stuff is new to them. And so that creates friction in the fundraising process, not to mention that even if you get someone to yes, uh, they believe in what you're doing and they've done their own due diligence, you know, there's $100,000, you know, at the end of that call, you know, at the end of the close, right? And so it's, this industry is highly, highly fragmented. There's many, many, many people offering investment opportunities in the market. And there's many, many, many, many, many, it just prospective investors. So for us, it's really been our mission to try to figure out, well, how can we do our part to help that capital flow more efficiently? Because obviously you solve problems on both sides, right? The, the passive investor wants what many deal sponsors offer, which oftentimes are above-average, you know, risk-adjusted returns that are, you know, pushing double digits, right? And, and very— and they lack the volatility of the private markets. And so to, to, for those who qualify, you know, because of their net worth or their income, right, it's very attractive. But once again, that friction sort of gets in the way. So that's really what we've done with VeraVest. And where my passion is, is that in speaking with investors, you realize that for them, the biggest obstacle is just, you know, it's fear. I mean, this is money they work really, really, really hard to earn and You know, so therefore parting with that money and investing it in somebody who, you know, is not a brand name or household name is frightening. And that means that more often than not, your sales cycle's drawn way out, right? I mean, it could be 12, 18, 24 months from the day you meet somebody before they'll actually make that $100,000 investment. So, so that's really where we're at.
Let me, let me jump in and, uh, you know, I think maybe add color to what you're saying. So I would assume that Would it be fair to say that a majority of the investors you work with passively investing in our kinds of offerings, you know, private placements, alternative investments, it's not their full-time gig at this point? They're probably still very involved in either a career or a profession or maybe just even just retired and playing, but they're not they're not dedicating a significant amount of time to vet out deals and do deep dive on figuring out where to put their money. Is that a fair assessment?
Yeah, I think that's a fair assessment. Yeah. Okay. So, it's really not their full-time thing. Yeah.
So, you mentioned the fear of, you know, so these aren't people that are probably, if they've amassed, you know, a high net worth or an ultra-high net worth, they're not necessarily afraid from the standpoint of being naive or ignorant, but they actually if they've accumulated those assets, they probably have respect for what real risk is, but they just don't have the time or desire or tools to do the work that it requires to, you know, to do that due diligence. So I think, you know, services like what you're offering, and to a degree, that's also what we like to do is educate people. You're providing that service because it really is, it's where you can lose in alternatives. We all know where, you know, where we can win, and we've all, we've all won a lot in this space. But figuring out what pony to put, you know, you're on the right racetrack, but figuring out what, what, you know, pony to put your money on, that's really where I think people hit a, hit a brick wall. Because look, everybody's a good marketer these days, you know. You can hire people to do your marketing for you, and everybody's deal sounds fantastic on paper. So the next step is how do I decide to actually pull the trigger? So anyway, that's—
No, I completely— that's exactly what— that's exactly right. Right. Even all the investors' conversations I have, that's— they're like, Lance, this is great. You guys are doing the background checks on these guys. You're verifying their track record. You're monitoring the stuff on an ongoing basis. Then they get to the point, they're still like, even then they're going, okay, Now, how do I choose which one? Like you said, these are smart people, they're successful people, they're sophisticated, but even the investment due diligence side of doing the vetting of the investment, it's a non-zero effort. But yeah, that's definitely the case.
Lance, we did a survey of our audience not too long ago and asked, what are some of the challenges you face when you're trying to invest in offerings like this? One of the biggest challenges that most people said was doing due diligence, right? How do I know I'm asking the right questions? Um, how do I know what to look for? And it's not necessarily a, an issue of trust or an issue of, you know, they're not, they're not dumb people, but they don't know what they don't know. And it's, it's that kind of prohibitor, right? So talk about how, how you guys at Verivest do some of the due diligence that you do on sponsors? And, and what's kind of some of the inherent challenges that an individual may have when, when talking with a sponsor, right? Where they may not have, you know, the ability to get the same information you guys can get as a single individual, you know, with a sponsor that may be working with hundreds or thousands.
Yeah, so, so what our process is, it really starts with the people. So, you know, the first step we take is we say, okay, you've got investment opportunities you want to make available or are making available, who are the principals, right? Like, who are the people that control this particular investment opportunity? We run the background checks on them. We're looking for, you know, are there accusations of fraud? Were there felony criminal convictions? You know, I mean, the real basic stuff, right? Just to make sure that, hey, these are fundamentally good people who've, you know, kept their nose clean. The step beyond that then, what we really do is we request their marketing materials. Like, what are you giving investors today? Because what I'm going after is what claims are you making? Like, what representations are you making to investors? Because that's— and oftentimes, of course, it's the amount of capital we're managing or assets under management, you know, that people, you know, they sort of use that. And so we start there and I say, okay, you're telling— you've got $50 million, it says right here on page 4 that you've got, you know, over $60 million in investor, you know, capital under management. Okay, give us some financial statements, right? Let's just start there and let's see, can we corroborate that claim? And then to like proven track records, or they got some other sheet in their marketing collateral that's saying that they've bought all these properties or they've originated all these loans or bought all these loans or whatever. Same thing. I'm like, okay, do you realize that when the investor consumes this, the first thing they're thinking is, Is this BS? Or, I mean, how would they know, right? And so, so we just, we make our sponsor members aware that that's really how the other side's looking at it. And then let's gather that information and see if we can corroborate and validate it. But that's really where we start. It's just like, you're making claims, and you certainly don't want to be positioned where you're misrepresenting yourself. Because I think that's where the marketers and many of these guys get a little overboard at times, right, with exaggerating their claims, not realizing that it's a big, big, big number no, as far as the SEC is concerned. And it is very powerful and it does change the way that people perceive you if you're making audacious claims, because many of them will take them as gospel and truth.
Yeah. What do you find, having done this for a long time and working with a lot of both sponsors and investors, and what do you find are maybe the biggest misconceptions from an investor that's trying to evaluate an opportunity, whether it's an oversimplification or an overcomplication of something that they are emphasizing in their due diligence? What would you say are the biggest kind of things that, maybe myths to bust in a due diligence process?
Yeah, I think a few of the big things that I think investors do that they need to guard themselves of is just really focusing on those targeted returns that are being quoted. You know, they really use that as some measuring stick from one opportunity to the next. And that's why I— that's really why I launched the podcast, The Real Estate Risk Report. That drives me crazy more than anything is because you can't do that, right? Like, one person's 10% return is not the same as another person's 10%. I think, James, I think—
fun with numbers.
Yeah, I think we had this exact— you, Bob, you and I talked about this in the podcast, I think, when I had you on. But so I think that's the big thing is just, they kind of just go right after that number and then they use that as their filtering criteria. So now they've just narrowed down the world based on something that is misguided. And so I think that the counter to that is more of asking themselves more high level, what is in my investment portfolio globally today? What do I have? Doing an audit of that and then asking themselves, what What don't I have enough of? Have I invested in too many of these deep value-add multifamily deals? And now I'm just sitting there with exposure of that sort, and I don't have really— because I think that's one of the things they think that that's sort of, well, it's cash flowing, and I'm going, yeah, but that cash flowing could go away quickly. Whereas, or am I too heavy on income? Do I have too many of these income investments, maybe like Aspen Income Fund or something? It's just, once again, everyone's different, but you need to sort of know where you're at. And then begin to look and then ask yourself what the underlying assets you have exposure to, right? I mean, if it's— we're talking real estate, I mean, what's the underlying asset? Is it single family? Is it multi? Is it industrial? Is it self-storage? I mean, you want to build a diverse portfolio if you're going to play in this, you know, in, in this alt sort of game in the real estate sector in particular. So I think that's one of the big things they sort of overlook. I think the other one too is just the whole notion of like skin in the game. Like, is though that that's like the holy grail. It's— I'm not saying it's not important. I just think that it's a tricky one, right? I mean, if you're really, really, really wealthy, then my expectation is you put a bunch of your own money into the deal. But if you're an emerging manager, right, it's just once again, it's different for everyone. And you have to sort of, you know, you have to really think that through. It's just not that simple of using skin in the game is like the disqualifying criteria of whether you'll invest or not. Sure.
I'll throw one at you based on the skin in the game. And then you mentioned earlier the financial, you know, look at financial statements. So, I'll be transparent here. I know a guy that used to be a deal junkie and he was super optimistic, very capable, and he was doing small developments in Southern California. And every deal looks great coming out of the starting gate. And so, moral of the story is that guy that I know really, really well, right, Ben? That guy over time, when he looks back at the properties that he had control of, if he had had deep pockets and been able to weather the storms that come, the ups and downs, would be sitting on probably a billion dollars worth of real estate instead of having gone completely broke because of the debt alligator and really not having the sufficient liquid capital to back up. What happens if you have to put this thing on mothballs for a year or 2 years? And so, it's kind of inherent in the entrepreneur world, the real estate entrepreneur world. It's inherent that once you learn how to find a good deal and execute it, you don't want to keep money in the bank. You want to go find the next 3 or 4 good deals. And I see a lot of investors don't really Look at that aspect of it, and the person can be smart, the business plan can be sound, the deal can look great, but if it's a deal junkie, which kind of goes along with being a developer mindset, that's something that can torch everybody's investment. And I know that guy, and it was painful.
Yeah, you got it. Once again, and going back to, like you said, picking the pony, right? In that case, if that guy was offering some of those investments up to limited partners, or passive investors is that once again, that's mean context matters. So you need to look at it and not just the deal the guy's presenting, but you say, let me see the deals that you've got in the pipeline, like that you've already got underway and whatever. And then see, now the skin in the game thing has context because you say, whoa, it looks like you're kind of getting out over your skis. Because I've heard that same, the East Coast version of the same story, right? I've heard that story before, right? It's just that And sometimes, once again, even like private lenders get in trouble because they just, they just myopic on the project at hand that they're underwriting, not realizing that all these other deals they've got, the deal junkies sort of got going. If anything sort of hiccups, all of a sudden that guy can be sunk. And now you, your first position loan that you thought was just high and dry and never going to lose on is, you know, you just had a whole portion of your portfolio with that borrower go kaput.
Right.
And so it's like that to me, being an investor means that you have to look at the holistic picture of the party you're conducting the due diligence on, you know, go up, you know, pan out, get an understanding, then drill down. You have to take your own situation, pan out, think about what you need. Don't get overexcited, right, about the pretty pictures for the development project, whatever. Just slow it down a beat, right? And it's just, I think if you do that, you'll end up being okay. It's just, it's certainly, if you find yourself getting all emotional and excited, you know, you're, you're probably, you're probably going down the wrong path. You really need to try to keep yourself in an analytical frame of mind, have a process, you know, any process, but be consistent.
Yeah. One of the comments on the skin in the game, and this is something we we've talked with investors about many times, is it doesn't just look like one thing, which is cash in a deal or cash in a fund, you know, and it can be like in Aspen's case where, you know, a fast growing operator. And so we have a whole management company that, you know, bears the cost and the burden of all that growth and the staff and the overhead and, you know, all the due diligence and other things that it takes to grow these businesses. And, you know, that, that's some element of skin in the game as well, where it doesn't always have to look just like cash, you know, in a deal, which is obviously a good indicator and something that you shouldn't— you know, you should want to a certain degree. But to your point, it's, it's a much broader conversation than just zeroing in on that one factor as the primary decision maker.
Yeah, and it's a good point, Ben, right? Because that is where you look at that and you see a lot of the sweat equity and a lot of money that's being poured in to subsidize and underwrite. I think it's important for passive investors to understand that when deal sponsors are like brand new emerging, their overhead's very low, they can be really nimble. The good thing for an investor in that perspective is that you can get really, really good economics because they're hungry and they want to prove themselves. And as they grow and scale, there's this dip. It's really hard because when you look at the business model for guys like you or anyone that's sort of an investment manager in the real estate space, there's really no such thing as exponential growth. It's very linear, but your expenses and what you— and everything, most of your upsides on the back end, right? And so asset management fees or acquisition fees, any of those things, they barely cover overhead. In fact, when you're growing and scaling, they don't. They don't cover it. Right? So you really— and I think the other thing to keep in mind for passive investors there, if we're talking about investing like a billionaire, I think that's something to keep in mind is that there's actually opportunities to have, especially if you've been really successful yourself and you do have some money, is really think about approaching some of these emerging firms and making investments in their operating company. Right? It's just, it's stuff like that, that if you want to, I mean, it's not just the LP. There's, I mean, obviously once again, that's one component of your portfolio. I invest in Aspen Income Fund. That's a fixed income replacement to my portfolio, meaning I can count on that to be consistent cash flow to pay my bills. Right. But if I want to go and kind of get into that venture space, once again, in the spirit of having something for the whole thing, investing in— if they're willing to let you in potentially into the operating company, could be really, really, really, you know, a fruitful investment.
Yeah, that's a really cool perspective. You hit on something which I want to kind of dive into a little bit, um, is fees, right? And one way that, you know, as a passive investor, if I'm looking at an opportunity and you're looking at just the headline return or the IRR, um, you know, a lot of times investors don't know how to read through a PPM and maybe don't know how to pull out all maybe the hidden costs of, of an offering, right? And I know you guys look at that, and those are a lot of times can be more transparent when you're looking at a platform like Varivest. And you're looking at those kind of things and making sure it's not maybe, you know, outside of market rates. But, you know, there are PPMs and offerings that I've seen, and I know other investors probably have as well, where it's, it's, you know, very fee-heavy. And if there's a deal where it's really heavy on the fees, that's something that in my mind should be a yellow flag. What do you kind of see as, you know, maybe hidden fees to look out for, or things that are maybe above market? And is that a concern to you, you know, as an investor?
Yeah. So in fact, the first thing I look at when anyone sends me offering materials that I'll usually try to get to the limited partnership agreement first, the OA, because the PPM's got a lot of stuff. And of course, the risk factor, I mean, I'm not minimizing its importance, but I know when I can get to the operating agreement, I can find the fee section much faster. They have to be disclosed. And there usually are clauses inside of the PPM that say something to the degree of like, Whatever's here doesn't, you know, the operating agreement is the final right arbiter. So sometimes I'm like, well, you know, I'm gonna go right after that and I'm gonna write 'em down. I literally will just say, I'll read it and I'll put 2% asset management fee. Okay. Fees, you know, and they're usually in one section, but you, and even like one I was reading the other day was talking about refinance proceeds was sort of in the distribution column. And I was looking at it and it says, it basically said, Okay, when we refinance, 70% to the limited partners, 30% to the manager. And I'm like, okay, I read it again and I read it again and I'm like, whoa, wait, it says that. Wait a minute. So you're saying if I go in, I do a cash-out refi and I get the proceeds back, I would think it'd be 100% to limited partners because that's capital, right? But it says only 70% goes and 30%. So I'm going, you know what that is? That's a hidden fee. That's 30% refinance fee, right? Like that's criminal. That's criminal, right? But it wasn't in the fee section. So, but that was in the operating agreement, right? So, because it has to be clear, it's a legal document. So I think it's going after those things, jotting down the fees and saying who gets paid what is a great first exercise. Then the second exercise is You take each fee on its surface and you say, what is that for? Because my philosophy as an architect of these funds is you put the money where the work is. So you put ease where effort is expended. And then you say to self, what type of effort needs to be expended? We've talked about this before with your strategy. Executing your strategy is a lot of work. These loans are generally small, they're smaller, you got to sift through tons of stuff, you've got to like maybe do some workout, like it's intense, it's labor intense. So therefore, one could substantiate a higher fund management fee or something, right? Because it's just more effort. Whereas if you're buying core plus multifamily properties that are basically running themselves, I would scrutinize a high fee because I'd be like, seriously, like 2.5% for what? Like, what are you doing? No renovation, you know what I mean? The tenant is stable. So I think that's once again, context matters. I want to think about what's this fee for? And as an investor, then go push back against the ones that just seem like, I don't get it. Why are you charging a 5% disposition fee? Like, I don't understand. Like, am I missing something? Is there some like extra work that's involved in disposing of the asset that I'm not aware of? Maybe there is. I don't know.
Yeah.
That's such a good such a good point and making that distinction. Like Ben alluded to earlier, we have a pretty massive overhead for our operation and there is a lot of work going. So we, as the manager of the fund, I mean, we're paying pretty significant salaries in some cases to people to come over into the business venture and work on that thing and they're working on it continually. But we're paying for that. And so, some of the fees that we take, and you mentioned covering the overhead, doesn't cover it, but it at least doesn't get us— I mean, we can keep the lights on and keep the doors open and keep operating because it doesn't help anybody if we can't. But we don't make money unless the deal's the deal. And in our case, it's a series of a bunch of little deals, unless it's profitable. So, you know, we're not in business just to pay our people.
Yeah.
You know, and not make a profit.
That's right. And that's what I call, that's what you want to look for is that next layer. Is this aligned? Is the offering aligned? As I now understand the business, is there alignment here? Right? And so, because some people think that it's cute to subordinate management fees to like a preferred return, like that makes my offering more attractive. And every client of mine that's come to me that tries, I'm like, I can't do it. I cannot let you do that. I don't understand, Lance, but that'll make me more competitive. I'm like, maybe it will. But once again, things happen, things that are out of your control, market forces, could be against you. And the second that something happens and all the money legally and contractually needs to go to the investors and not to you, right? You're not going to work for free, are you?
You're not doing them any good if you have to let your staff go, you know. You're not doing them any good if you have to cancel your lease and walk out of the building and there's no company left.
That's right.
It's no, it's no good. And so when you, when you evaluate those fees and you say, okay, it seems reasonable, right? It's covering overhead. Now you have alignment because like in your guys' case, it's like you've got to clear the hurdle. You've got to get past the preferred return to win, and that's alignment. That means everyone that shows up is like, that's what they're there to do, is to perform so that you guys can actually be profitable, make money, do what you want to do.
Yeah, drill down on that a little bit more on the alignment of interests and just how even waterfalls, other things can incentivize that. I think it's something that maybe kind of a newer concept in these types of investments, right? Because if you're investing in stocks and bonds, it's not kind of a similar concept as it would be in these private equity deals where there is kind of this waterfall of distributions and certain things occur and then certain parties get compensated for that. Talk a little bit about what you look for when you're evaluating opportunities and what do you see as really positive strengths to an alignment perspective?
Yeah, I think it's kind of along those lines. Once again, I'm looking to make sure I understand how the business works. See where the fees are going, understand the parts, and then say, okay, am I, as an investor, is my downside risk being protected? So that's how I evaluate whether or not whatever hurdle, whether it's an IRR hurdle or preferred return, do I feel like given my understanding of the strategy that I'm being compensated to protect my downside risk? Meaning, am I going to get what is reasonable? Right. And then from there, then I say, okay, now when I clear that hurdle, Let's say it's 50/50 after that, or let's say it's like, you know, in some it's none, like it all goes to them. Then I'm evaluating and saying, as I understand it, because like with some of the strategies like you guys, like there's a note rate on there, you guys can buy it at a discount, your yield that you can generate, it's capped. I mean, like it can only be so much, right? And so you have to, an investor, you have to realize that and think through that. There's literally a ceiling to certain things. Now, when you're investing in equity, right? Like, you're, you know, in common equity, like, you're in first loss position. It's, it's in theory, it's unlimited upside, right? And so at that point, then that's where you're looking for, is you're identifying this is a commercial real estate acquisition, I'm investing in basically first loss position common equity, you know, alongside the sponsor, and therefore, you know, my, you know, my upside's unlimited. So then I'm saying, is it fair that they're going to give me 70% of anything above that hurdle rate to another hurdle rate of whatever. Once again, it's contextual, but you have to evaluate and say, does it seem fair? Because if it doesn't seem fair, just with common sense, then it probably isn't. It just might be one-sided. And some of those guys do that. Once again, the underlying risk is huge and they put hurdles in to basically cool down the returns so that it doesn't sound so risky. Oh, it's going to generate a 14% return. Meanwhile, it's like ground-up construction in the roughest parts of town, or I don't know. It's all context matters. It's really important to understand that.
Yep. I love that. I love what you're— I mean, it's pretty evident you've looked at a lot of these offering documents before. And one thing I would say to any listeners, if you're getting new to this space, introduced to it, one, go to a platform like VerraVest and and realize they're doing some of the work for you, but it doesn't alleviate, you know, the diligence that you still need to do for yourself. And the reason that Lance can say these things so confidently is he's looked at probably 1,000 or more offering documents and he has a context for what feels, you know, what's reasonable and what's not reasonable. And, you know, just even going on Verivest and starting to download offering documents of, you know, some of the top sponsors there and just start reading through them and get familiar with them, you're gonna get a really good, gut sense of does this feel reasonable and fair or not. Lance, I kind of want to shift the conversation a little bit. This is something we've talked about before, but how do you view Varivest in the value that it's bringing to investors relative to maybe other crowdfunding platforms out there? We've heard of a lot of the other ones that are kind of focused on accredited investors. So there's the Crowdstreets, the RealCrowds, RealtyMuggles of the world that have done a lot of volume. They attract a lot of accredited investors. But talk about how you're structured differently and you view this as crowdfunding 2.0, I think I've heard you say, and the new model, and how do you see this being advantageous?
Well, I think first and foremost is that with crowdfunding version 1, much of this notion of syndicated equity and private placements was new to many, many, many, many people, right? They just, they weren't, didn't even know that you could get into the deal. So I think it made sense how it kind of played out, but we're now sort of at that Amazon.com pivot point where people are, they're aware that it exists. They've read a lot of offering documents, they're becoming privy to the different strategies and, you know, it's evolving and maturing. And so for me, when that happens, you know, we need to create an environment that's more inclusive, not exclusive. Because like I said, that's part of— I mean, it's always been the beauty of real estate is it's— fragmentation is a feature, right? It's location, location, location. It's everywhere. So, um, to sort of just like boil the ocean down to like a handful of offerings is just— it's okay. Like, I'm not saying that every deal that anyone ever put together is worth investing in, but it certainly isn't 3%, right? I mean, it, in my opinion, it's somewhere around 50 or 60% of any offering that someone puts together and goes through the process. Is probably worth investing in. I don't know, maybe I'm being generous. But so really, that's my big thing is just be more inclusive and to add reputation to the space that already exists, that's burgeoning, right? And so when you look at any of these things that any marketplace that springs up, eBay, right, versus Craigslist. Craigslist did not add reputation. It's a complete dumpster fire now, right? But you have eBay that did, Amazon that did. And so we're doing the same thing. We need to add reputation contextually, right, for that fits to the, to it. And to me, it's about the participants, those who are presenting the offerings and opportunities. So that's the big difference for me is giving people access to more options, and then teaching them, right, and doing our part. I mean, I think everyone needs to be educating, like you said, Jim, right? Like, that's, that's just part of what you need to be doing. And give them more options so that they can actually build a diverse portfolio of these sorts of investments. So I think that's the biggest difference. And then us not promoting directly, right? Like, that's the other big thing. We need to just be the referee and we need to provide the rails and the infrastructure to facilitate these transactions, handle the compliance, make sure all those things are that oversight. And that's sort of, I view it as private, the private sector stepping in so that the regulatory regimes don't need to. Because if this thing keeps going, look at crypto and whatever, I mean, if you just let everyone do what they want to do, it becomes just a mess and then they overly regulate us. So I'm like, let's step in and regulate ourselves. It just makes more sense to me.
Yeah. Yeah. I love that. Just to underscore the point here is some of these platforms are registered broker-dealers, which means they get compensated for the equity or funds that are placed through their platform with some of these sponsors. So it's not, not always a, you know, misalignment of interest. But what you're saying is Varivest is a completely neutral third party. You're not, you're not getting paid more from a sponsor to raise more equity. In fact, you're not even facilitating those conversations. You're purely being the middleman, being the referee, to your point of you know, we're doing these checks, we're doing the background checks, we're doing, you know, just the basic gut check. And are they, are they at least showing what they're saying that they're going to do and representing that and then allowing investors to kind of start that conversation with the sponsor with a leg up because they know that some of the basic questions are answered.
Yeah, that's right. We're just, we're short-cutting that sales cycle. Right. And that burden that that Jim talked about of just like, it's, it's too much lift for them to conduct that in-depth due diligence. And then post-investment, like you guys, you submit all of your financial data to us quarterly. We review it just to make sure that everything that the agreement that was signed is being done as said, right? So once again, I feel good about spending a lot of time talking about Aspen Funds because I know that you guys are doing what you said you'd do. "Now, will you always execute? I don't know. I hope you will, but I'm not promising that." That's not what I'm telling people. Invest in Aspen Funds. I guarantee you'll get whatever they told you you're going to get. I'm saying they're good guys that are committed to doing the right thing. We're watching what they're doing, forcing function, right? Right there, it's a powerful thing.
So one of my final questions is, where do you see this whole world of crowdfunding going in the future and where do you see Varivest going and where does it fit into the bigger picture? Yeah.
Where I see it going is that the percentage of offerings with some kind of real estate asset behind it, of those who are using that 506 exemption, which is just those prior business relationships, that shift is going to continue and it's going to accelerate to where pretty much everybody's going to be publicly advertising and soliciting the offerings, have the ability to. So that's what's happening. And we'll call that crowdfunding. I don't know, but it just means accessible to anyone who qualifies. So I think that that's what I'm hoping will happen. I'm trying to do everything we can to remove as much friction that stands in the way of people deciding to make that leap. Now, of course, it's easier when you have a fund you want, it's perpetual, it's evergreen, You know, but many of these single asset deals are still choosing to only, you know, present them to those they have prior business relationships with. So not everyone has a crack at them. And I think that the minimum investments are going to continue to go down, you know, because I think you guys know back, you know, 5, 6, 7, 8 years ago, $100,000 was really the typical minimum. And now we're seeing it as $75,000, $50,000. You know, it'd be nice to see it get around $25,000 or something like that. But that's where I think it's headed. But my big thing is just access, safety, comfort, people, peace of mind, just people being able to— And of course, what I really hope happens is part of what we're doing is just to open it up where there can be a secondary market where we've solved— where Verivest in particular solved enough of this information asymmetry problem that people can actually not only purchase in the primary issuance of any given offering, but actually have the ability to to liquidate their position, someone can purchase their position without taking a huge liquidity and minority discount.
Very cool.
That's cool.
Yeah.
And then world hunger after that.
I like it. That's a good plan. What's the best way for listeners to get ahold of you if they're like, "Man, I need to spend more time learning more about this, give us the name of the podcast again. And obviously, you have an amazing library of resources. One of my favorites is, I think it's The Definitive Guide to Investor Due Diligence. That's for free, I think, somewhere on your website. So we'll have the links in the show notes, but just give a sense of where people can get ahold of you and get some of these resources.
Download the ebook. You can go to verivest.com. It's right at the bottom of the page. Just plug in your email. It's all we're asking for. So you've got the guide, kind of walkthrough, kind of sponsor due diligence and ongoing monitoring and those things. And then, you know, verivest.com, obviously the directory, you can find, you know, folks like Aspen on there. And then if you've got any questions, yeah, the real estate risk report on any of podcast channels, whatever, iTunes, you name it, you can just type in real estate risk report and find me, subscribe and listen to that. And if you have any questions, just email me, lance@verivest.com.
Awesome. Well, thanks so much for coming on, Lance. This has been really, really helpful, and I'm sure our listeners will really, really get some good gold out of this.
Yeah, thanks for having me, guys. It's good catching up as always.
