How NFT's Are Going To Change The Fund Game

Today we're going to talk about how NFTs will potentially disrupt and change the fund and syndication world. Yes, the world of raising capital down to small everyday investors, how NFTs and tokenization can absolutely transform this entire industry. Hello and welcome back to the channel. My name is Bridger Pennington. On this channel, we talk all things funds, finance. We help people start, launch, and scale their own funds. As of today, we're over 16,000 thousand members in our communities and courses on investment funds, how to launch private equity hedge funds, venture capital, real estate funds. I've launched 3 funds of my own. Just recently we launched a crypto fund, and actually it's been very fun to run, and we've done very, very well throughout this market volatility. So let me take you back a little bit about funds in the first place and how NFTs could disrupt this entire market. So first off, when I use the word fund, we have Investment Fund Secrets, our whole company. The word fund, all I mean, a fund is a pool of money and investors put money into that pool. They invest. Us as fund managers, we can draw from that pool and then we make investments. When those investments make money, it flows back to the pool and gets split between the fund managers and the investors. And these investments can really be whatever we want. We can do like a hedge fund. We can buy public security stocks, bonds, options. We could be a private equity fund who buys private companies. You could buy a local bread shop. You could buy Kohl's or Sears or a huge company. You could be a real estate fund and your investments here would buy and sell real estate. This is the world of investment funds. Now, in traditional investment funds, these investors over here have to be wealthy individuals. They have to be at usually at least an accredited investor, which means they have a net worth of over $1 million excluding their home, or they make $200,000 a year or $300,000 a year with their spouse. Kind of see how it does that like 1, 2, 3, kind of a cool way to do that, right? There's actually other tiers higher than a credit investor. There's a qualified client who has to have a $2.1 million net worth. And then above that, you have a qualified purchaser who has a $5 million net worth excluding their home, or they're an entity with $25 million in assets. Typically large investment funds are only reserved for these types of individuals, high net worth individuals. But recently something very interesting has happened with the crypto and blockchain space. This is the introduction to DAOs and tokenizing assets. So a DAO, or a decentralized autonomous organization, functions very similar to a fund, just like I described above. You have investors who put dollars into this DAO. They are then issued a token or a coin for investing in this DAO. And now typically, instead of having fund managers up here that manage the fund, they use smart contracts to decide on what the fund does. Now, all this money flows into what's called the treasury, and whoever set up the DAO decides the smart contracts on what the treasury is going to do with that capital. Now, some treasuries act similarly to an index fund where they essentially have code and programs through smart contracts that tell them to go buy Bitcoin and tell them to go buy some Ethereum and tell them to go buy some other types of coins or token. This treasury amount, if it's well managed, gives these token holders what's called a floor price. Meaning if you liquidated all the assets of the treasury, you would come up with a set dollar amount for number of tokens issued. Additionally, some DAOs have been set up where all the token holders can vote on what is done with the DAO. So for example, A few months ago, there was a DAO put together to buy the Denver Broncos. They actually issued a bid to buy the Denver Broncos. They were outbid by the Waltons. And what they did was every single token holder was able to vote depending on how many tokens they held on the price and what they would do with the Denver Broncos. Additionally, I've seen other DAOs where everyone votes on what real estate to buy, or I saw a DAO that was gonna buy a golf course. All of them come together, each token holder votes on which golf course to buy. Kind of cool, right? Now, in addition to that, I've also seen other DAOs where they have a little bit more centralized aspect to them. They have some type of management team that selects good investments for the treasury. It's very similar to a fund. It's actually exactly how a fund works. And for doing that, for selecting good things in the treasury, they get paid some type of fee or coin or token for their efforts and time spent on the DAO. Additionally, when those investments make money, these smart contracts can easily distribute returns to token holders. So if you hold a token and you— we made $1 million and we want to distribute that to our token holders, we can easily click a button or not even click a button. The smart contracts just do it for us where they just distribute the capital pro rata based on how many tokens you hold. Kind of cool, right? It's not that crazy though. We've seen this before with different stocks and different funds. This is just done through the crypto and blockchain space. Now, if you're like me, you can see how this is becoming disruptive in the space, but you also might say, well, what's the difference? Like, why not just do a fund? A DAO sounds even more complex. This sounds like stupid. Why don't I just do a fund? What's really cool about a DAO is 2 main things. Number one, it provides liquidity for investors. Up above here on normal funds, most of the time your money is locked up in these funds for 3, 5, even 10 10 years before you can pull money out. Additionally, you can't really sell your position if you invest into a venture capital fund. It's very hard to sell your position. In a DAO, you could hold a token, and if you wanted to leave that position, you didn't like the DAO anymore, you could liquidate and sell that token to someone else. This allows investors to come in and out of investments very quickly. Now, there are pros and cons of that. A nice thing about a fund is if everyone gets scared or there's a bad news press, no one can leave. You get to stay long-term, and typically long-term investors outperform short-term hyperactive trading investors. However, number 2, a pro, is that more investors can come in. That leads us to our second point. This allows everyday investors to get involved on big projects or big deals and sometimes even have voting rights on those projects or deals. In a fund up above, you again, you had to be an accredited investor. You had to have a— be a qualified client or qualified purchaser to invest in these funds. Now, at least as of today, regular day investors can come buy these tokens or collectibles on this products. Now these tokens can be classified however you want them. You could classify them as an NFT, as a collectible that you hold on this fund, and you get reflections from holding or airdrops from holding that NFT. Again, allowing everyday investors to be a part of this and allowing high levels of liquidity inside of these DAOs. Personally, I think over the next decade this will be a slow-moving boat, but we're going to see a lot more investments or investment vehicles started through DAOs. People are going to raise money for a $2.5 million-dollar apartment complex potentially through a DAO. People are gonna try to raise money for a private equity deal or a venture capital deal potentially through a DAO. Now, does this do away with the old investment funds? I don't think so. I think traditional venture capital, private equity funds will be necessary and still be very valuable. And potentially they could even launch their new funds through a DAO model to allow investors just to easily, more easily come in and invest through cryptocurrency rather than sending wires or other clunky transactions that happen in fiat. Now, for that to happen, that's, this is a long boat ahead of us. I think this is of 10 or 15 years out before there's mass, mass adoption, especially amongst old family offices and old money. They'll probably be one of the last people to adopt this. But when it is adopted, I think it will be a massive shakeup in the market. If you want to watch some of our other videos more in depth on DAOs, the risks of DAOs, how to start investment funds, click on the links above and below this video. Let me know in the comments what you think the future holds for DAOs, NFTs with— in relation to funds. You guys are amazing. Please like and subscribe this video. You guys are awesome and follow along for more.