Full Transcript
slava (00:01.843)
Hello and welcome back to another episode of Smart Humans. I am super excited about today's guest. We have the CEO and founder of one of the largest alternative investment platforms on the internet, Milind Mehere. Welcome to Smart Humans.
milind_mehere (00:17.198)
Thank you for having me.
slava (00:19.795)
So, we always like to start with the same question with everybody and your origin story is gonna be really interesting. How did you even get into alternative investments?
milind_mehere (00:30.818)
So I think for me, the journey was very organic, similar to a Travis Kalanick or Brian Chesky that they were trying to solve their own problems and they started Uber and Airbnb. So for me, I came to this country as an immigrant student, joined the professional workforce, was kind of climbing the corporate ladder. What was told to me was 60, 40 is the way to go as far as investments were concerned. So 401k, 529, all that.
co-founded a company before Eel Street, company was doing extremely well. Then global financial crisis hit 2009, portfolio down 50%. Go to my financial advisor, I said, hey, what's happening here? He said, what can I do? The whole world is collapsing. And so I asked him, can I invest away from the stock market in assets that are non-correlated and can generate some passive income for me, like Apollo and Blackstone and some of these real estate funds and all that.
He starts laughing. He says, hey, I know I'm your wealth manager, but you don't really have wealth and to invest in those type of private equity firms. And I'm like saying to myself, here is my company, it's about 400, 500 people. I think I'm doing pretty well. How can I not invest in these type of investments? And that was really when the light bulb went off, which is...
How is it that we don't have access to good investments away from the stock market? And by the way, I didn't know the words non-correlated meant and all, I'm a tech entrepreneur. And so over the next few years now, I was investing through my PA, trying to do real estate deals, hustle in New York, along with growing my company. And finally, as my previous company got acquired and I was looking to do my next thing, this thing kept coming back to me, which is like, how do you...
solve this income and opportunity gap, how do you really create alpha in your portfolio, real returns in your portfolio away from the stock market, like the top 1%, like the institutions. And that's when I partnered with my co-founder, Michael Weiss, he comes from that investment world, and we have complementary skill sets where I knew how to build a brand, technology, operations. He knew investment management, risk management, and compliance, which is very important in our space.
milind_mehere (02:48.014)
And that's how, you know, Yieldstreet actually was started. And Slava, you know, you kind of went through the whole regulatory changes and you had a very, very successful crowdfunding startup. You were one of the early OGs of that. And so, you know, a lot of regulation change, betterment on the robo side, lending club on the lending side. And there was this big void on the wealth tech side, which is where Yieldstreet tried to fill it, where we were going to create this.
option for your portfolio and modernize your portfolio.
slava (03:20.979)
That's an amazing story. I love the immigrant background. So when you mentioned your PA, your personal account, what were some of those investments that you were starting to do early out of your personal account?
milind_mehere (03:32.738)
So mostly tied to real estate and some small business loans outside of the stock market. And so I still remember, Slava, I would drag my wife on a weekend, go to Harrisburg, Pennsylvania, look at a day's end or a holiday end, right? Like Indians and motels sounds cliche, but you know, that's where the great cash on cash returns were. I used to look at QSR, you know, restaurants and subway chains and things like that. I was actually one of the founding members of
Coldwell Banker India, we actually took the master franchise and took it to India to expand in India and it's still operational over there. So I was like mostly like many people, real estate is such a big asset class, you get a lot of exposure to that. So mostly in and around real estate was some of the focus at that time.
slava (04:22.559)
So this is like 2009, 2010, 2011, things like that.
milind_mehere (04:26.942)
Yeah, it was probably between 2010 and 2014-15.
slava (04:31.071)
Great. And so how about the other asset classes? Let's say like art or crypto, I imagine is very early for that, or collectibles or I mean, debt. It sounds like real estate you really had dialed.
milind_mehere (04:44.874)
Yeah, so listen, I did some debt, mostly loans around for small businesses and things like that. Art, I was dabbling, but nothing substantial. Believed in that as an asset class, but much more from an interest perspective because it's such a wide asset class. Didn't do crypto at the time at all. And outside of that, angel investing for sure. And so did a few of those. Mostly in
piggybacked on my wife. So my wife used to be a venture capitalist at the time and she was big supporters of female founders. And so we did a bunch of those investments jointly at that time.
slava (05:27.623)
Amazing. Sounds like a power couple to say the least. And then as you've obviously built out Yieldstreet and so many different asset classes, has your personal investing evolved? Have you moved into collectibles? Have you moved into art? Have you moved into crypto or how has your own personal investing involved?
milind_mehere (05:47.046)
Yeah, so great question. I think the beauty of Yieldstreet has been that, you know, we obviously invest on the platform. And for us, the thesis really was very at the very beginning, we didn't want to build a monoline asset class business. So when we started Yieldstreet, we were the early, you know, if you look at crossing the chasm, right, like we were the early pioneers, like trailblazing the path. A lot of the VCs during our seed round told us
guys focus on one or two asset classes. And at that time, mostly everything was happening in real estate, naturally, right? It's one of the biggest asset class. And we said that, listen, over time, this game is not going to be when investors are going to go to 15 platforms. They want one place to come and get access to everything. Which is, by the way, what you're trying to solve as well, right, in many ways to say, hey, I'm going to kind of aggregate variety of different asset class platforms out there so that people can come and choose what they want and diversify their.
So for me, it has evolved as Yieldstreet has evolved. So my portfolio outside of the stock market very much is around the different asset classes available on Yieldstreet. So private equity, credit, lots of real assets that includes real estate, transportation, art, things like that. And then continue to do some private investments, but primarily has been those, those has been the big, big sector.
Crypto is a big world. I have mostly dabbled trivially in crypto. I'm a big believer in blockchain. And crypto was, for Yieldstreet, traditionally, we are very conservative as a platform. So until a few months ago, we had not really offered crypto on our platform. Our platform is meant for investors, not traders.
So, we kind of tried to use that conservative lens. And so that's kind of how my personal investing preferences have evolved in the last, I would say, five, six years.
slava (07:50.047)
Great, and then what do you think about the shift more recently of people wanting to get more into collectibles like Michael Jordan rookie card or things like that?
milind_mehere (08:01.65)
Yes, so listen, I think there is two ways for us to think about those type of things. So are you again like when I make a distinction between investor and trader, the same distinction happens in collectibles also. Are you an investor or a trader? If you're a trader, you're dabbling 20, 30, 50, 500 dollars, I think it's fine. You can enjoy because you feel the sense of
ownership pride like, hey, I want to have a piece of the Horace Wagner card, like, you know, whatever 10 shares of the Horace Wagner card and all that. Is that an investment strategy? I'm not really sure in terms of how much it's going to go up because you're even $50 becomes $75. It's not really meaningful to kind of how you should think about your investment portfolio. Now if you wear your investor lens, then you have to be really
careful and do the same amount of diligence that you would do when you're investing in real estate. And so for me, at that point in time, it's not so much about gamification that hey, it's like really cool graphics and you see your stock price move up and all that, which is going to happen when there is easy money, which is what has happened in the last two or three years. But then will this thesis hold up over the next three, five, seven years cycle? That's what you have to really be careful about. So my general view is that, yes, I think art is a good thing.
and collectibles are an asset class. And as the world becomes more democratized and there is more access, of course these things are going to be very, very good. The question really is that, are you wearing your trader hat and like kind of fun hat versus a long-term investor hat? And depending upon which hat you're wearing, you have to be careful on how you're evaluating it. So for me, it would be fun to go, big New England sports fan.
So go to fund to invest in Tom Brady or Celtics or Larry Bird and all of those things for fun. But if I'm really thinking about collectibles, then I'm really thinking through how do I really value that asset class? How much money should I put in? What's really where in time we are with regards to the market and how much speculation there is and not there is currently? And invest according to that.
slava (10:22.14)
So are you a big Celtics fan?
milind_mehere (10:25.098)
Yeah, I'm generally a big Boston sports fan.
slava (10:27.911)
Nice, nice, so you're having a moment.
milind_mehere (10:30.11)
So I spent a lot of time in Boston before moving to this great city of New York. But I still kind of carry my Boston roots. And unfortunately, I...
slava (10:40.379)
Yeah, I mean, you definitely had, I was gonna say you definitely had your run with the Patriots and now you have your Celtics performing quite well.
milind_mehere (10:48.686)
Correct, yeah, today it's gonna be it, you know, onto the finals. Ha ha ha.
slava (10:52.127)
Nice. Exactly, exactly. You mentioned easy money over the last few years, which really leads me to the next question is about the market. The easy money seems like it's coming to an abrupt end. Maybe not abrupt, but it's definitely slowing down. And the market has definitely been shifting for many different reasons. What's, Malin, your point of view on what's happening in the market, whether it's the private markets, alternative markets, the macro markets, public markets. I love, you know, you're...
You're one of the people that is so connected across all these different things. Our listeners love to hear from people like you. So what's your point of view on the market?
milind_mehere (11:28.842)
Yeah, listen, I am no economist, but I'll make a couple of points here. So broadly speaking, I think the markets really have overreacted in some ways. But what has happened is that in the last two or three years, we knew that this story was going to end not so well. Right?
Governments around the world, Slava, printed 20, 25 trillion dollars. So it was easy money that propped up the asset values, you know, and that also draw up inflation. So we knew this was going to happen, but the government had to do that because of, you know, obviously extremely unforeseen circumstances because of the pandemic. And so obviously that raised, you know, raised inflation very high. Pandemic created supply chain problems. And then housing went through the roof over the last couple of years.
And now that money is no longer available and quantitative easing has cooled off, you're seeing some cracks in the ecosystem. But I personally feel that I think NASDAQ has been oversold when Facebook is trading at 10PE, Google is trading at 20PE, when P&G is trading at 25 and Coke is trading at 27. There is, I think, a little bit more of that sentiment that has crept in. But I think the main thing to take from the public markets
is the fact that investor sentiment is very, very powerful. The other really aspects is that this is where lots of different factors contribute to the psyche. What happened in the crypto world, crazy things were happening again because of easy money and technologies can go sometimes very ambitious. And so if you've got to make stable coin pegging and...
people are getting 10, 15, 20% yield on stable coins. You have to ask yourself as an investor, how is that possible? Because somebody has to pay that money, right? And so for you to do recursive lending on the blockchain and on using all these DeFi protocols, you have to be really careful. So there are all these things that are kind of confluence of events that's happening. Now, if you think about, conversely, if you think about our world of private markets, that is in some sense a big reprieve.
milind_mehere (13:50.774)
Right. And so what I am seeing in my own personal portfolio is my public portfolio, obviously, is dramatically down, similar to all of us. But my yield street type portfolio is extremely stable still. And I think generally, when you think about overall holistic portfolio, this is where we feel that private markets has a critical role to play in your portfolio.
because that's how institutional investors, high net worth and family offices invest to really kind of create this complimentary hedge against public equities and volatility in the public markets. And so I think that's really where investors should think about what is the role that private markets and non-public market investments play in our portfolio when these type of circumstances present themselves. And this is not new, right? For a hundred years, we know this cycles, it happens.
But human memory is very short. When the going is good, you know, people want to go enjoy like, you know, and think that this party is never going to end. But then, there is always a curfew and party does come to an end. And so it really depends on like how well prepared are you in that type of a situation.
slava (15:05.223)
Yeah, your point about the party ending. So it seems like the party has come to an end. The question is how long is the party going to be delayed for or stopped? Do you have any sense? I know you said you're not an economist, but from your point of view, is this the sort of thing that we're already at the bottom, or this is going to take another year before we see bottom? Or how long is, let's call it, bear market, this recession, this whatever we want to call it?
you know, the down part of our cycle. What do you think?
milind_mehere (15:37.854)
Yeah, so I think I don't know whether we are bottomed out or no. I think for me, the main indicators really are we have to wait for at least one or two more quarters. So probably into the fall to see what is the impact of interest rate hike and is inflation cooling. Like just yesterday, we got numbers that consumer spending is still very, very strong. And so the question really is as quantitative easing stops and interest rate hike kind of takes into impact.
You saw some numbers on mortgages slowing down dramatically from quarter over quarter. So I think realistically, personally, I don't think that I can predict what will happen until at least the fall to see how long or how sustained this turn is going to be. Because companies at the end of the day are still posting reasonably good numbers. And I think the question, Slava, is going to be that...
people over hired in certain circumstances, people became more ambitious in certain circumstances. So there is a general concern among venture and growth equity communities, which always happens when such type of events take place. And so I think there's gonna be a natural tightening of the purse. And so that can obviously be a kind of a self-fulfilling prophecy and can create a lot of
lot of effects if people started to suddenly say hey, hiring free is no more expansion, no more investment because people just don't know. So I think that could add a lot more pain versus actually the fundamentals of each of the businesses.
slava (17:17.403)
Yeah, and then even this morning, there was a new inflation number that came out, which was actually a little bit slow down. So I think that's why we're seeing the green today. So, you know, there, I think there's going to be this push and pull. Like you said, I think we're going to be seeing some chop in terms of those that predict, you know, we've seen the bottom versus those that say we're going to keep going down. So the next few months or quarter or two is going to be very interesting for everybody. Um, so that transitions us really to, you know, your platform, Yulstree. How should investors be using your platform to navigate this market?
milind_mehere (17:48.974)
So listen, before we get into yield street, the other big point that everybody should understand is that in periods like this, when inflation is very high, people should really consider how much cash they are sitting on because you're losing 7-8% a year to inflation. So doing nothing is actually not so good for you. So the question really, and listen, for every individual, every family, it's a different equation, but you have to understand how much liquidity do you truly want and how much cash do you want to truly sit on.
because these are the type of dips, so-called dips, that great investors like Warren Buffett jump on and take advantage of, and professional investors take advantage of. So my first view really would be for the listeners of this podcast is to evaluate that, because many times we are too conservative sitting on too much cash, right? That's why there is $6 trillion of cash sitting in the top five or six banks. Now, coming to Yieldstreet, we have always believed that
60-40 is dead and you need access to private markets in your portfolio. And times like this, as I said earlier, proves itself. And so we think that private markets provides that fixed income alternative, that growth mindset that you need to have. And so we obviously encourage consumers to always look at alternatives and add them to their portfolio.
slava (19:17.595)
And who's the like the typical user at a Yieldstreet? So if the listeners are here, is it them? You know, who should be considering using it?
milind_mehere (19:28.226)
Yeah, listen, so Yieldstreet is open for everybody. There are some products that irrespective of your accreditation status that are available to Yieldstreet for users to use. And then there are certain products that are available to accredited investors. So this is anybody who's a SOFA or a Betterment customer, a millennial that is, you know, a mass affluent consumer can use Yieldstreet. And by the way, primarily, all of these restrictions are not by Yieldstreet, right? These are regulatory restrictions that we all have to navigate.
slava (19:56.829)
Of course.
milind_mehere (19:58.086)
So these are the typical consumers that if you have six figure investable assets, you should consider investing in alternatives. Now, Slava, can I say or make a case for why even outside of VLT, why alternatives are so important, which is what the problem that you have obviously recognized and said that, hey, you also want to contribute to taking alternatives mainstream. So yeah. So for me,
slava (20:22.312)
Absolutely.
milind_mehere (20:26.022)
Number one, at the top of the house, right? Fintech is, I think Fintech is entering the golden age. This decade is going to be the golden age of Fintech. And I have spoken about this in the past. And if you think about private markets, in the last 20 years, the alphas come from private markets. Why am I saying that? Think about the private equity firms like Apollo, Blackstone, Carlyle, KKR, the top five firms. They took first 30 years to go from zero to $40 billion of AUM, okay?
Since the global financial crisis, Lava, they have gone from 40 to 400, 500, $700 billion. So they have tremendously grown. Who are the investors in them? Big pension funds, endowments, massive institutional investors. Why are they investing in them? Institutional investors have between 50% and 60% allocation to all. Why are they investing in them? Because Blackstone, Apollo, KKR is delivering the alpha in their portfolio.
Conversely, the public markets have become more and more passive to ETFs, index funds, mutual funds. And that's what we are all, 99% of us are consuming. So we have been left out of this whole alpha generation and institutional have really taken advantage of it. Now if you look at the last two or three years or the last five years, consumer behavior has completely changed. They want to get educated. They want to sit at the table and multiple times they have demonstrated that.
If you think about what happened with Melvin Capital and the short squeeze and consumers really wanting that seat at the table with mean stocks and cryptocurrency and trading and all that, listen, because they want that seat at the table just like the institutions. And so for us, when you think about private markets, I feel that this coming decade, alpha in your portfolio, the returns in your portfolio, alpha meaning real high returns for non-technical listeners.
is going to come from private markets. And data and technology and changes to regulation can deliver that to you. So now the question really becomes is that is the consumer interested, wanting to learn, and truly add that all component to their portfolio? Our thesis or our understanding is that by 2025, users should have at least 20% to 25% allocation to all.
milind_mehere (22:43.99)
And by the way, you're seeing that because a lot of these big P funds that are firms that I mentioned, they're all going after retail. And they're all making public statements that we want to go after retail. And the reason, by the way, is that all the institutions are now tagged out, right? They're never going to go beyond 50, 60% because they obviously need liquidity, they need public market exposure, exposure to big stable companies, obviously in their portfolios. And so I think that dynamic is going to be very favorable.
to platforms like us that are trying to really democratize access, think about the little guy and make it easier for them. And then obviously I think the regulators are beginning to take notice and we all collectively as an industry need to really educate the regulators to understand like why these things are important component of the portfolio and how to protect investors. But at the same time, use technology, data, access to truly provide that differentiation in the.
slava (23:40.839)
Yeah, we have Vincent completely agree. It'll be incredible when everybody has access to alternatives and they have 5% in their portfolios and you say 20 to 25%, that would be incredible. I know that we have a long way to go before the market is there and it's great work by your team and many other great companies in the industry pushing it forward. You mentioned...
the shift of the investor, can you give us some perspective from your own data or your own knowledge on Yieldstreet? How has the diversification or how has the investing changed in the last year? When they were still drinking from the punch bowl, having the party a year ago versus last week or last month or now, where it seems like the tides are shifting. Obviously there's still good investments in alts, but how has the investing changed in terms of-
the types of assets, the types of diversifications, the average investment, et cetera, et cetera.
milind_mehere (24:39.37)
Yeah, great question. So listen, 2021 was one of the best years for Yieldstrate. We grew almost between 200 and 300 percent on every metric. And there was a lot of strong demand. You know, historically, our platform has had a lot of strong demand. One reason is because we always have this diversity of product on Yieldstrate. Right. So if you think about Yieldstrate, there are really two strategies, income and equity growth. Like those are the top level buckets.
And within that, there are four or five food groups. So private equity, private credit, real assets, including real estate, art, transportation, venture capital, and then crypto. And then within those five food groups, there are maybe 20, 25 strategies. So in real estate, we do everything from equity to a mess to senior secured debt. And within real estate, we do...
single-family rentals, multi-family distribution center warehouses. So there are multiple different strategies that people can get access to. So our consumer likes to diversify. On an average, they make five investments, six-figure portfolio. And once they make the first investment, we can see a path for them to kind of continue to expand. The beauty of the platform is that you get monthly or quarterly coupons that reinforces the value that we are trying to create, the moments of joy that we are trying to build.
And so that is something that is very important for our users. And then that's really where they come back and engage with the platform. Now, historically, as I said, we don't really try to put every shiny object out there. So we only put about 10% of the investments that we see around the thesis that I just mentioned. And so our consumers are adopting that. Some people have more affinity towards real estate versus some might have affinity towards private equity.
The other big thing is that on Yield Street over the last two years, we have expanded by not only offering direct investments, where you could invest in a 300-unit, multi-family Nashville apartment complex, to some of the leading funds in private equity and private credit. And so you will have funds like KKR and Onyx and Bonn Accord and leading private equity firms and private credit funds that will meet your diversification criteria.
milind_mehere (26:55.186)
Now coming to Q1 was strong for us, coming to last four weeks or six weeks, very, very interesting data. We are definitely seeing some slowdown in our investor base. People are gravitating towards more income. People are gravitating towards more short duration investments. So that's definitely what we're seeing on our platform. What I will end by this kind of segment is by saying, by saying, sorry about that.
by saying that when these type of opportunities exist, Yieldstreet is not a platform for you to make money in the next one month. We are not a trading platform like a Robinhood or a Coinbase or something like that. You should think of Yieldstreet and alternatives as a complementary aspect to your portfolio for the long run. So cycles come and go, but now is the time to get access to good investments. And I think that's really what we are excited about. So for example, real estate debt market last year at Slava.
was really, really trading tightly. People could take out real estate debt at 6%, 7%, 8%. That's not what our investor wanted. But now that has flipped to low double digits and can go into teens. So that's something that our investors would like. And so for us as a platform, we can dial up, dial down based on what our consumer wants. And that is the advantage of being a multi-strat, multi-asset platform.
And so I think, you know, just like what you should think about for your public portfolio is buying the dips and not be fearful, really understanding your liquidity needs as a family, you should also think about, you know, obviously adding odds to it, not with the next six month view in mind, but the next three to five year view in mind.
slava (28:37.191)
Yeah, I love the long term thinking. So you mentioned you've been growing real fast. Yale Street's been around for several years. You're really becoming a known institution. What's your thoughts and timing on IPO?
milind_mehere (28:48.758)
Listen, right now we are very excited to just build the company. We, as you know, we raised a big round last year. We have a, you know, big, big runway ahead of us for us to really pursue innovation. We have some couple of very interesting products coming out in the summer. And that's our focus. We are, you know, this market is going to present a tremendous M&A opportunities, so we are excited about that. So if you know of any companies that may need some help, please.
please DM me and that is really our focus for the next 12 to 18 months, not really thinking through IPO. For me as an entrepreneur, founder, CEO, IPO is just one milestone along the journey and for great companies that naturally happens.
slava (29:36.307)
You teased us, what's coming this summer?
milind_mehere (29:41.366)
What's coming this summer is for a consumer to really engage with the platform in an automated way where you don't have to pick one investment at a time. And based on your preferences, your time horizon, your yield requirements, your risk profile, the platform will suggest a collective portfolio for you.
slava (30:02.939)
Awesome, awesome. So a lot of people want to have as much knowledge as you. So what is it that you're reading? What is it that you're listening to? What is it that you're watching? Do you have any, what is it that Melinda's that you can share?
milind_mehere (30:15.986)
Yeah, so listen, I'll start with watching. I'm in this very recent past. So loved watching V-Craft and currently watching Super Pumped. It's always interesting to see the founders' perspective. Obviously, it's overdramatized and stuff like that. But for light watching, I think that has been very interesting. With regards to listening, I listen to
Hidden Brain a lot, a podcast. I listen to All In with Chamath and David Sachs, a bunch of those guys. So it's a combination of a bunch of business podcasts as well as kind of the human behavior type of podcast that is always interesting to me. And Reading List recently has been around team and culture. So reading a book from McKinsey around effective CEO.
leadership currently and has been I have been reading Shackleton the book which has some very interesting leadership lessons and it's kind of interesting time now as we are you know really looking forward to the coming year so that's what I'm doing
slava (31:29.643)
Amazing, thank you for sharing that. And with our last question, we always like to put our guests on the spot, which is what is one asset or one investment that you would recommend now in the alt space that three years from now we could have you back on and we could talk about how it did. So it can't be an abstraction and it can't be a market or a general thing. What would be one thing you would recommend to put money into? And we all know that it's not investment advice, but our listeners like to hear what people have to say.
milind_mehere (31:57.898)
Yeah, absolutely. So I'm glad you said that. This is not an investment advice at all. Listen, I think for me, one specific investment that I really liked was BonAccord, which is a GP Stakes business. So this investment firm actually makes investments in other private equity firms and takes
and I feel where the market has been over the last few years, I think that is one investment that personally I am excited about. I tried to pick an investment that was slightly differentiated versus give a generic answer on either real estate or crypto or something like that. So I thought that I would pick a very specific investment, which I think would be very exciting. It's called Barnacord. I think...
slava (32:43.643)
I love that. It's bon accord, is that what it's called?
milind_mehere (32:48.95)
We may have some open on the platform, but I'm not sure whether it's fully subscribed. But the Bonocor is name of the fund. It's owned by P10, which is a publicly traded company. And again, it's GP Stakes. What it means that they will take stakes in other private equity firms or hedge funds or asset managers. And over time, we expect that to be a sound investment.
slava (33:13.715)
Well, thank you very much for your time here. It's been an incredible journey. We covered so many different topics. You mentioned to us that cash on cash returns. You were doing that even from the beginning. You told us not to sit on too much cash because obviously it's not working for us in this inflationary environment. You really told us an amazing stat, which is much of the alpha from the markets has really come in the private markets, right, in the last 20 years. And I love this quote, which is cycles come and go, but now is the time to get in.
So thank you so much, Milind, for joining. We look forward to having you back.
milind_mehere (33:46.006)
Thank you so much for having me.
