Co-founders Jacob Miller and Joe Lonsdale on helping investors access private markets
Joe Lonsdale How do you educate the RIAs about what's going on? How do you help them do this easily? Is this a big stressful thing for them to engage with? Like, how do you make it easy?
Jake Miller Yeah, so a lot of them have a bad experience of alternatives more broadly coming in because there were a ton of hedge funds in the mid-2000s that didn't do so well. And a lot of these can be black box strategies. One thing in our advantage is private markets are, at the end of the day, relatively simple to explain. I mean, they're buying a good company at an attractive price or lending to a good borrower at an attractive rate. Now, obviously, they're intricacy in how do they pick those deals, price them, etc., but the baseline is much easier to understand than I have a black box that trades currencies. Yep. On top of that, we really try and get them in the room, both virtually and physically, with those top allocators you mentioned, top multifamily offices, single family offices. Seasoned allocators, less so on the institutional side but people who really understand what it means to manage wealth and how they've done that successfully; at most, the average family office holds about 30 to 50% in private markets and has a ton of experience that they can share with our users.
Joe Lonsdale That makes sense, and then and then, is there some way to make it easy? I mean, by public markets, you just click buy on E-Trade or something or Robinhood, I suppose if you're the younger generation, like, what are you doing? Can just click buy on these alternative too? Is there like 100 pages of paperwork, or how does it work?
Jake Miller Yeah, this has historically been really painful. We solve this in two ways. One, our primary way of doing business, we build custom funds with our RIAs. This allows them to take their principles, values, views, as well as input from us on what we're super excited about, and create a wrapper that will hold five, ten, even fifteen managers at a time. And it'll be just one subscription document to get access to all of them. And it also be at a minimum that allows even folks on the smaller end of the wealth spectrum to get diversified access to privates. Now that one sub-doc is made a lot easier because we integrate with reporting systems, custody, CRM, and so the sub-docs become 90, 95% pre-filled. The RIA just has to come in and basically click generate documents, and it's all via e-signature. I know firms that are still using fax machines and so it's not...
Joe Lonsdale Basically, technology makes this all a lot easier and that's your job.
Jake Miller And the information flows correctly, which is really important. If it's on paper, you can easily miss a K1 and misfile your taxes. You can not know where performance stands when managers late. How do you talk about that? We've built rails so that every relevant piece of information shows up two plus one, and it'll feel a lot more like what you're used to. Joe Lonsdale The next day, which is fast, and I guess I know a lot of content. You're interviewing managers you’re teaching...
Jake Miller Yes, we’ve filmed over 100 videos now I've written about 75 articles as well as about 25 primers; what are capital calls? What is a sub-doc? Stuff that maybe you don't want to read more than once, but it helps advisor get comfortable and confident to go talk to their clients.