Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
What's the Alternative? | Episode 13 | Micro Private Equity: Investing in Small Business featuring Mike Vranjkovic
7 Plays5 months ago
Welcome to Banrion Capital Management’s What’s the Alternative Podcast! Join host Shana Orczyk Sissel, the “Queen of Alternatives” Founder & CEO of Banrion Capital Management, as she interviews leaders in the alternative investment space. Learn more about their firms, their passions and about the many different ways investors can use alternative investments to add value in their investment portfolios.
In this episode Shana sits down with Mike Vranjkovic, Managing Partner & Co-Founder at WebStreet, a firm that specializes in Micro Private Equity investing with a primary focus on e-commerce businesses.
Mike Vranjkovic is the Managing Partner at WebStreet, bringing extensive experience in finance and online business. He co-founded WebStreet with Justin Cooke and Joe Magnotti, the owners of Empire Flippers, the world's leading marketplace for buying and selling profitable online businesses. With over a decade of experience in the online sector, Mike has managed multiple departments at Empire Flippers and has been involved in hundreds of online business transactions. Following his tenure at Empire Flippers, he successfully launched several online ventures, including a seven-figure eCommerce brand. Mike began his career in finance in Chicago and holds a degree from DePaul University.
Learn More About WebStreet: WebStreet (Formerly Empire Flippers Capital)
Connect with WebStreet on 𝕏: @WebStreetLLC
Learn More About Banrion: Banrion Capital Management
Connect with Banrion on 𝕏: @Banrion_Capital
Connect with Shana on LinkedIn: Shana Orczyk Sissel
Connect with Shana on 𝕏: @shanas621
If you are an advisor wanting to check out our platform, we want to hear your feedback!
Important Disclosures:
The opinions expressed on the “What’s the Alternative Podcast” are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security.
It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
The guests featured on this program are participants on Banrion Capital Management’s platform. As such Banrion may receive payment for their participation as a platform partner.
Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Banrion Capital Management or its affiliates. This information is intended to provide educational value, highlight iss
Recommended
Transcript
Introduction to the Podcast
00:00:02
Speaker
Welcome to Bonnie and Capital Management's What's the Alternative podcast. Joining host Sheena Orsik-Sicil, the queen of alternatives and founder, CEO of Bonnie and Capital Management as she interviews leaders in the alternative investment space. Learn more about their firms, their passions, and about the many different ways investors can use alternative investments to add value in their investment portfolio.
Mike Vrinkovich's Background and Career Journey
00:00:32
Speaker
Hello, everyone, and welcome to another episode of What's the Alternative? I am your host, Shana Orzak Sissel. I am the founder and CEO of Bonran Capital Management. And today we have with us, oh my God, I totally should have done this before we started this, but this will be cute. Mike, and I don't know how to pronounce your last name because it's long and it's
00:00:55
Speaker
Eastern European, and I'm going to let you do that. He is the founder and managing director of Web Street, which is a really interesting firm doing some really cool, unusual types of investments. So Mike, I'm going to have you pronounce your last name because I bet you even if you told me it before we went live, I definitely would have screwed it up anyways. Actually, thanks. Thanks for having me on here today. It's Mike Vrinkovich. There's just not enough vowels in that last name.
00:01:24
Speaker
I have the same problem. Orzic, the only vowel is O in the beginning. So people look at it crazy. So I get it. Well, welcome to the show. And wanted to kind of give our audience a little insight into your background. I mean, we'll get into Web Street and sort of unique opportunities that you guys invest in a little bit, but I'd love to hear your journey into where you are today and what kind of drove you to
00:01:55
Speaker
get together with your co-founders and found Web Street.
00:01:58
Speaker
Yeah, absolutely. So my background is in finance, specifically derivatives trading. About 10 years ago, I joined what was at the time a startup called Empire Flippers, which was a brokerage for online businesses. So profitable, cashflow positive, micro private equity, online businesses. So things like websites that make money through ads, e-commerce businesses that sell products online, agencies and software companies.
00:02:27
Speaker
And working at that broker, just a question that we kept getting over and over again was, this looks really interesting. It's phenomenal that I can buy these businesses at 3X annual profits. However, I have no time or I don't have the necessary skill set to run these businesses. Can I just give you a bunch of money and then you buy one for me and then you run it or can I buy one and can you run it for me?
00:02:51
Speaker
it wasn't some genius idiot that we had on our own. The whole reason why we started Web Street is because we heard that question over and over again. We saw that we had a high quality problem and we saw that we had all the right places in place to solve it. Okay. So talk a little bit about you call yourself like micro private equity. Like how do you go from derivatives training to, to micro private equity evaluating e-commerce businesses?
00:03:19
Speaker
Well, to be honest, I didn't even know it was called micro private equity at the time. One of our investors a few years ago told us like, hey, you guys should really explain this as micro private equity. It'll make sense to people that you're talking to for the first time. So I found the idea of online businesses really, really interesting for multiple reasons, some of them being
00:03:37
Speaker
the trend with everything moving online even before COVID, more people working from home, more shopping, being online.
Web Street's Investment Model
00:03:45
Speaker
I like the scalability of these businesses, the limited overhead with no physical storefronts or office locations. And my plan was actually to start or buy one of these businesses myself. I was actually looking at the brokerage to buy one myself
00:04:00
Speaker
and see if I can figure this out. And then I ended up taking a job with the brokerage because I figured, hey, what better way to start than to see a whole bunch of these different types of businesses, different types of monetizations, different types of business models, and quickly figure out which ones work before I zero in on my strategy. So I joined the company early on. It was the two founders, which are my co-founders on Web Street right now, when I came in as an employee on the brokerage.
00:04:25
Speaker
handful of people and it grew really quickly and it really took off today. It's the biggest brokerage for online businesses. And by the time I left, it was over a hundred people worldwide. Oh wow. So help me understand when you say brokerage for online businesses or these online businesses, the founders are coming to you and they're don't want to run the business. So they're looking to sell. Um, explain to me exactly what you mean when you talk about like brokerage for e-commerce.
00:04:54
Speaker
Correct. So just like a regular business, like you would look at a brick and mortar business, the brokerage focuses only on profitable businesses. So no pre-revenue, no pre-profit startups, businesses that've been running for multiple years are generating revenue and profits every month.
00:05:12
Speaker
The main distinction here is that they're entirely online. Oftentimes, there will be a team. The team will usually be remote. There's no office space. There's no physical retail location. There's a whole bunch of different monetizations that we mentioned briefly earlier. How does Empire Flippers become Web Street? How did the decision come to broaden the scope of taking on investors now?
00:05:42
Speaker
Yeah, good question. So I left Empire Flippers to actually start my own e-commerce business, build up my own e-commerce business, stayed in contact with the founders of Empire Flippers. We were really good friends and we kept coming back to this idea of people being able to
00:06:00
Speaker
Invest in these businesses passively because that's not what the brokerage did at all. Usually with somebody came to us and said, Hey, I don't know anything about online businesses. I want to buy one. We would tell them that's probably a bad idea. You should probably buy either a really small one and figure out what you're doing or build your own business. But there were a lot of people that simply wanted to receive allocation or wanted to receive exposure.
00:06:22
Speaker
to online businesses. They wanted a passive investment. So this is how we launched Web Street, completely separate company from Empire Flippers. The brokerage is still around, still helping people buy and sell businesses. Web Street was originally called Empire Flippers Capital. We renamed that to Web Street not too long ago, and we work with all brokerages that sell online businesses. So I'm going to go a little personal here, but what kind of e-commerce business did you decide
00:06:52
Speaker
wanted to run. You said you joined the brokerage because you wanted to get to know the landscape and all the different opportunities and then figure out what your best fit was. What did you end up coming up with that conclusion? Yeah, good question. So me and a business partner in this, we started this together and we've tried lots of different products, probably made every mistake imaginable, every mistake you can think of.
00:07:15
Speaker
almost went under many different times. We had different products in the kitchen niche, in the restaurant supply niche. We had medical devices and we finally found a product in the health niche and it worked really well. We ended up private labeling it.
00:07:33
Speaker
creating a brand around it. And it got to the point where it became a business that runs itself without requiring a lot of my time. So what I really wanted to do is I wanted to take on a bigger challenge and something more exciting and seeing the deal flow on the brokerage, these different types of business models, creating my own business like it, I immediately saw the appeal of this potentially being a passive investment.
00:07:59
Speaker
So I think our listeners, when they think e-commerce, the first thing they think of is like Amazon, right? So when you talk about e-commerce and the business opportunities there, can you give us an idea of like the wide array of different types of companies and maybe a couple of examples across those different sub sectors and industries so that our listeners can understand how vast the opportunity set is?
00:08:25
Speaker
Yeah. Yeah. And absolutely we can start with e-commerce and Amazon. So what most people don't realize when you go to amazon.com and you buy something, majority of the products that you're buying, I would say maybe as many as 70% are not large brands. So sometimes you're buying large name brand products, but majority of the time you're buying from a small and medium sized businesses. So let's say you're buying a pillow and it's not a certain pillow.
00:08:53
Speaker
it might be another brand and oftentimes this is being sold directly to the consumer. So what Amazon has done really well is they flattened the distribution and the supply chain before you would have the manufacturer
00:09:09
Speaker
Then you would have a distributor, then it would go into retail, and then it would go into the consumer. Amazon has managed to flatten that and really, or shorten that and really cut down on prices. So you have a lot of brands that are manufacturing their own products, working with a contract manufacturer, selling directly to the consumer online. So that would be a great example of one of these
00:09:30
Speaker
e-commerce assets or e-commerce businesses that we buy. Now, of course, you also have people selling through their website in addition to
Influencers in E-commerce
00:09:39
Speaker
your Amazon and so on. So that's a good example of e-commerce. So Amazon is, there's a lot of like sub businesses under Amazon, right? So that they're just using Amazon as a vehicle to get to the consumer, but like the actual purchase is going through the small business. Is that accurate?
00:09:59
Speaker
Yeah, correct. So instead of having to put your product in retail stores, finding distributors that place it in retail stores, now you can reach the consumers directly by listing it on Amazon. And Amazon makes this really easy by handling the payment processing, by handling the fulfillment. As a brand owner, you actually
00:10:20
Speaker
send your product to Amazon, they'll distribute it across different distribution centers across the US, they'll take care of all the shipping, they'll take care of the returns and so on. So now you just need a really good product and you can reach the market much faster.
00:10:36
Speaker
Interesting. So that's kind of like a retail. Are there other kind of e-commerce businesses out there? You mentioned healthcare. What other types of opportunities? You said software at one point, so I'm really curious. Because when you say e-commerce to me, I immediately think Amazon, I immediately think retail. But it sounds like this is a way bigger opportunity.
00:10:59
Speaker
Correct. Correct. So another monetization that we focus on, we call it content or websites. So when you're browsing the internet and you go to a website, the way that website makes money is with, most of the time is with display advertising or affiliate ads. So to give you a good example, New York Times, the newspaper sometime back bought a company called Wirecutter.
00:11:24
Speaker
and they basically do reviews of different types of products. So let's say I'm searching for best carry-on luggage, I type that into Google, I see that they have a really good article about different types of luggage, I read their reviews, and then when I click the link to see that product to go buy it somewhere, whether it's that brand's website or whether that's Amazon,
00:11:46
Speaker
The way Wirecutter makes money is they get affiliate commission from that sale. So that's another business model, generating traffic to your website and then monetizing it with ads or affiliate offers.
00:11:59
Speaker
And then another monetization which probably more people are familiar with is software or software as a service. So over the last decade or so, we've seen a lot of software tools move away from a one time purchase or one time fee to a monthly recurring subscription. So in some of our past funds, we've bought businesses.
00:12:21
Speaker
that have created a software tool that have a reoccurring monthly revenue from their customers and that's charged every month. Yeah, that's our business model. We're a SaaS business. SaaS B2B, we do subscriptions. Yep, exactly the same. So, a little more complicated. We're not
00:12:43
Speaker
We're not in your realm because we do more than just the online stuff. Obviously we have a variety of services that we do and we create a lot of content and things of that nature. So I have some questions. Like I'm going to go a little bit outside of like the investment opportunity and just ask about how certain trends in the industry in general impact sort of these types of businesses. And the one that I am most interested in and selfishly so is kind of this idea of how influencers
00:13:18
Speaker
and TikTok have these influencers. And it used to be that you need to have hundreds of thousands or millions of followers for businesses to want to work with you. And now there's this emphasis on micro influencers that have 10 to 12,000 followers, but like a very targeted market. And so how do trends like that
Management of Investments at Web Street
00:13:39
Speaker
impact the opportunities for e-commerce to grow and kind of
00:13:40
Speaker
and websites like, particularly Instagram,
00:13:45
Speaker
continue to take share in these smaller businesses that you're talking about to get their products out there. How much does this influencer model have to do with that?
00:13:57
Speaker
Yeah, I would say you hit the nail right on the head when you said targeted. So if you have a product where you can find influencers with a very targeted audience, it's a really effective, cost effective marketing strategy for acquiring new customers. So we're definitely seeing some of that.
00:14:18
Speaker
It's not something that we're seeing on every single business that only works for certain products. Usually there's a price range associated with it. It has to be a product that people have an emotional connection with, that there's not a lot of
00:14:33
Speaker
decision analysis in the process. So let's say it's a $50 product that you see your favorite influencer using on Instagram or TikTok, and you can quickly grasp the concept of this product. That would be a good example of that marketing strategy working.
00:14:52
Speaker
From an influencer perspective, how does the influencer model help some of these smaller businesses grow and succeed? As we've seen, Gary Vee is a big proponent of internet and using and leveraging social media as a way to get your brand out there in a cost-effective way. How much does this actually act as a disruptive mechanism for the larger brands?
00:15:19
Speaker
Well, there's one thing we've definitely seen over the last 10 or 20 years is a lot of these challenger brands coming in. So these much larger brands, they typically have to appeal to a very wide audience to make the economics work. However, if this direct to consumer model and especially with being able to market directly through to influencers to very, very targeted
00:15:42
Speaker
potential customers, you can build a much smaller brand that solves your ideal customers need much better because you're going after a much, much smaller audience. So we've definitely seen a lot of that where you have the smaller businesses and by smaller, I would say, let's say a business that could be selling for
00:16:04
Speaker
$1.5 million. It might be making $500,000 in profit a year. And it serves a very, very small niche, but it solves that problem perfectly of who's the customer's problem perfectly. Now, in the essence of how you make investments, do you ever advise companies on this? Are you running companies? Is this part of like a strategy that you would recommend? Um, and is that part of how you are managing the underlying investments within your portfolio?
00:16:34
Speaker
Yeah, so I would say for the influencer marketing, less so. We see it sometimes, but not all that often. It has to be a good fit for the type of product and the type of audience. And when it comes to running these assets, so we've bought about 42 online businesses or online assets in the last three years. And they vary significantly from business model, it could be a software business, an e-commerce business, a website,
00:17:00
Speaker
or even agencies, the strategies are very business model specific. The way we do this is we partner with experienced operators, so people that have built these businesses from scratch in the past, have successfully exited them, and have even bought multiple businesses like this, employed their playbook, executed on it, and been able to sell them for hire.
00:17:26
Speaker
So the reason we do all these different business models is to give the investors a nice diversified portfolio. So for example, let's say you're an investor and you really like websites and you buy one of these $500,000 websites. There's a lot of single points of failure there.
00:17:43
Speaker
Even assuming that you can solve the problem of a specialized skillset and time, you have giant points of failure. However, if you take the same 500 grand and you invest it across, let's say five different investment funds and each investment fund buys five to 10 businesses managed by different operators and portfolio managers, the risk reward is just a lot more favorable.
00:18:06
Speaker
Okay, so let's talk about the opportunities today. So why should anybody be considering this? We talked about this before we went on, but I talked to a lot of advisors and one of the things that I'm constantly surprised to hear is that most advisors think about alternative investments in very narrow way. So they think of it just very much private equity, private credit, venture capital, maybe they look at real assets,
00:18:35
Speaker
A lot of times they don't even think of hedge funds as alternatives, which is crazy to me, but they think of it as like, well, stocks and bonds still, even if it's long, short.
Micro vs. Traditional Private Equity
00:18:44
Speaker
And there's a.
00:18:46
Speaker
massive array outside of even those very narrow verticals. You call yourself micro private equity, so you kind of fall into that. But like, where's the opportunity set? Why e-commerce? Why now? How mature is this particular industry? I think about it, and I feel like it's pretty mature. But am I missing something? And what trends, technologically speaking, are coming along that sort of
00:19:15
Speaker
help act as a tailwind for even greater growth in this particular area.
00:19:21
Speaker
Yeah, really good question. I would say the biggest tailwind is the move to everything being online, whether that means working from home, so there's less demand for office space, whether that's shopping online versus going to a retail store. This is a great way to receive exposure to that and benefit if that continues. We've seen them
00:19:46
Speaker
a massive acceleration with COVID. People were forced to work from home. People were forced to shop online. And then after everything opened back up, they kind of realized, hey, well, I guess I'm not forced to do this anymore, but this is a lot easier. Maybe I'm going to continue doing some of this. So I think that's the biggest tailwind that we have. And then the other thing here is obviously the non-correlation to typical asset classes. So if you look at our returns and you build out a chart and you overlay
00:20:16
Speaker
equities, bonds, real estate, whatever, you don't see much correlation at all. And that's really one of the big selling points for alts in any investor's portfolio is building some non-correlated returns.
00:20:31
Speaker
Now, why is that though? Because when I think private equity, private equity is highly correlated with equity markets. Is it because of the micro aspect of this? So when you think micro cap stocks, they have the strangest correlations with traditional stocks. But is that the reason why? Why would this particular niche be so uncorrelated to even just traditional private equity?
00:20:59
Speaker
Yeah, good question. I think a lot of it is due to the cash flowing nature of these businesses. So typically we're not buying a business that we're looking to 10X. Now it does happen with some businesses. What we're looking for with our investment thesis and with our strategies, we're looking to buy stable businesses that are kicking off
00:21:18
Speaker
consistent cash flow every single month, which we share with the investors. And we see way less correlation in the investor returns as a result of that. And then keep in mind, because of the low multiples at which these businesses trade at, you don't need to generate massive growth to deliver good investor returns. You simply need to keep them stable without taking excessive risk to grow these businesses. So how does this kind of
00:21:49
Speaker
work similar to private equity. So you talk about cash flows and that's great because that means throughout the time that somebody's invested in this type of strategy, they're getting cash flows all along the way, which is something very different from a traditional private equity setting where there's not really cash flows that come along the way. It's really all about the exit opportunities, which can be somewhat frustrating as an investor, right? Because
00:22:13
Speaker
in a market like today where there's exits and the monetization is a little bit harder of those names, the IPO market's not that great, it can take a while. In this case, you're talking about a situation where there's constant cash flows coming off it, but ultimately, isn't the goal to monetize the business at some point and through a sale or an acquisition? Is that part of the investment thesis?
00:22:37
Speaker
Correct. So the biggest thing to remember here, like we talked about, is the cash flow. So if you look at the investor returns, probably two thirds, maybe three quarters will come from the regular quarterly cash flows. The additional quarter or so will come from the exit when the business is sold.
00:22:59
Speaker
in terms of comparing ourselves to traditional private equity, our hold period is shorter. So our expected hold period is three to five years. And then of course the casual component like we talked about. One other good way of looking at this, one way I've had it explained to me actually by our investors is we had a guy tell us, well, why don't you just call yourself digital real estate? So you basically buy a property
00:23:25
Speaker
That's generating earnings. You hold onto the property, you try to make some incremental improvements, and then you eventually sell it. I think that's a good way of looking at it as well. The example that I've used before, it's basically investing in small businesses, but you're not
00:23:41
Speaker
launching that small business and dealing with the astronomically high failure rate, you're buying a small business after a handful of years of it showing steady results, and then you're putting in a professional operator to run that business and to maintain those earnings and achieve some incremental improvements. Okay. But the goal is, of course, to eventually monetize the entire investment through a sale and acquisition. It's not to hold forever, I'm assuming.
00:24:10
Speaker
Correct, correct. The expected whole period, three to five years, the goal is to sell off all these assets, return 100% of the funds to investors.
Diversification Strategies at Web Street
00:24:19
Speaker
And remember, we're buying these in a portfolio. So a fund might have five to 10 assets. And as we sell them off, we don't reinvest the money, we return the money to investors. And if they want to reinvest, they have the opportunity to do that with future funds. So all businesses will get exited.
00:24:35
Speaker
But majority of the returns will come from the quarterly distributions, not at the end on an exit. What kind of yield are we talking about here? Because I never think private equity and think yield. 12%, 12%. So if you look at our track record over the last three years, we're averaging 12% a year. And of course that varies from asset to asset, fund to fund, but that's what we've been able to deliver in cash and cash yield.
00:25:02
Speaker
So some trends that are going on right now, you know, we were talking about this before we went on this Nvidia reported earnings and AI is all the rage, you know, how does AI kind of impact
00:25:16
Speaker
your business model and the businesses underneath it. And is there ways that you can take these businesses when you purchase them and then use this cutting edge technology to make, you know, incremental improvements to the business? Have you thought about that? Yeah, absolutely. So our operators are usually they're the early adopters of technology just because they have to be in a lot of them have been using AI for the
00:25:41
Speaker
the last year or so to make their workflows more efficient, meaning less staff, less costs, and they're able to deliver products faster. So we've definitely seen some of that. We've also seen risks with AI. So if you look at Search, where a lot of the websites receive their traffic and eventually their
00:26:02
Speaker
earnings from. Google has made some changes to stay relevant in times of chat GPT and that's definitely cut down traffic to low quality types of sites and many sites overall. So there's definitely some risks there with AI, but there's also opportunities with the agencies that we're buying as well. There's some exciting stuff going on there.
00:26:25
Speaker
Yeah, I noticed that myself. I noticed very recently, probably in the last month or so, if you Google something, what used to happen is you'd have the top search results. And if there was a paper or something, it would have that little summary part at the top. And it would give you the reference website that that summary came from. But now, when you do it,
00:26:49
Speaker
It's an AI summary. And it doesn't necessarily obviously link to where that data came from because it's kind of a subset of a bunch of stuff. And they might at the very bottom, if you like expand the AI response, have a couple of links to websites that they think are relevant. But it may not be even the websites that they pulled the information from, which
00:27:12
Speaker
to your point, I think is really interesting. How does that actually affect like the Google ad business? I'm assuming that has a lot, that's a big part of you were talking about like paid advertising and things of that nature. How does that shift affect the way that people think about SEO and Google ads and things of that nature?
00:27:31
Speaker
Yeah, there's definitely a massive impact. So simple affiliate and advertising businesses are not doing as well as they used to for the exact reasons that you described before you would search for something.
00:27:47
Speaker
it would display a top website, you would click on that website, go to that website, get your information and maybe you would click on an ad or a link and that's how that website would make money. Well, now if you type your question into Google and Google gives you the answer and you don't need to click through any of the websites, those websites are going to have less traffic and less revenue as a result of that.
00:28:08
Speaker
We're definitely not seeing it across the board on all types of businesses, but we have modified our investment pieces and it's something that we're looking at closely. So if Google moves to more of an AI model to stay relevant and competitive, how does that impact the types of assets that we're buying? How does that impact the strategy and the assets that we're currently running? I have to wonder how that affects Google too, because a vast majority of Google's revenues in the past were generated by this
00:28:36
Speaker
advertising, right? So like the disruption of AI in that respect, I'm curious how Google or anybody monetizes the AI.
AI in Business Optimization
00:28:48
Speaker
You know, I know in Google's case, they owns, what is it, Gemini? Something like that. Yeah. And, but like, that's not a revenue generator necessarily. So I'm curious to see how that kind of evolves.
00:29:04
Speaker
Yeah, me too. I definitely don't have the answer there, but I'm watching it and I'm very, very curious as well. I think you're right. I think the overwhelming majority of their revenue comes from ads. And oftentimes when you have such a vested stake in something continuing the way it has been for, in recent history, you're less likely to innovate and come up with the paradigm shift product or idea. And that's probably the reason why Google didn't come out with chat GPT.
00:29:32
Speaker
reacted to chat GPT with their own, you know, with their own, um, with their own AI bot. It'll be really, really interesting to see if, if people are going to chat GPT directly to look for answers instead of Google, if people are going to Instagram to look for products instead of Google. Um, and, and if search results or people using search becomes less relevant, it'll be really interesting to see what Google does. Good thing for Google is the, you know, they've got a lot of firepower. They've got a lot of cash that they're sitting on and.
00:30:02
Speaker
if anybody can figure it out, they can, but we'll see what happens. Yeah, it's really interesting. It's funny. I was talking to someone earlier today about AI, and I actually was having a conversation with my dad about it earlier today because I think for the older generation,
00:30:20
Speaker
AI is a largely negative thing because it's not helping them in efficiencies in their life, but they're far more likely to fall for the negative types of AI that's out there, like the deep fakes and the way that you can spoof phone numbers and voices and things of that nature. There's pros and cons to AI in that sense.
00:30:44
Speaker
And it's also interesting how like meta is trying to incorporate AI, like I, I will say, and I'm sure you see this with your businesses I'm curious if you have a different opinion. The best social media content for like
00:30:59
Speaker
targeted advertising, meta does the best job of anybody. I get hooked into so much crap because I saw an Instagram ad or a Facebook ad and they talk to each other. So you'll leave Instagram and you looked at the ad and then all of a sudden you go over to Facebook and the exact same ad pops right up on top of your newsfeed. They're so good at it. And then they're like at Twitter, Twitter's ads are the worst thing I've ever seen. They're horribly targeted. They're random. They're small. Like I don't understand how
00:31:29
Speaker
or why anybody would advertise on Twitter. And I'm not as familiar with TikTok and how they do it, but I will say that I'll be interested to see how incorporating AI kind of impacts that. Because I will say my initial experiences with meta, their new meta AI bot for search have not been all that positive. I don't actually like it. Because I want to search for something specific and the AI thinks I'm trying to do something
00:32:00
Speaker
more broadly. Well, they're definitely still tweaking it. I mean, even if you look at Google, a lot of people are complaining about the quality of the search results. Like this has happened to me as well, I'll search for something and the top results will be forums or user discussions from 10 years ago, 10 years ago. And it's like, well,
00:32:18
Speaker
That's not what I was looking for. I kind of need this to be a little bit more up to date. But specifically with social media ads, the really exciting thing there is, and a lot of our businesses do run social media ads, is you can get very specific with the interest targeting.
00:32:37
Speaker
So you can say a person that's interested in this based on these variables, based on these data points that Facebook or Meta has collected. If they live in this location, if they're estimated to have this type of network, show them these types of ads.
00:32:53
Speaker
The one thing that I saw somewhat recently in the last month or two, Chase is rolling out, Chase JPMorgan, they're rolling out a ad platform as well that will allow you to target
Advertising Strategies and Future Platforms
00:33:05
Speaker
people based on their credit card and transactions. So in theory, I don't know exactly how it will work, but in theory, you'll be able to target somebody that has shopped
00:33:15
Speaker
here over a certain dollar amount, spend this much money. I think that'll be really, really exciting to watch. I don't know if they've opened it up to only very large ad agencies or if it's open wider, but I think that'll be fascinating to see.
00:33:31
Speaker
How did they do that? Now you've piqued my curiosity. As you're talking, the first thing I think about is on my American Express every month, I get an email from American Express saying, here's your offers for the month. And it's businesses locally and things of that nature and looking at my spending patterns and where I've been.
00:33:48
Speaker
Um, it's like restaurants and things of that nature. Like, so that's what I initially think of, but like it's within, I have to go into Amex and they send me that email. Like how, how would you do that? Like is JPMorgan chase attempting to do that just with their traditional credit cards in the same manner or is it, is it advertising on, I think they're allowing outside advertisers in.
00:34:12
Speaker
And they're allowing them to use the data that they have on their credit card transactions to target the right people. And from what I've read, they're making it more of a affiliate deal. So, or more of a, uh, if somebody clicks the ad, that's when you pay versus a display advertising model. And, and one, one interesting to what you said about before.
00:34:34
Speaker
of the same ad following around on the different platforms. That's probably the most effective paid advertising strategy. They're called retargeting ads. So let's say you are on a website, you're in the shopping cart and you get distracted and you end up not completing that purchase. Well, you get pixeled or crooked, meaning you get tracked as having gone through the funnel at that point, meaning that you're very, very likely to convert at some point in the future if you don't on your own.
00:35:02
Speaker
So you'll see these different ads at different places in the internet, and you can actually see them across different types of platforms too. Oh no, I know. You see it on Instagram, you see it on Facebook, and then you go to the Wall Street Journal and it's like in the corner. I'm like, where is this all coming from? Yeah, no, I totally know what you mean. And sometimes it's annoying because sometimes it might be an ad where I was just like, wow, this is zero interest in it. But then it starts following me around because I engaged with it in any way.
00:35:30
Speaker
And sometimes they'll do it poorly. If they don't have their ads set up, sometimes you will buy something and they will continue seeing their ads for a week. And you're like, all right, I already bought this. Why do you want to keep bothering me until like wasting money as a business? A lot of these companies don't care because the ROI on retargeting ads is so high. So even if they're not perfectly optimized, that's okay.
00:35:52
Speaker
Oh, interesting. So a couple other things I wanted to just touch on, like when you talk about your funds being diversified and you were talking about a couple of different things, like when people invest in one of your strategies, do they choose like an industry or is there like, every fund has different operators that are involved in it and different underlying, obviously different underlying investments, but could they be more focused on certain areas or are they all kind of broad?
00:36:21
Speaker
So we launched diversified funds. So we call them rounds now. Now we call them funds trying to standardize our language a little bit more. And each fund will have anywhere from three to five operators in it. And each operator will have a unique strategy. So there might be one Amazon FBA e-commerce operator.
00:36:40
Speaker
there might be a SaaS operator and there might be a agency operator and maybe a website content operator. So let's say four different operators, each one of those will go out and buy from two to five acquisitions. So if one of them doesn't do well or if something happens in the industry that hurts the earnings of those assets that he's bought, that adjusts the risk nicely.
00:37:09
Speaker
Our audience is mostly financial
Opportunities for Financial Advisors
00:37:11
Speaker
advisors. And when we started working with Web Street, because Web Street is on the bothering platform, traditionally Web Street targeted the retail market. So when we start to talk about advisors, you know, why do you think that this is something that advisors can use as an attractive way to provide their clients with something a little differentiated? What kind of clients would be most attracted to something like this, do you think?
00:37:38
Speaker
Yeah, good question. So I would say high net worth individuals, ideally ultra high net worth individuals that are looking for additional alternative investments that are seeing the trend of things going online and shopping, working online, and that want exposure to that. One of our previous investors told me, hey, I'm getting completely killed in commercial real estate.
00:38:03
Speaker
I can't beat them, I might as well join them. So if you guys as things do really, really well, it's almost a hedge to some of the real estate that I can't get out of. I would say clients that are looking for yield and then clients that are looking for a completely passive experience. So occasionally we'll have investors say, Hey, can I
00:38:20
Speaker
Can I help with managing these businesses? Can I give you my feedback? And the answer is no. If you want to do that, I'll recommend you to some great brokerages. If you're looking for a passive investment that will deliver some market beating returns, we're the place to go. So it's all done for investors. They'll be by default investing in nicely diversified funds, at least in the online
00:38:41
Speaker
business world, of course they should allocate, the advisors would take care of this, I don't have to say it to this group, but they would allocate a small portion of their network into this.
00:38:51
Speaker
Yeah. I just find this very fascinating because the idea of micro private equity is sort of an interesting one to me. And I've never really heard it phrase that way, but it's brilliant. So whoever it was that suggested that that's how you frame it, it's a genius is exactly the way that I would frame it. Is there anything that you think I missed? Any questions I didn't ask, anything you want to tell our audience before we move and end the show?
00:39:19
Speaker
No, I think that covers it pretty well. So basically a new alternative asset, cash flowing profitable online businesses managed by highly experienced operators, portfolio managers, quarterly cash yield with additional gains on an exit. If anybody wants more information, obviously we've done very well with individual investors. So we've raised 30 plus million dollars from individual investors.
00:39:48
Speaker
This is our first time opening this up to registered investment advisors. So one of the things that I'm trying to figure out is what terminology to use, how to best explain this, and I'm probably not doing the best job in the world. So if anything is not clear, if anybody has questions, I'm definitely happy to talk and for selfish reasons too, I'll figure out how to best explain this to registered investment advisors.
00:40:09
Speaker
Yeah, I think that that is a place we can definitely help you. And if you're an advisor who is interested in this and wants to help our friends over at Web Street kind of frame their story a little better. And if you think you have some thoughts, we'd love to hear from you.
00:40:26
Speaker
And with that, I'd like to thank you so much for joining the show today, Mike. It was a pleasure. It's, like I said, something really different and outside the box and that's kind of exactly what we're looking to build here at Bonrion is these niche, exclusive opportunities that advisors can kind of pair based on what their underlying client
00:40:44
Speaker
looks like in ways that allow them to stand out from the rest. So thank you so much for your time. And until next time, everyone, make sure you like and subscribe this video and we'll see you next time.
00:40:59
Speaker
The opinions expressed on the What's the Alternative podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or incoming specific security. This is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your
00:41:17
Speaker
financial advisor prior to investing, and the task performance discussed during this podcast is no guarantee of future results. The guests featured on this program are participants on Bonrin Capital Management's platform. As such, Bonrin may receive payment for their participation in every platform partner. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always, please remember investing involves risk and possible loss of principal capital. Please see
00:41:54
Speaker
investment objectives, risks, charges, and expenses, this and other important information is contained in the front prospectus and summary prospectuses which can be obtained from a financial professional and should be read carefully before investing. statements attributed to an individual represent the opinions of that individual as of the date of the published podcast and do not necessarily reflect the opinions of bonding and capital management or its affiliates.
00:42:09
Speaker
make advice from licensed investment professionals.
00:42:15
Speaker
This information is intended to provide educational value, highlight issues, and should not be considered advice, an endorsement, or a recommendation. All bonding capital trademarks mentioned are owned by bonding capital management, an affiliated company, or it's funds. All other company and product names mentioned are the property of their respective companies.