Fintechs have already democratized stock trading for retail investors.VC investors poured $4.8 billion into the next frontier of alternative-investment startups in 2021.A handful of VCs and analysts shared their picks for alternative-investment fintechs to watch.”Democratization” is a word you’ve likely heard in chatter about stock trading and crypto.And now the buzzword has moved to the alternative-asset marketplace as investors clamor for access to private markets.
Private equity, venture-capital funds, and real-estate investments come at steep prices that traditionally only institutional investors and individuals flush with cash could afford.But fintechs in the alternative-assets space have changed the game by bringing automated processes and fractional shares that remove middlemen and lower costs to less sophisticated investors.
This innovation comes at the right time: Everyday investors increasingly want access to alternative investments, which tend to be less correlated to an increasingly volatile stock market and have historically outperformed public markets.
In 2019, alt-investment stars were mostly real-estate fintechs like Fundrise and Cadre.
Today, the definition has broadened to other markets, including investing in pre-IPO unicorn tech firms, private equity, and collectibles like fine art or baseball cards.
In 2021, alternative fintechs attracted $4.8 billion in total capital globally, and are on track for more backing as the sector heats up, according to PitchBook .One of the biggest venture-capital raises among alt-investment fintechs went to Roofstock, a real-estate-investing startup that received $240 million and a $1.9 billion valuation.
Insider spoke with a handful of venture capitalists and analysts about the fintechs focused on alternative investments that they think are worth keeping an eye on.
Below are six early-stage alternative-investment fintechs on their radar.
Allocate From left: Allocate cofounders Hana Yang and Samir Kaji.
Allocate Cited By: Ripple Ventures and CB Insights
Total raised: $5.4 million
Investors: Tusk Venture Partners, Fika Ventures, Anthemis Group, Basis Set Ventures, Urban Innovation Fund, BluePointe
What it does: The company operates a software-as-a-service that provides a space where various types of institutional investors, like wealth management firms or family offices, can connect with a diverse pool of venture-fund managers, including emerging fund managers.Allocate was cofounded by Samir Kaji and Hana Yang in 2021.
Why it’s notable: “Allocate is definitely one I would put on people’s radars.Samir Kaji is one that you’ll be hearing a lot more about in the news,” said Matt Cohen, founder of VC firm Ripple Ventures.”For any investor who currently doesn’t have access to like the Andreessens, Sequoias, and the top-tier early-stage venture funds; if they want to invest in Ripple and they don’t know us well, then they would come through an intermediary.”
Altan Insights Altan Insights founder and CEO Russell Lieberman.Altan Insghts Cited By: Lightspeed Venture Partners
Total raised: $1 million
Investors: Slow Ventures
What it does: A third-party data and research company that offers a platform where investors can track their fractional shares of alternative investments and get an aggregated view of fractional share marketplaces, including Rally Road , Collectible, Masterworks, and Otis, which was acquired by Public in March.
Why it’s notable: “If you have many platforms providing all these various access to assets, someone needs to figure out how to create the data layer, a research layer, on top of this.Altan Insights is a company that is very interesting to me.They’re sort of going around and building integrations to pull all the data out of these platforms and provide it in a digestible format to make an investment decision,” Justin Overdorff, a partner at Lightspeed Venture Partners, told Insider.
Alto Alto CEO Eric Satz.Alto IRA Cited by : CB Insights
Total Raised: $70.3 million
Investors: Acrew Capital, Advance Venture Partners, Alpha Edison, Coinbase, Foundation Capital, Franklin Templeton, Gaingels, Moment Ventures, NY Life, and Unusual Ventures
What it does: Alto, founded in 2015, is an investment platform where individuals can invest their self-directed retirement funds into alternative investments.
Why it’s notable: “Alto IRA brings a new approach to alternative-asset investing by combining retirement planning with investments in high-growth, nontraditional assets such as private equity, venture capital, real estate, art, and crypto.
The IRA market is antiquated and ripe for disruption, and Alto’s model has the potential to bring better diversification, and potentially better returns, to its users,” said CB Insights.
Equi From left: Equi cofounders Jeremy Smith, Itay Vinik, and Tory Reiss.Equi Cited By: CB Insights
Total raised: $10 million
Investors: Foundation Capital, Hustle Fund, Montage Ventures, F7 Ventures, Gaingels, and Calm Ventures
What it does: Dubbing itself the family office for everyone, Equi , founded in 2020, is an online platform that allows accredited investors (individuals with incomes of $200,000 or more and couples with $300,000 or more) to invest in major alternative-investment funds.
Why it’s notable: “Alternative assets have historically provided higher returns than stocks or bonds, which makes them appealing to most investors.However, these investments come with high barriers to entry, including a requirement to put in an initial capital of $70 million-plus.Equi removes these barriers for accredited investors in the US, and offers a flagship investment fund that includes hedge funds, private equity, real estate, and private credit,” said CB Insights.
Rally Road From left: Rally cofounders Max Niederste-Ostholt, Chris Bruno, and Rob Petrozzo.Rally Road Cited By: Ripple Ventures, CB Insights, Lightspeed Venture Partners
Total VC raised: $60 million
Investors: Accel, Upfront Ventures, Wheelhouse
What it does: Founded in 2016, Rally is a platform marketplace where investors of all income levels can buy a fractional share of an alternative asset such as a baseball card or classic car.
Why it’s notable: “If someone can’t afford to buy a Bored Ape Yacht Club original or a crypto punk, but they want to buy a fractional unit of that asset, there are platforms like Rally Road based in New York that are actually doing that,” Cohen told Insider.
RealBlocks RealBlocks CEO Perrin Quarshie.RealBlocks Cited By: Stella Ventures
Total raised: $10.7 million
Investors: Crosslink Capital
What it does: RealBlocks is an online marketplace where investors can invest in micro shares of private equity and real-estate funds with regular and crypto currencies.
Why it’s notable: “Most investors don’t get access to the best products specifically when it comes to real-estate investments.And we’re not talking about there’s plenty of companies that give you exposure to rental properties.What they’re talking about are massive real-estate funds that typically have billion-dollar entry points.
And they’re collecting demand and giving you access to REITs and other products.
The second problem: RealBlocks is solving the liquidity challenge.It’s one thing to invest in these, but they tend to be very illiquid assets.One of the reasons why they have such high-ticket prices is that they want stable money; they want money that’s not going anywhere.
And so, long-term vision: just to democratize access, but then offer secondary liquidity, which is a key part of getting retail, smaller investors involved,” said Jon Zadoff, the founder of Stella Ventures..