Buck: Welcome back to the show everyone today my guest on Wealth Formula Podcast is Travis Smith. He’s been on before. He’s a founder and CEO of a company called Tribevest. This is a group investing platform that’s really changing the way we view and understand our financial opportunities. Travis comes from the traditional financial world having worked with Morgan Stanley initially then got involved with some fintech and then ultimately was able to find this solution for an inherent problem in our space which we’ll talk about in a minute. Travis, welcome back to Wealth Formula Podcast.
Travis: Buck, so good to see you again, and thanks for having me back.
Buck: Yeah of course man. You know, so we talked a few years ago about Tribevest when it first started. I think Jim Pfeiffer one of our investors and Wealth Formula Network members introduced us and it certainly addresses an interesting problem in the space. Do you want to talk about sort of the problem that Tribevest solves or attempts to solve and how you went about filling that gap?
Travis: Absolutely. So coming together to invest together is nothing new the wealthy have been doing it for a long time but they have a country club network to do it right they have their attorney friend, they have their financial friend, they have their banking friend, and they come together and do deals all the time, but if you don’t have that country club network you know how do you come together with people you know, like, and trust and Tribevest is that technology. We just make it super streamlined super easy so that when you see a deal and you want to do it together and why would you want to do it together well one it’s fun and two to get over certain capital thresholds right so now with Tribevest you can come together with your partners file your LLC in any of the 50 states and within less than two days we’ll get your EIN back, we’ll open up a business bank account, this is all in one step and make it super easy to do ACH capital contributions, pull your capital, and make a transaction together. So the problem has been on the investment side you know it’s always been one to one investor one investment opportunity and as you know you probably get this all the time. Like hey, can I bring my brother along? Can I bring my friend along? Well, now we make it super easy for all parties involved.
Buck: I think the problem that you’re describing I think you know we see in our investor club a fair amount and usually it’s not so much you know can I bring my brother along or whatever because honestly if they have the capital they just you know of course they can come along, they’re just gonna be a separate investor. The issue that I think that your model is addressing is that you know in this private equity real estate space, sometimes it’s very difficult to get adequate exposure with limited funds. So for example, many times, average investment minimum might be fifty thousand dollars might be a hundred thousand dollars. Sometimes it’s 250,000 but there’s investments that you may want to get into. And so if a high paid professional wants exposure to as many wide variety of deals, instead of necessarily putting their 200,000 allocated for the year into you know two deals the idea is, therefore, to essentially you know create a little bit of leverage for themselves in terms of exposure by partnering with others and making that 200,000 still going to have the same potency but can be spread across more opportunities. Is that kind of what you’re seeing the primary use for or is it something else?
Travis: 100%. As you know, the passive investor looking for different syndicates. They’re passionate about working with the sponsors and finding all sorts of deals. And as you just mentioned, maybe they get in on their own they get into two or three deals a year, and meanwhile, they’re saying no to a lot of deals that they like. And by coming together with their tribe you know, now they’re pulling a million dollars together and they’re doing 12 deals, they’re doing 15 deals together and again spreading the risk of getting more exposure and just overall good business practice altogether.
Buck: So you know let’s talk about the specific service of Tribevest because really, what you’re talking about is creating an LLC and a tax ID and a partnership. So why do we need Tribevest to do that or what is the advantage of Tribevest doing that?
Travis: Right. So you know we’ve been in the first to the market and been leading the way really the only operating system out there that helps you operate as an investor group and you know what’s Tribevest role in that, well when you think about the burden that falls on that leader, you know we call them the founder, there’s always one person that’s kind of leading the charge. It’s somewhat unappreciated, but they’re going out and finding the attorney, they’re going out and you know figuring out what operating agreement and rules that they need, they’ve got to coordinate everybody, they’re texting them, they’re emailing them, and then they got to get them to sign these things and agree and align. I mean really, just any one of those things on their own Buck, not a big deal. But they really start to add up and it becomes overwhelming and becomes a non-starter. And then once you’ve actually formed that tribe, formalized it done it the right way, how do you operate right? And right now it’s spreadsheets, google drive, you know how do you collect the money, collecting checks, you know all that’s on the platform. So that’s you know where we started. And now what’s so cool about just recently is before, you had to kind of form this investor tribe you have a number of people in your community that are using our platform and they came together and they just keep pulling capital. They just keep pulling capital and participating in deals and it’s kind of you know the poor man’s version of a venture fund if you will. But it’s a venture business but now you could do it on a per deal basis. You could literally see the deal and if the deal closes in two days. Before, there was no way you could form a group and invest as an entity in that. And now, you could. We have tribes that have formed in as little as two and a half hours opening up a business bank account and literally could be investing that day. So that’s a little bit of the game-changer in terms of a new application that’s been opened up to the market.
Buck: So what else do you guys do then besides the opening up and obviously there is significant value in what you’re talking about is having sort of this turnkey approach where people can say okay let’s do it together and it’s been done before there’s sort of a referee involved in this. You’re not reinventing the wheel. So okay so now you have all those things in place. Does Tribevest have a role ongoing in the relationship is I mean where the check’s coming is any accounting involved any other services that you’re either doing now or thinking about adding
Travis: Yeah I mean we talked about what it takes to kind of get off the ground and to do it right and for everybody to feel comfortable with it. But our big role out there you know our value prop is being that neutral third party providing that transparency, eliminating the mystery, and giving everybody a place to log in and see all the activity and if you think about it so you’re forming a business you’re an LLC a multi-member business and everybody’s a member of the board. And so to stay in good standings you need to operate like a business and you know sometimes there’s a vote that needs to be involved well you can propose vote people go in and vote place their vet vote now they have a record of that all your documents your EIN your operating agreement any of your deal documentation are all in one place you start to manage your portfolio in there. So just this all-inclusive place to manage your business. And we can talk a little bit about some additional services that are coming down the road. But you know those fundamentals that are the core of what we do is just so important to this being a real thing. Now it’s more than just forming it. It’s like you really need to operate as a business and stay in good standing and have those guard rails we offer that.
Buck: So we touched on some of the issues that last time we talked about and I’m just curious, what have you done to sort of bolster compliance to SEC rules with regard to pooling of money? You know obviously, every member has to be active. Tell me about some of the issues because obviously, whenever there’s any pooling of money, my understanding, I mean I’m just not a lawyer but I’m a guy who does a lot of syndication, there is some regulation from the sec. Is this considered a security then or does it need to be registered? How does that all work?
Travis: Yeah this you know we got into this in our last meeting it was it was a great conversation and I think we’ve just gotten more clarity on where we fit in this as well as more clarity in terms of the regulations but you’re right. So I think the big distinction is, are you an investment or are you a business operating as a business and it was like well you’re pulling money to invest in an investment, is your investment tribe, your investment group. Your investor group, is that the investment and just a big resounding clear no you know and that’s the distinction. If you are putting your money into a fund or a syndicate, you know that’s the investment and that’s when you get subject to the sec and everything else you’re giving somebody else another entity your money and saying make decisions right on my behalf and that’s where you run into it but very clearly you know what you’re doing. With this investor group is you become a business owner and it’s not an investment in it. You’re literally contributing capital which equals your equity share of the business. And we track that like your CAP table, everything else you’re putting in ownership stake and capital into the business and then as a member of the board, you’re making a decision on which investment to put it in.
Buck: Yeah going back to that regulation standpoint I mean is this just to invest in syndications, in which case it would make sense to me that you don’t really have any obligations for the SEC or could this group get together and say they want to buy a building in which case then they are essentially forming a group that is buying an asset together and raising capital?
Travis: So the syndicate market has been huge for us ever since we went on your show. It’s just nice and clean as you kind of pointed out but you know even so let’s just take that going out to buy say a multi-family 10 unit apartment on their own, you know they want to buy it and they’re coming together forming that business. Again, the key here is that they’ve now come together as partners to be one investor and that’s what that LLC represents. So they’re buying that business now as soon as they start bringing in other investors and everything else to fund that then all of a sudden you know they need to think about well are we forming a syndicate or are we taking other people’s money and investment? Are they counting on us. But if it was really just that entity, say ten of us came together all through in five hundred thousand dollars and we bought a five million dollar building you know we could go do that and it’s just the business owns that apartment now.
Buck: Yeah. Well, that’s interesting. I would say that you know, and again I’m no attorney, but I would say that is a lot more gray area just based on what I know because then you’d really have to prove that everybody was doing stuff and all that otherwise you’d be looking at a security. But certainly from the syndication, and it seems pretty clean, but again I’m not an attorney don’t take my advice. Do your own due diligence. Right now, is it just previous people you know in your own life, friends and family, or is it also potentially allow opportunity for people to you know sort of hook up with other interested investors who don’t have any partners?
Travis: Yeah I mean the initial application is people you already know, like, and trust but where this is going is we’ll be able to connect people regionally via their investment interests their investment experience. So that’s where this is going. Now in the meantime, it’s really communities like yours Buck I mean we have a number of tribes that have met through you through this podcast. You know some of the events that you’ve put together that’s where they met and you’re that common interest that people have come together because of what you’re doing out there. They’re by definition they’re like-minded and kind of have the same mentality and cut from the same cloth what have you and gotten to know each other and talked about deals together. I mean these are all things you foster right like community and talking about deals and just becoming more informed well through that process people have become partners and ultimately formed investor tribes. You mentioned Jim Pfeiffer, he’s in five tribes you know he’s in five tribes actively doing deals you know many of them deals you’re familiar with yeah some of the people you’ve had on your show.
Buck: Yeah. So what’s next for the business here what other layers are you gonna potentially be adding?
Travis: Yeah so we talked about how important it is to be able to now you’ve formed that business and you’ve made your investment together, now you need to operate as a business and be able to show that so you know those are some of the core features. You have your cap table, your voting, your documents keeping records, your minutes, all those things. And now it becomes well can you help me with the bookkeeping can you help me with tax services and our K1s and the answer is yes we make that really easy but even before the end of the year, we’ll be able to do those K1s on your behalf through a vetted partner lending services insurance you know again these are businesses. So what types of services can we offer and those are all things that we’re actively in negotiations with different value-added partners or we call predictive partners to help our tribes get to where they want to go faster and safer.
Buck: And just to be clear, your focus is really facilitating the investment. You’re not getting into the game where you’re starting to recommend or you know talk about specific investments in any way
Travis: Right. That’s right. I mean you think about why are we in position to do what we do. We are a neutral third party. No, we don’t make any recommendations, we don’t partner with any investment companies. Really our job is to take care of the tribe and to be that neutral third party that layer of transparency fostering trust. And so they come together and make those decisions together and that’s part of this. It’s such a journey and educational experience that they’re going on together and if we were sitting there telling them where to where to invest and how to invest all of a sudden we become just another investment company. And you ask where else this is going? So you know the other thing is you can think about us. We’re not working with investment companies but being a tool for them. So that at checkout. They could absolutely use our services to say oh you need to form an LLC Tribevest is here and you can sign up through them and you think of us as like Paypal but for in-group investing and that’s where this is going. So we’re integrating with all sorts of different platforms out there to make it more easy.
Buck: Yeah. One of the things we talked about a little bit and just a reminder from last time was you know especially in the private investment space we have various restrictions certainly in our investor group. It’s really for accredited investors, right? So how does it work? Is it really up to every group to determine you know who’s allowed? I mean you have to be accredited or you don’t have to be accredited? I mean you know, generally speaking, the way things in our investor group work is if you can have an LLC if there’s multiple members everybody has to be accredited in order to participate through that entity. How much of is that your role, is it just you know to educate people or to guide them or what are you doing along that lines?
Travis: Yeah. Not an attorney of course but this is an effective tool to helping manage this first of all you know sophisticated, accredited, you know all these different things really by definition if you’re coming together to form an LLC to do an investment together, you’re sophisticated right?
Buck: I don’t agree with that. I don’t agree with that.
Travis: Right well I mean yeah okay so no, we’re not. But the point is the fact that you’re in a position to realize different ways of investing and coming together show a certain level of sophistication right? So there is this certain level of sophistication that comes with this. But I think you know more getting more specifically if you own 20% or more of that business right that’s you know and this is you know the KYC know your customer from the banks know your business KYB AML which is American Money Laundering like all these different things that of our financial institutions need to go through in terms of due diligence you know if you own twenty percent of a business that’s opening up a business bank account then you need to be one of those members where they’re doing that due diligence on. So same thing you know we take that kind of structure that you know that idea and if you’re 20% or more of this business then you need to be accredited if you if you’re doing investments private investment where it has to be accredited then if you own 20% you need to be prepared to be able to show that you’re an accredited investor but you know we have groups where you know we have 20 people in there and as long as the majority owners or the primary owners of the business are all sophisticated and accredited and are the ones doing the due diligence with the investment group you know it’s all on the up and up.
Buck: You know I think the laws and I would get some clarity on that if I were you because I know from the standpoint of every RegD offering I’ve ever done the LLC has to have every single member be accredited if you are in one of the exemptions that provides that you must be accredited now we don’t in our group we don’t do sophisticated investors period but for a RegD 506C for example, you are required to be accredited. There’s no sophisticated option there at all. So in those cases, I think it is a little different. I think you’re gonna probably need to but my suggestion again not legal would be that if people want to do things that are for accredited investors that they limit their groups to being accredited. But you know certainly if there’s certain documentation that you have that can prove otherwise well you know certainly let us know but the subscription documents that we provide typically are pretty darn clear on that.
Travis: Yeah and I think that’s just good yeah sound advice like you know can’t go wrong if everybody in your group is accredited. You know you’re an accredited investor entity so it’s very clear black and white and you know you don’t have anything to worry about. So that’s what’s nice about that. I think you know there is room for this conversation and you know what if there’s somebody else that’s putting money into an investor entity an investor LLC and again that’s what this is. It’s an investor business and then you know having a conversation either with the sponsor or you know the investment company to see if that aligns with their specific rules. But again you said it to be super black and white about it if everybody’s an accredited investor in the investor entity, you’re good to go.
Buck: Yeah well tell me you were on was it two/three years ago?
Travis: Two years ago.
Buck: So how many tribes were there then and how many is there now?
Travis: Right so we had like 300 tribes operating and you know pulling funds and everything else and now we have over a thousand and we’re going to have over 200 this month. So to give you an idea of just how fast we’re growing we’ll have 200 this month and we potentially could double that next month. So things are really picking up. A lot of things were accelerated by the pandemic and so a lot of people thinking about how to build wealth more effectively and we credit that with a lot of our success. So yeah it’s a fast-growing business and again really appreciate the early days of having the conversation with you and a lot of your audience are still you know on our platform and using our platform.
Buck: Yeah and you know people just to be clear I’m always poking holes in things but people have found this to be an incredibly useful service certainly in our investor group. So let’s just go through the process real quick okay say I think this is a good idea I’ve got a couple of friends of family that are accredited they’ve been wanting to do what I do and say hey all right well why don’t we do this together then let’s contact Travis’s group. Okay so where do we go?
Travis: Yeah you go to tribevest.com and you click start tribe and this is always the founder right the one initiator goes in and what they do is they build their plan. And it’s what’s the name of the tribe, what’s our goal, what’s our mission, what are we investing in, what’s our initial investment from each partner and how are we going to handle the exit, how are we going to handle voting, all those things and literally in five minutes they’ve come up with that plan and as you probably are thinking in your mind you’re like well that sounds a lot like you’ve they’ve kind of configured their operating agreement a little bit and they have. And now that plan can be shared out to your other two friends, accredited friends they look at it and say yeah this is great you know you’ve shared with me just how amazing this strategy of investing can be thank you for introducing me to this they accept come into the dashboard and now it’s about setting up their capital contributions.
Buck: Does that always have to be consistent or is that dynamic based on how much they put and do you keep track of their percentage ownership?
Travis: We keep track of all that so anytime one of the members put something in, we’re managing that equity percent in their cap table which is an important part of operating the business the right way. So yeah you know they can put in whatever portion they want in whatever they’ve agreed to and now it’s about finalizing the operating agreement right so they vote on it they sign it and then we file their LLC all on the platform right. I think I mentioned we had just the other day we had someone file in South Carolina at noon and by two o’clock we had their EIN we had their articles of incorporation you know everything and literally just from the members onboarding onto our platform. We’ve already done the due diligence on them we’ve already done the know your customer all those things and as soon as that EIN and articles organization comes back and loads up to your tribes into your tribe’s dashboard we’ve opened up an FDIC insured business bank account and so as soon as those funds hit that FDIC insured business bank account they can make decisions as owners of that business right on where to deploy that capital and that’s it. I mean I think the important thing here Buck I think what we’ve learned is so much of this has to happen before you come to the play. You know I think one time you’re really trying to solve the alignment piece and you know have is this a good idea and should we be doing this. So much of this has to happen at the dinner table or at you know after basketball or after the softball game.
Buck: Or maybe they ought to be filling that thing out together you know.
Travis: That’s right.
Travis: Yeah so starting on our startup plan it’s five dollars per member per month that includes the filing processing of the LLC includes the business bank account includes everything we just talked about. And then it goes up from there to business which is will be your registered agent you get all sorts of other different services and then it can go up to the venture plan which is fifteen dollars per member per month. So it’s five dollars per member per month ten dollars and then up to fifteen dollars depending on the level of service you’re looking for.
Buck: So obviously in terms of the cost is essentially things you’re for the most part that you’re going to be paying for anyway. It’s just built-in.
Travis: So yeah I mean if we really made it a no-brainer Buck when you think about you know what it would cost to set up and go do all these things in different platforms or different services to do it on a monthly manner or if you do it annually it’s actually got a discount but it becomes like why wouldn’t we do this. And oh, by the way, we have a dashboard and you know all of our documents are there and we can vote there and keep a record. And so that’s our thing, make it a no-brainer.
Buck: Yeah well listen this has been great good luck to you. You seem like you’re trucking along here and doing great work in a much-needed space. So I mean I think the best businesses ultimately come out of they solve problems right they solve inefficiencies and this is certainly one of them in our world you know where you want to invest in private investments and individual assets but you got to have the ability to you know hit those minimums and hit a lot of them in order to get some diversity in your portfolio. So great idea, good work, and love to have you on the show again you know in another couple of years and see what you’ve done.
Travis: You’ll be hearing a lot about us in the near future and again thanks for the opportunity and always appreciate your approach to poking holes and you know really looking out for your audience and just have always appreciated the opportunity thanks.
Buck: Thank you, Travis. We’ll be right back