Note: This is a sponsored issue from our good friends at WebStreet. We have invested in this company, both personally and professionally, because we believe in what they do, and how they do it. As always we think you’ll find this very informative and fair.

Let’s go 👇

What is WebStreet?

Fractional ownership of alternative assets has been popular and lucrative in recent years, as new platforms offer investors a way to own pieces of real estate, art, wine, and more.

One of our favorite such platforms is ​WebStreet​. They apply the fractional ownership model to the digital acquisitions space.

“Great,” you say. “But what are digital acquisitions?”

Digital acquisitions is just a fancy term for buying websites that are already making profits and optimizing them to make even more profits.

WebStreet was born out of this world. Their roots lie in the website acquisition marketplace ​Empire Flippers​, where the team initially started out as an online business broker. (Think of it like a real estate broker, but for websites and online businesses.)

After a while, they realized that there was a huge demand for selling slices of these online businesses.

See, operating an online business is hard work, and investors don’t really want to do it themselves. They’d rather outsource the work and collect the returns.

So Empire Flippers spun out a company called Empire Flippers Capital, which allowed investors to earn money without having to handle the actual website operations.

Empire Flippers Capital later rebranded to ​WebStreet​. And here we are today.

How does WebStreet work?

WebStreet essentially operates a fixed-income digital asset fund.

Here’s how it works:

• They ​raise funds from investors​

• Then find 4-8 profitable online businesses to acquire

• They hire managers to effectively manage them. Managers make day-to-day spending, hiring, and investment decisions to increase revenue.

• After optimizing the businesses, WebStreet resells them and distributes the profits to investors

Through this, WebStreet aims to return 20% per year. It’s sort of like an annuity, but paid quarterly (and without the guarantee).

The best businesses are often the more expensive ones. The funds WebStreet raises allows them to buy higher quality sites, while smoothing out downside risk.

What businesses does WebStreet buy?

Well, they aren’t exactly household names.

WebStreet allows investors to purchase passive pieces of online businesses that already generate cash flow, including SaaS, content, and Amazon FBA/KDP operations.

These aren’t hot startups like Tesla, OpenAI, or Klaviyo. They don’t get talked about in TechCrunch, and most of them are pretty under-the-radar.

But in my opinion, this is better than investing in startups.

Unlike the syndicates on, say, AngelList, WebStreet can spin off cash flow to its investors, as opposed to letting them participate in the profits of a future sale that, in many cases, is unlikely to ever happen.

Performance

Over the course of WebStreet’s previous five funds, they’ve raised more than $40 million, resulting in a cash yield of 11.4% and a projected IRR of 20%+.

In fact, WebStreet’s earliest funds are now going through their first exits:

Fund 1

• $5.3 million capital deployed

• 4 portfolio manager (PM) funds

• 11 acquisitions

• 20.1% average life-to-date (LTD) cash yield

Fund 2

• $5.2 million capital deployed

• 4 PM funds

• 12 acquisitions

• 15.4% LTD cash yield

Fund 3

• $4.4 million capital deployed

• 3 PM funds

• 7 acquisitions

• 5.8% LTD cash yield

Fund 4

• $1.8 million capital deployed

• 2 PM funds

• 4 acquisitions

• LTD cash yield: In progress

Fund 5 (← Note: We invested in this one)

• $5.4 million capital raised

• 4 PM funds

• Acquisitions: In progress

• LTD cash yield: In progress

Portfolio diversification

Since Fund 6, WebStreet has begun targeting ​targeting SaaS businesses​ as well.

Accredited investors can diversify their portfolio across a variety of online business models to reduce the risk of any single point of failure.

The types of businesses WebStreet invests in have a shorter hold period than real estate, better cash yield than stocks or bonds and a higher target IRR than other alternative assets.

WebStreet Investors receive quarterly cash distributions and their portion of the profits when the asset is sold after 2-4 years.

A personal note

As I mentioned above, we invested in WebStreet’s Fund #5 through our ALTS 1 Fund.

But in full transparency, that’s not where the relationship ends. Our CEO Stefan von Imhof has also personally invested with WebStreet.

You can read the full article here.

Closing thoughts

What we love about the world WebStreet operates in is how it’s still sort of the wild west. 🌵

Remember this is still a relatively unregulated industry, and WebStreet continues to lead the way and break new ground.

They’ve realized something important, which is that people aren’t very good at picking winners.

It’s better for investors to spread the risk around and just invest in "the market."

WebStreet helped create this market, after all, and they know it better than most.

Where things go from here is anybody’s guess. But fractional website investing and pooling funds is one area I am especially bullish on. And I think WebStreet is just getting started.

If WebStreet can continue to deliver 20%+ returns, they could start attracting serious capital, allowing them to buy businesses worth $10m and up.

If that happens, they’ll be out of “micro” private equity, and become a fully-fledged PE firm.

If you’re interested in learning more, click below. We trust these guys and know them well.

Disclosures

• This issue was sponsored by WebStreet

• Our ​ALTS 1 Fund​ has invested $20,000 into ​WebStreet Fund 5

• AltAlts CEO Stefan von Imhof has personally invested with WebStreet

• This issue contains an affiliate link to Empire Flippers

This issue is a sponsored deep dive, meaning Alts has been paid to write an independent analysis of WebStreet. WebStreet has agreed to offer an unconstrained look at its business & operations. WebStreet is also a sponsor of Alts, but our research is neutral and unbiased. This should not be considered financial, legal, tax, or investment advice, but rather an independent analysis to help readers make their own investment decisions. All opinions expressed here are ours, and ours alone. We hope you find it informative and fair.