Monday, July 9, 2018
Interview with Alex Schoenbaum, CrowdOut Capital
For today's interview, we talked with Alex Schoenbaum, the CEO of Austin-based CrowdOut Capital (www.crowdout.com). CrowdOut Capital said last week that it just reached a total of $112M in loans on its online loan marketplace, so we thought we'd chat with Alex about how the company's marketplace works, and what it's working on.
What's CrowdOut?
Alex Schoenbaum: CrowdOut is the first marketplace lender to the middle market and lower middle market. CrowdOut originates, underwrites, and syndicates $3 to $30 million loans to companies with annual revenues between $10 and 500 million.
How did you start the company, and what's your background?
Alex Schoenbaum: I started the company with my colleague Brian Gilmore in 2015. We both have 15 plus years of experience in finance - mine mostly in private debt and private equity, Brian’s more in institutional sales and trading. Working together on a few transactions, Brian and I found that private debt fits needs of nearly all investors - not just large institutions. However, there is not really a good way for an investor to invest these types of opportunities. Given all of the changes in technologies over the last several years, we knew we could streamline the investment process in a way that enables hundreds of investors to participate in a single opportunity.
Why do Middle Market companies need a service like yours?
Alex Schoenbaum: Middle market companies have a few options when it comes to raising capital: One, raise equity and dilute ownership, two, get a loan from a bank, and three, borrow from a non-bank lender like CrowdOut. Borrowing from a bank offers the lowest cost of capital, but comes with the least flexibility. Raising equity comes (potentially) with the most flexibility, but the highest costs. Debt from CrowdOut offers much more flexibility than bank financing, but with significantly lower cost than raising equity.
What investors should be using your platform?
Alex Schoenbaum: Accredited investors--defined as those with more than $200,000 annual income, $300,000 if married, or $1 million of net worth outside of a primary residence--that are looking to earn higher investment rates than on publicly traded bonds but are looking to diversify away from the stock market or real estate investments. CrowdOut offer the opportunity for investors to earn passive income from a diverse set of industries and companies.
Why would investors want to invest on your marketplace?
Alex Schoenbaum: CrowdOut’s marketplace is the only one offering investors the ability to earn passive income from larger corporate loans. Today, there are lots of platforms offering investors real estate related investments or angel investments, but CrowdOut is alone in its niche. Additionally, the middle market makes up about a third of the U.S. economy - and it is difficult or expensive to invest this portion of the economy! We have tried to simplify the process and make it much more affordable for all investors
How is your company funded?
Alex Schoenbaum: We have raised some equity from our early loan-buyers - folks that like the investment opportunities that we offer and want us to find more.
Finally, what's next on the horizon for CrowdOut?
Alex Schoenbaum: Having recently surpassed $100 million in originations, our next milestone is $250 million - something we hope to achieve in the near future. We are searching for great, growing companies that could use alternative sources of capital! We are also always looking to improve our investors’ experience and have some ideas that will becoming online later this year.
Thanks!