Alternative Investments & Angel Investing with Guest Alexander Morsink & Host Stephen Simpson - Ep.7

On this episode Stephen welcomes Alexander Morsink;  

Alexander Morsink is a Co-Founder and Managing Director of Equivesto, a Canadian online investment platform and equity crowdfunding portal.  Equivesto is a fully licensed Exempt Market Dealer, and has helped dozens of Canadian companies raise over $85MM since Equivesto’s launch in mid-2020.  Alexander is also an Angel Investor, Board Member of the Niagara Angel Network, and a mentor/advisor at several Canadian startup accelerators and universities.   

Linkedin: https://www.linkedin.com/in/alexander-morsink-80003433/ 

Twitter: https://x.com/AlexMorsink 

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Web: focuscapital.ca 

Transcript

0:10

Hey guys, Stephen Simpson here on this episode of the Focus Capital Podcast. I interview Alexander Morsink. Alex is the co founder and he's the managing director of Equivesto, which is a Canadian online investment platform and an equity crowdfunding portal. We talk about how he started the business. What sort of the current state of affairs here in Canada for the Private company investments and some of the opportunities coming up in the future. Equivesto is doing some really cool things here in the Canadian market. It's an episode I'm sure you're going to want to check out and to find out more about what we're doing at Focus Capital, I invite everybody to check out focuscapital. ca on there. You can find out about our projects. You can sign up for a free newsletter and get access to all of our other resources on there. And with that, I hope you enjoy the show.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 0:56

Alex, welcome to the podcast.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 0:58

Thank you for having me.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 0:59

All right. I'm looking forward to the conversation today because one, you're an entrepreneur and I think you and Equivesto are doing some great things for the market here in Canada. And I think it's going to be an interesting discussion for our listeners to learn a little bit more about The private and public markets here in Canada, some of the opportunities for, let's call them alternative investments and maybe learn a little bit more about some things that they wouldn't have otherwise known if they followed a more traditional investing path and just stuck with with your more sort of standard investments. So again, I'm looking forward to to learning something today and sharing some information with you. With our listeners and finding out more about what you guys do. We'll talk a lot more obviously about equi, sto and some of the nuts and bolts and get into some of the details. But I think it'd be great if we could just start with learning a little bit more about you and how you got started and what sort of was the genesis of starting Eves and maybe some of your influences and getting into that. So if you could talk a little bit about that'd be great.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 2:00

Yeah. So I started my career after university in corporate banking at Scotiabank. So I worked there for a number of years and at the, I was chatting with my best friend who's now my co founder and he had gone more of the sort of technology IT consulting route, but had also started some companies himself. And so we were, In this position where on his side, having started a few companies, he saw the challenges faced by companies looking to raise capital certainly as startups, getting access to more investors, getting access to that early stage capital. And then on my side, I was interested in starting to invest more, make more interesting investments. I was already doing a fair amount of, derivatives based investing, and I wanted to find some other sort of Alternatives beyond just purely public markets. I was interested in startups myself and I learned. Oh, you at the time it was actually impossible to invest in a startup unless you had a million dollars in financial assets or you were making over 200k and you know I was trying to work my way up there but I certainly wasn't there at the time and it didn't really make sense to me That as someone with, I was working in corporate banking, structuring, very sizable deals with other financial institutions. I felt I was sophisticated in my understanding of investing, but there was no means for me to be able to invest in private companies until I was essentially rich or the government decided I was rich. And so we got together and seeing the two sides of the coin. The market seeing the need seeing a potential solution. We said, okay, how can we go about tackling this? And this was 2015, 2016, and right around that time, equity crowdfunding as a concept was being more firmly established in the United States and also the rules were just created in Canada to allow it. And just as a, as a. Idea equity crowdfunding essentially allows the general public to invest directly into early stage companies. If you think about, a Kickstarter, that's a reward based crowdfunding. So you're putting your money towards a project with the hope that they'll give you the item, Oh, I want to buy these fancy new shoes. They haven't made them yet, but I'm going to put my money towards this Kickstarter campaign and hopefully four years down the road, I'll You know, this 200 turns into some shoes that I get sent. With equity crowdfunding, they're actually allowing you to own a piece of that company, like a sort of micro angel investor. And so with the advent of rules, securities legislation that made that possible, we really saw that as watershed moment in. How Canadian finance could work because for so long, literally since the creation of Canada, essentially rich people could invest in private companies and everybody else couldn't. And so with this change, suddenly, wow, everyone else has the chance to invest in these. earlier stage, very high risk, but high potential businesses. And there was a lot of potential for certainly loss, but also wealth creation in those type of investments. And so when we were looking at holistically okay, what is the wealth split? The divide between wealthy and not wealthy, getting larger and larger. This seemed like a tool that could help bring that back a little bit. Like even in Canada, a lot of people are talking about homeownership being less accessible and moving in that direction. Private company ownership was even less accessible. And suddenly now there were tools to allow that. And so that really excited us. So we said, okay, how do we do this? How do we get involved in this? And that's what started our journey. I'm not sure if you want me to go through the rest of the story right now, but that's that's where we got started.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 5:57

No, that's a good sort of background. And I always ask that question because I like to understand sort of your influences and what maybe some of those pain points or whatever it is that caused you to move in that direction. So it sounded like in your situation, it was a combination of an opportunity. Based on the regulations that we're changing here in Canada around that 2015 timeframe, but also just this personal desire to have access to these types of investments. Yeah, maybe just expand a little bit more on, on that and just what were some of those specific pain points that you saw?

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 6:28

Yeah, so certainly on my side, the pain point was I was looking for different investment opportunities that were not directly correlated to the market. I wanted, to use market speak. I wanted more alpha, less beta, right? I wanted to avoid market correlation and find investments that were going to create real organic sort of true growth. And. If you look at the ways that sort of all of the extremely wealthy people in the world have got their wealth is because they started a business or they invested in very early stage businesses and going public, at the time when I was just in corporate banking and doing my public investing and IPO was an exciting moment, right? That the stock was available for the first time. There was a lot of speculation around that. That was when the new companies were coming in. For these ultra wealthy individuals, for these investors in the private space, that's when they all get out. They already made their 10, 000 percent return, and this is their exit, and this is where we're all excited to get started. And so that for me was suddenly like, okay, these guys, the people who are making the real money, they're all cashing out. At this moment that we're just all buying in, how do I buy in way earlier? What does that look like? How do I even do that? And that's where I wanted to go. And that's when I was stumbling into what were essentially a number of barriers and it was really just very serendipitous that the rules were changing at that time. Like I, I was coming at it from the perspective of, okay, I want to invest in these, how do I do it? And then three weeks later, it's oh, the rules have changed. You can now, it's okay. That's great.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 8:10

timing. Yeah,

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 8:11

a very good timing on my co founder side. He had started a bunch of different companies and he was from a minority background. And so even the experience that he had going out and encroaching. Potential investors and essentially being, dismissed in a, either a subconscious or a conscious way because, oh, he doesn't look like us or he's not, he doesn't belong to the right clubs. He doesn't know the right people. If you actually look at the percentage of early stage companies that get access to. Either angel investor or venture capital, the number is really small. And then even within that small number, if you then start looking at it based on, background, different factors, socioeconomic factors, it's basically you look like me or you, or, you're basically not going to get funding, which doesn't make sense at all, right? Ideas don't discriminate. And so how do we make How do we make this more democratic? How do we allow more people to access and participate in this so that more good ideas get funded, right? There's been so many situations, so many businesses Sheertex is a great example. So she founded this amazing company that created basically like indestructible, like pantyhose and leggings. And none of the venture capital firms saw any value in it because they're all male focused. They didn't see the market. So she did it on her own. She scrounged together some money, through her own thing, got looked over by traditional sort of venture capital angel investor sources and, a hundred million dollar business. In a couple of years, like absolutely taking off so useful, such a valuable product, and it was totally missed. And that blind spot essentially is just, it's just losing investment opportunity. And so it was like, how do we help all sides of this problem at once? How do we help more people be able to invest in things where their money can start actually earning them, profit. really serious return, though certainly coming with risk. But then at the same time, how do we help more exciting and innovative ideas get funding? And there's less gatekeeping based on sort of socioeconomic factors. And that was what really was driving us both.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 10:32

Yeah no, that all that makes sense. And I think the thing that stood out to be in what you were saying there too, was talking about those early stage investors getting out when most of the other people were just starting to get in. And those early stage investors really had the advantage of time, but they also took on the most amount of risk.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 10:54

Absolutely.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 10:56

And I think risk is something that, every investor should really understand, but it's something that, once you've handled and once you've mitigated and once you understand it and are comfortable with it, because you've educated yourself in a certain market or you've diversified enough so that you've spread the risk across a few different investments or what have you. I think that's an important thing to understand, but it's key in what you were just saying, because not only did they take on the risk, but they had the opportunity to do it.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 11:23

And that's where, we haven't talked about exactly how my business operates yet, but certainly that is one of our most key functions. So our license is something called an exempt market dealer. We're not just a listing platform. We're required to do essentially a suitability and eligibility assessment for every investor coming through and help look at their personal scenario. The, their understanding of these types of investments and also the risk that they might be able to financially carry based on their personal situation. And a big part of our role in the market is to help make sure that the risks associated with these investments are transparently and clearly identified to investors, because you're totally right. Every investment carries risk. They carry different levels of risk and the risk associated with any type of private investment is high. Every investment that we offer is a high risk investment. No questions asked for sure. What's important is helping provide investors with information so that they can understand the risks associated with each individual investment and make a choice themselves with what makes sense for them. Because. If you look at the way the financial markets operate, if you're getting something that's earning you high return. it's going to have higher risk associated with it. If you're getting lower returns, there's going to be lower risk associated with it, right? There's a reason why GICs pay out traditionally a very small percentage return. And if you're doing some really crazy, options strategy, then you potentially can earn big money. But if it fails you get the floor gets wiped and you lose everything. So finding the right balance of Risk for each individual investor is really important and we are not portfolio managers. We're not taking somebody's entire portfolio and deciding what they should be doing with it. But what we are doing is saying, okay, if you have decided to take a percent of your portfolio, maybe you want to take 10 or 15, 000 and say, okay, I want to make some potentially riskier investments with this because I want to get access to some potential higher returns. Okay. What are my options available to me? And what are the different risks between them? Because while we started our business with the focus on, that sort of early stage startup company, now our platform is about all private investments available in the market. So we still have those startups, but we also have Localized small businesses. We have more commercial businesses, but then we also have private funds. We have real estate funds. We have fractional real estate. We have the whole gambit of private investment opportunities in Canada. So if somebody wants to take higher risk, but still wants that sort of asset backed, a little bit more secure, we have those private real estate opportunities. And certainly in Canada, we've seen a lot more people say, okay, I'm going to I want to take some risk, but they're not necessarily as risk forward as maybe American investors might be. So we've really seen an increase in demand for those real estate connected higher risk investments. Okay. I'm investing in the building of a condo. So it's not, I'm buying a condo and flipping it. It's I'm building a condo tower and there's risks associated with that construction delays approvals, a million and one different risks. But at the same time, there's still the ownership of that land and the potential ownership of that building that's backing your investment. So there isn't that. It's not about fear of it's going to go to zero in the same way that you might if it's a pure sort of tech startup play. So we've got a bunch of different options for people. And that's where we want to give those opportunities, right? It's not about saying. Every investment on our platform is the right investment for you because I can guarantee you it's not. That's not what we're here to do. It's really, we want to give you the tools so that you can learn about this and you can make the choices that make sense for you based on what's available.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 15:32

right, for sure. Before we jump in and talk about the current state of affairs and maybe who some of your typical investors are and d dive a little bit deeper into the mix of investment types that you have I just wanted to ask you about some of maybe the challenges you had in, in getting the business going.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 15:50

How much time do you got?

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 15:51

The top five or something like that. But no, I'm always interested, in that entrepreneurial journey. So obviously you had a corporate job in the banking sector and then you switched away from that. And I'm always interested to hear a little bit more about the entrepreneurial journey and what some of those challenges were. And yeah, maybe if you could just touch on a couple of those and yeah,

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 16:12

So the first thing I'd say is, with entrepreneurship, you got to be just smart enough to be stupid. So you got to be smart enough to know what you're doing, but stupid enough to leave your very nice, comfortable job and go work for nothing, twice as many hours. But in terms of the challenge the main thing, the largest challenge that kind of summarizes everything would be actually getting the securities license. So normally with a startup or a new business, you can test things out and iterate, right? You're like, okay, I want to sell cookies. I'm going to bake some cookies, try to sell them, see if anybody likes them. Is my pricing good? Do I have the right mix of sugar and butter in my cookies? You can test and iterate. So most startups, Work in that kind of way you get to market as quickly as you can you offer your product to the market? See if people are accepting it and then you modify it and change as you go with this type of business You cannot operate without a securities license The license for a private investment dealer in Canada is called an exempt market dealer. And that's the same type of license for a very small private securities dealer and an investment bank. It's the same license all across the board. And essentially, the long and the short of it is getting the license is very difficult. It took us three and a half years of preparation and application and everything to finally get the license. So we started the business actually getting incorporated and launching and everything. I think in early 2017 or late 2016 and we received at the end our securities license in May of 2020. So that's three years of preparation, Work and getting the license is not guaranteed. Of course. So going through all of that work, getting it prepared, we had to raise capital in order to build and get ready all the things that we needed. Essentially, it was. Spend a 1M dollars and hope. That the government actually approves you, so you can have your 1st client and make 1 dollar.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 18:18

right.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 18:18

And so that piece was really the. Largest hurdle to even start operations is okay. What's involved because my background was not in securities law. And so I had to self teach myself Canadian securities law to the point where I could, along with my co founder lead this company. And then it was building and preparing the technology to operate our online platform because it's an online investment platform. And so we need the securities license and we need the detailed policies and procedures and the audited financial statements and the, there's a minimum amount of cash we have to have at all times. And we have to make sure, doing this and we're doing anti money laundering, anti terrorist financing tracking, and we're a million and one things that the company has to do for every client at all times. and the technology to run it and the license and the documentation for that. And then basically applying to the government and saying, Hey, please, can we have one of these licenses? And they're going through the long list. And it's a very sort of private process. So you send your application in and then they're like, okay, we got it. And then eight months later, they're like, Hey what the heck is all this about in your document. And you would send a reply back and you're like, okay, thanks. And then five months later, they're like, Hey, what's this? Oh tell me about this person's history and background. When you apply to become an exempt market dealer, the company is what becomes the exempt market dealer. But you have employees that have to be in specific roles with certain exams that they've passed, certain licenses, certain job experience, and they apply alongside. So your company is applying with all these documentation and all this, your technology and everything, but you have somebody applying as your chief compliance officer and you have somebody applying as your what's called ultimate designated person. And you have somebody applying as your dealing representative. And if people, if they don't like the person, the whole application goes back. And so everything has to be in order. properly perfected, T's crossed, I's dotted on all levels. So it's not just, Oh yeah, your company and documents are all good. We'll approve that. But you need a different person in this role. No, it's, Oh, we don't like that person. Reject everything. Start again at step one. So you go through that process with them and then finally they're like, Oh, let's have, our interview or let's talk to you. So then they bring you in, you talk to them for four or five hours. They ask you a million or one questions about the business, what you want to do, how you want to operate. And then they're like, okay, great. Thanks. Talk to you again in a couple months. And then at that point, it's been a year and a half that you've been just waiting. Again, not operating, paying all the salaries, being in your office, sitting around. And then you just get a letter one day and you're like, congrats, you're approved. And you're like, amazing. Now I can go find a client. All the clients I lined up a year and a half ago are gone. Everyone's tired of waiting. So let me start again.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 21:25

Yeah. That's, unfortunately, it's it's typical of a lot of processes here in Canada when dealing with any type of nonprofit or government regulator or agency, it's yeah, unfortunately, it's just part of it. But yeah, so obviously the time was one of the challenges and also managing, your investors and raising capital to get through the process and that sort of thing. Yeah.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 21:46

Yeah, certainly. Just, yeah. Raising the capital without the license and saying, Hey, we need this money to build this thing. But. It's totally going to fail unless we get this license and we don't have it yet. So you just got to give us a bunch of money and just wait and hope. That's, that was, certainly managing those relationships was a big part, but yeah, everything associated with getting that license was. The initial hard part. And then of course, once you get it, it's like the regular challenges with starting a business, finding your, yeah, finding your place in the market, pricing, target customer, all that stuff comes afterwards.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 22:18

Yeah, for sure. Okay. So why don't we shift gears to the current state of affairs. I'd love it if you could just talk a little bit more about, and I think you started to go into this sort of breakdown and types of investments that are offered on your platform. And, we first got in touch when I was talking to you about some real estate projects and different things that we've got going on, but as you mentioned, you've got. Startup companies, you've got different funds going on, you've got the real estate stuff. So it'd be interesting to talk about and learn a bit about how, what the breakdowns like, what maybe projects work, what don't work, what have you seen in the few years that you've been operating? And yeah, I'd like to learn a little bit more about, who's your average investor, what's your typical investor looking for, and just what's working and not working maybe on the platform right now.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 23:07

Yeah, certainly. Just to, to cover the different range of investments. So as you mentioned, we've got traditional sort of technology driven startups. We've got small businesses, both more local sort of restaurant brewery type things, but also some more commercial. manufacturing. We have fractional real estate, so individual real estate properties that can raise or a sort of a small group. We also have private funds. So we've got private investment funds. We have private real estate funds and it kind of everything in between. So initially the focus was on the startups, but at this point it's very much how can we bring. All of the different private investment opportunities to investors where they can make, different choices that are right for them in the private space. One way that we have really grown and expanded is working with the different companies or the funds raising, we call them issuers, people issuing the shares or the investments. But essentially we really learned pretty quickly on that. Even though we are trying to offer this platform and create this sort of opportunity for investors in Canada, most investors are attracted to individual ideas. They're not necessarily looking, people's money's already invested somewhere. They're not necessarily looking around as much saying, okay I wanna look for other investment opportunities as much as if they see something that really grabs their attention or excites them. Then they'll want to go towards that. So rather than us going out and advertising our platform a lot and saying, Hey, come on Equivesto, come to our investments, we found what was much more effective is helping our individual issuers build their communities. So have a company basically saying, Hey, look, I have this network of people. I think they might be interested in investing in my opportunity, I need help navigating these rules or can you help get me sort of investor ready? Can you help structure my deck or a fund saying, Hey, we have to race through a licensed platform like yours. We're looking to bring our investors in. How do we set this up and structure it? That's really easy. Been an area that we've really excelled working closely with issuers to help them, prepare their offerings and be best positioned to go out to investors. And so that's translated into, if you were to say, okay what's the biggest driving force for success of an offering on the platform? It's really, what is the community and the network around the individual company? Looking like certainly in Canada, the number of people who would say, okay, I care about this business. I'd invest in that is potentially greater than people who are saying, I am a sort of regular Canadian investor. I'm not happy with my investment in the stock market. So what I want to go do is bet a bunch of money on a startup company that I've never heard of before. And I don't have a ton of experience with. And so that's really where we've tried to bridge that gap with the education, the security, the, the structure processing and providing all of these additional services beyond just the sort of due diligence into the companies and the verification and all those sort of things that, that go on. In terms of the average investor though, it does mean that there is quite a range of investor clients that we support. We have some investors who are very high net worth, highly sophisticated. They invest in private investments all the time. And so they're just using this to access some of the investments that we offer. And so they know exactly what to do. They love the process because it's very simple compared to what they're used to. Very easy. So like fantastic, bam. in and out in five minutes type situation. And then completely on the reverse side, we would have people who are really excited about this new company that's being prepared, or this local brewery or restaurant in their area. They haven't made private investments before, but the mission of this company or this business is something they really resonate with. And so they're making their first private investment and they go a bit slower through the process and they consume a lot of the educational material that we offer to help them feel a little bit more comfortable and understand how this actually is going to work and how the pieces connect together. So when they make their first investment, they say, okay, maybe I put in 500 bucks or 1, 000 into this, local distillery or this brewery that I love their beer, but. I feel a bit more comfortable, I understand now. And then they now have this community connection to this local business. They're a sort of part owner of a business that they care about and everywhere in between. I'd say our fastest growing segment though of investors are individuals who are really starting to build out their portfolio a little bit. They're not necessarily high net worth or ultra high net worth. They're in a position where they've got a great job They're part way through their career. They have really strong income coming in maybe a dual income household And they want to start finding Some returns beyond the stock market. They want to diversify a little bit. And so most people go to real estate first, that's the first place that they go to, because a lot of people in Canada feel more comfortable with real estate investing. So they're saying, okay, I'm thinking about buying a second property and then renting that out. But that's a lot of work. I don't know what's all involved in that. I've never done it before. I have my own place, but it's different if I'm going to suddenly become a landlord. And so they're discovering that process. And then at the same time, they'd say, okay, if I wasn't going to become a landlord and own a property outright, what are my other alternatives? in this space for private real estate investments. And then that's where they'll discover some of either the fractional real estate or the real estate funds. And they'll go from there.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 29:11

Yeah.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 29:11

Real

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 29:12

I, yeah, and I think, so I've, anecdotally, I've seen the same thing as well where people are looking to dip their toe in the water of real estate or some kind of, investment in a startup business or something like that. And just having a platform where they can go to is really nice because you're able to get some sense of, and you talked about the process of going through and understanding the risks and it's a structured way of doing it. But that's interesting that you do see the interest in real estate from a lot of people very early on when they're getting into this. And so I think the other thing with real estate obviously is it's backed by something, right? There's always a property there. Whereas the sort of risk reward might be greater with a absolutely brand new startup company, but. Again the risk is higher. So the, the potential for loss is also there.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 30:05

Yeah. People will often start in the real estate space. And then as sort of time progresses or as their sort of appetite for risk changes slightly, that's when we'll start seeing people say, okay, you know what? I want to start looking into the startup space. I want to see what that's like. We coordinate with a fair number of people. Angel groups. So there's a, there's basically people who go out and invest directly into early stage companies are called angel investors and there's organized groups of them across Canada. And so we work with a number of those groups. So people might go and be a member of a group and say, okay, this group is going to then invest into this company. And we would actually facilitate the due diligence and then the actual investment. into that company for the group. So sometimes that happens that way, but certainly people who are looking to get into angel investing can use this as a way to test it out because normally angel investing, you're looking at a minimum check size and minimum investment of, 25, 000, 50, 000, which is quite sizable. Equity crowdfunding allows investments, as low as 5, 000, 1, 000, even, 500. And so it lets you. Practice and invest into an early stage company, do that due diligence, but you don't have to risk such a large sort of initial check. So we do have a lot of people who are, they say, you know what, I like these tech early stage tech companies as an asset class. I like this as sort of something to try out and see. It's something that excites me. I'm not going to get any returns for five, 10 years. It's a very long play, but okay. I want to get started with 500, see how it feels. And then. Practice those skills. Okay. Looking at this company, where is it fitting with its competitors? Do I agree with the valuation? Do I agree with the terms reading through that? And then working their way up to some of our larger deals where they would still have a minimum check size of 10, 25, 000 and are for those higher net worth investors.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 32:08

I wanted to ask you about what types of businesses or real estate projects or funds, what's maybe some of the things that make that offering on your platform successful? Do you see some similar traits in, even though there may be different types of investments

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 32:23

Yeah, certainly the key and this is where we try to help our clients for sure. But the key is the preparedness level of the issuer, the company that's looking to raise capital. If we look across industries, what kind of unites them, it's okay. Having taken the time to really get organized before going out to raise, we spend a lot of time where we try to differentiate as well is working on that, what we call investor readiness. So working closely with the companies so we can make sure that when they do approach investors, they are doing it from a position of, okay, you are putting your best foot forward. You have the right materials that investors are looking for. But a lot of people. For example, try to build in stealth mode. So you're building your startup and you don't want anybody to know about it. Cause you don't want anyone to steal your idea. So it's all very secretive and in some situations that's necessary, but the trade off of that is you don't get to build that community and taking the time to get prepared, get ready. You're going to end up building a network of more and more people who are interested hearing about what you're doing. They want to get involved and so we often see companies approaching the platform who already have sort of network that they've been accidentally building and now is an opportunity for them to tap into that and that can tie it in with that great level of preparation can lead to, some very considerable success right away.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 33:50

Yeah and it's good you said that because there's so many tools out there to grow your network, social media, whatever it might be and just communicate. And what I've seen is a lot of people really like to follow the journey too, right? They want to get behind the story. They like that story of something that's being built, something, and they could be part of that, whether it's a community or a journey from an idea to a successful business or a real estate project or whatever. Yeah that really makes a lot of sense to me.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 34:17

Yeah. One of the biggest things that we've seen, you talk about, okay where do I gather my network? So should everyone be on like, should it be Instagram? Should it be TikTok? Like where should I be building this network? And what we've found, a lot of those can be all highly valuable highly valuable. But the one that continues to pay great dividends to the company is essentially a quarterly newsletter. Having people like a wait list or a newsletter, collecting people's email and giving them a short update of what you're up to every three, four months, having that sort of consistent communication, the type of people who are going to want to join your sort of newsletter and stay on it because they're following your journey as a company, obviously leveraging social media and everything as well. But where we see the greatest what I'd call like return from community is usually around building that sort of newsletter and sometimes that's not something people think about the right. Oh, okay. I'll just send people to my Instagram. Have them follow me on, Twitter or X or whatever it is and have that community there. And that's a great way to reach a broader network. But if you can convert those people into following your quarterly updates, so many of those people. Okay. who are in that area, they're building a deeper relationship with you. You're getting more information around what the business is doing. And you have in that network, potential investors, potential customers, potential suppliers potential sort of networking partners who can introduce you to other people. It's that sort of level of connectivity that can take the business even further.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 35:56

Yeah, totally agree with everything you just said. And I've seen that in our own experience with Focus Capital. We may have a lot of people checking out our social media posts and things like that, but the ones that are subscribed to our newsletter, they're much more engaged, like you said, and they've really been a lot more plugged into what we're doing and they've taken. The step of actually opting into that, right? So they've made that decision and they want to see that story and that content from us. Yeah. I wanted to ask you also Alex, about the current economy, the interest rate market, the environment that we're seeing now. You're several years into this sort of journey here with this business. How have you seen the economy and the interest rate environment affect the business as it's going right now?

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 36:42

Yeah. And It's a very good question and it's quite interesting. Part of the reason why I even wanted to invest in private investments in the first place was to essentially disconnect myself slightly from the standard market fluctuations and find something that is going to not necessarily perfectly track those same returns. Now, The economy overall, we're not going out and shorting businesses, none of these are reverse scenarios. It's not, we're not just buying gold and waiting for the economy to tank so that gold goes up. So if the economy overall is really, going to do terrible, then everything is going to do terrible or most everything is going to do terrible, but often certainly with what we've seen in the markets and certainly in the private markets in the venture capital or angel investing market. They can sometimes move in an opposite way or in a disconnected way from the general market. So a lot of people, when we've seen interest rates going up, but returns in the market staying flat, we see, we saw in a massive exodus of people from the public markets to private markets looking for other returns. A lot of our. Everything is high risk, but a lot of our lesser high risk investments that potentially are real estate backed, many of them can offer a, no returns are guaranteed, but a more structured return that is more consistent and will outpace a lot of the returns that people are seeing in the markets when, markets are not doing necessarily very well. So we had a ton of people say, Okay. I've been, I've had my RRSP and mutual funds for 20 years and everything just tanked. Like my returns have really fallen. I'm looking to diversify into something else. You have RRSP eligible private real estate funds that are targeting, 10, 12, 15, 20 percent annual return. I'm not putting everything there. I know it's high risk. I want to put a bit of it there so that if it works out, those returns will help raise my overall portfolio and how that's doing. So we, there are other factors that govern, those individual markets, there's the real estate market. There's the primary real estate market. There's a secondary real estate market. They each have their own, impacting factors, certainly in the private investment space. There's the venture capital market. There's the angel market. They each move separately. But what's really drove me to even do this was that it's not directly connected to things happening in the main sort of stock market. And so you're able to find those alternative asset classes that can give you different returns. That do contain risk, but different returns that are going to be separated from what's going on in the general market. Like right now, everything went bananas with AI. And we have, we've had a market run going up and up for a while. And then. People are expecting it to change and certainly in the Canadian space. Rates were raised. So real estate buying went down, but it's still, prices are still quite high for real estate. And when are the rates going to go up? This sort of all this back and forth rates have a serious impact. on the secondary market because people are using mortgages to purchase these properties. But if you are building a building, of course, rates impact you because you're borrowing money to, to build the building, of course, but you, because you're taking on this additional risk, you are pricing in a fair amount of price fluctuation on the top end when you sell Even the costs, even if the costs go up considerably, you're still going to be able to make some returns selling that building because you're adding new net new buildings to the overall market, which is a value add. And so when you're thinking about real estate investment, you just want to keep in mind, okay, is it primary market? Is it secondary market? And where is it located? We have some investments that are not focused in the GTA or the lower mainland in Vancouver, and they don't have the. Price fluctuation in housing prices that we have in those areas, they're going up at a very sort of consistent constant pace. And so for them, the ratio between the actual returns on rents and the value of the property remains quite consistent. If you look in the GTA right now, Rents are quite high, but rents are nowhere near high enough to necessarily make investing in a real estate property individually make a lot of sense. Like your rent would need to be so high to, to cover your mortgage on your, 1. 1 million condo that like things just don't, the math doesn't add up necessarily. And if you look in other markets. They still do it's normal or whatever we would describe normal to be. It's less inflated a little bit. And so there's, you just want to be cognizant of, okay. Not all investments are the same, not all real estate investments are the same, not all secondary market real estate investments are the same. You just want to think about and understand those sort of differences because there's benefits and drawbacks to all of them.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 42:01

Yeah, and I'm glad you said all that because I think the beauty of really getting your head around a platform like yours and, or even just thinking about investing out of your traditional basket of, stocks and bonds and mutual funds. It's important to become educated and learn a little bit more about what options are out there. If ultimately you don't take that step to invest in these types of things, that's okay, but at least understand it, do your own homework, evaluate it. And then, like you said, maybe just take a smaller portion to start with and look at these types of things. But I also think it's important to, be diversified geographically, right? So obviously we're in the real estate space. I don't actually invest where I live here in the GTA because, I've got my personal residence, but our investments for Focus Capital are located outside of the GTA. And that's, very intentional because of some of the reasons you just said that the value that we see outside in other markets is much greater the opportunity to make things cash flow. And so it takes some work to get out. Side of your local market, but it's important to understand what opportunities are out there because some of them may work for you. And if there's a platform, like the one that you're offering where people can get access to these, why not have a look at those? Why not actually evaluate them?

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 43:17

Absolutely. And obviously I'm here to talk about my platform and everything, my platform is designed to make things more accessible, but there is another platform in the Canadian space focused on real estate that actually does a better job than even the Equivesto platform. And that would be Addi invest. We work with Addi on some of their deals but Addi has investments starting at 1. into fractional real estate, private real estate. And so if, the investments that we're offering, some of the minimums are a thousand or 5, 000, if that is still too much, and you really want to test it out, then not to send people away from my own company, but, I'm here to educate people and help people understand all the options that are available. I'm a terrible salesman. So maybe you want to check out Addy if you're looking to say, okay, I want to put, 50 into 50 different properties. How can I do that? You can pick 1 per property through the Addy platform. And we do support them and we help assist with some of their deals, Addy is not my platform. But it is a great option in the market. And I really feel like. It's important for people to have these opportunities to learn about this, right? Like I, I'm a big supporter of financial literacy and I've been trying to do everything I can to improve that. Ontario, we finally got some more financial literacy a couple of years ago for high school students, but for everybody who's not in high school anymore how do we learn? How do we get more access to information? I try to do that wherever I can, but I'm not here to, Try to direct people only to my offering. And so there's a bunch of other places where you can learn and get exposure as well, but just getting into the market, starting to learn, starting to read about it, joining your newsletter, learning about what focus capital is doing. These are all going to be ways where people can start getting exposure to that.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 45:07

Yeah. And I think it's great now because there's so many options for education, right? It could be just to sit like a podcast like this. It could be a weekend seminar. It could be a course. It could be a book. It just so many forms of content that are out there. And most of them are free. If you really just want free content there's a lot of stuff out there to get people educated. So absolutely. I'm totally on the same page with that. So maybe shifting gears and starting to look towards the future, what what's coming up. I wanted to ask a bit more about, what do you see as some of the opportunities for the future, not only with Echo Vesto, but maybe the broader market that you spoke about earlier. Are there specific plans for the way you want to grow the business? And I'd love to hear your thoughts on that.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 45:50

Yeah. So we've been quite fortunate that, Equivesto is doing well and continues to grow quite quickly. Where we want to take it is helping to create, that access point where more Canadians understand about private investing and it becomes just a standard part of what people think to do with their portfolio. You'd say, okay, I've got some in mutual funds, some in stock, some in bonds. I'm going to take. Five or 10 percent and put it into the private markets, the exempt market, because I know it's higher risk. I want to take that risk and get some potential higher returns. And then we could be the platform to facilitate that. And that's really we were in it for the long haul. If I sold this business and went to do something else, I would just start the same business again. This is what we love to do on the team. And. We see such an opportunity for people to generate some greater returns and turn that into some generational wealth and build that generational wealth. And we want to help our clients be able to do that and expand into that space. And so it starts with just education, helping people understand that private investing is something that they can do. That you can do is Canadian and it's accessible to you and we just want to keep being able to support that and allow more and more great opportunities like that to be available on the platform. So that's really our focus. We want to make sure we can remain diversified so you can have the real estate, you can have the startup, you can have all these different pieces. One of the things that the Ontario government has actually done recently that's pretty exciting is created or extended a pilot for something called the self certified investor category. I know I had talked about investing as an angel investor before and investing in early stage startups. Essentially, the self certified category allows people with the right level of education or job experience associated with the specific industry to invest a larger amount into a deal in that space that would normally only be for these higher net worth angel investors. And so that is just an example of how You know, ways that, we, but also the Ontario regulators are working to improve access in the space. And we really want to help people, expand their portfolios and increase the potential returns that they're able to access and just make deals that for so long were really limited in terms of who could access them, make those more accessible to everyone.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 48:29

Okay. Interesting. Yeah, I was actually going to ask you about what you saw in terms of the OSC and maybe some of the other provinces across Canada and, it sounds like there's a pilot program and that's been expanded and that sort of thing. So maybe talk a little bit about this category that what was, what did you refer to it as? It wasn't

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 48:46

This self certified investor.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 48:48

how would that relate to accredited and maybe some of the other categories that you're seeing there?

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 48:52

Yeah, certainly. So essentially the categories are. We talk about accredited investor. I'll just explain what that means for a second. So accredited investor doesn't mean you've gone and taken a course somewhere. It doesn't mean somebody has given you a stamp that now says you're accredited. It literally just means you can prove you have either income over 200, 000 per year or 300, 000 combined with a spouse or net financial assets excluding any and all real estate of over 1, 000, 000 Canadian. So you literally, when you sign up on Equivesto and you're filling out the forms, we're asking you, financial questions, if you choose to proceed as accredited, you have to actually provide documents to prove that. And then we can label you as accredited. The self certified category essentially says, okay, you don't have the 200K, you don't have the million yet, but you have either. There's a whole list. It's in our learning center. I can't remember it off the top of my head, but essentially you have like you have an undergrad in business or you have an MBA or you have a law degree focused on this type of business, or you have, certain number of years work experience in this type of industry. But essentially, you can use this category to be able to invest up to 30, 000 per rolling 12 months. So per year into you. Private investment deals that would normally only be for accredited investors. Equity crowdfunding has additional paperwork, a lot of additional work and time that a company would have to go through to make themselves eligible to actually do an equity crowdfunding round. But with the self certified category, if somebody meets those requirements, Any deal, even if it's normally an accredited investor only deal, they can allow in self certified investors. Now, just as a bit of context, the securities laws in Canada are regulated on a province by province basis. And the regulation applies based on where you live as an investor. So the self certified sort of pilot is only in certain provinces. I'm pretty sure don't quote me on this. I'm pretty sure it's Alberta, Saskatchewan, and Ontario only. So not Quebec, not BC, not these other places. So if you lived in BC and you had the education that would have allowed you to be self certified because you live in BC, you wouldn't qualify. So that's a little bit. challenging sometimes for investors to understand certainly in Quebec to be able to raise capital from Quebec investors, you have to offer your investment documents in French. And so some investors in Quebec are very frustrated by that because they're like, I'm bilingual. The document's right there. I can read it, but you're not allowed to take my money because I live in Hull and not in Ottawa. There's benefits and drawbacks to that, but the regulators are, they're working hard and they're coordinating as best they can to help ensure that all Canadians are able to access investments in a safe and compliant way.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 52:00

Excellent. Okay. No, that makes sense. I wanted to ask you also about Sort of the future and where you see the potential growth areas, right? So you mentioned AI, obviously there's a, there's technology hitting us every single day. There's new things evolving. Real estate's always going to be there. I'm a real estate guy. So that's, where I play. But there's all different types of businesses. Do you see segments of the market that, there's potential for growth, but not only potential for growth, but. Potential for using a platform such as yours more than others. And do you, you just talk a little bit about what opportunities you see there.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 52:36

Yeah. It's certainly interesting. We talk about, I mentioned AI before, AI is the term of And so a lot of people are excited to invest in things that have AI on the label. Personally, I find following the investment of the moment can sometimes lead to challenges because so many companies are slapping AI on anything to just call it AI and join the bandwagon. I typically try to actually look for deals that are not the deal of the moment for a number of reasons. One, They're probably, they're not going to benefit from the increase in pricing that the sort of deal of the moment would be, and so you might get a bit of a better deal. those companies will be hungrier to raise capital because they're not, there's not as much hype around them. And so for them, finding investors is a bit harder. But those opportunities are still there. There's opportunities in all different markets all the time. And I just as a personal thing, if everybody's saying, look left, I look left and see what they're looking at, but then I, it's not that I won't look right to, I'll just look around and see what's there. So I would say don't get overly excited by whatever the hype is of the moment and focus on the fundamentals of the business. How do they make money? Who are their customers? Do the customers really want the product? Is there a big enough market to sustain a business like this? Is this the right team to lead this company? Do they have a good business model? You can apply that in, in real estate, in startup investing, small businesses, anywhere and everywhere. If you're focusing on the fundamentals, then that allows you to pick winners, regardless of whether it's an AI moment or not,

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 54:23

yeah, no, and we're on the same page with that again. I'm a real estate guy and one of the things I love about real estate, it's boring at the end of

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 54:30

no AI.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 54:33

we could slap an AI label on it to make it sound sexy, but yeah, at the end of the day, it's a building and we rent it out and that's that. Yeah.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 54:41

And you're totally right. The end of the day, people need a place to live. People need food to eat. People need heat. They need warmth. They need a place to work. Like they need, there's just core needs, right? Faced by any sort of community and making sure that you can meet those needs in a way that's effective. You will make it through any industry, right? If you look at any sort of boom or bust moment, obviously, a lot of people like to look at the example from the 1700s in Amsterdam of the tulip bulbs, the first sort of in today's money, trillion dollar company that then Boston and everything, there's always going to be potentially sort of flavors of the moment, but at the end of the day, everyone will always need the standard sort of core things that will never go away. And so yeah. From our perspective, what business am I running? I'm trying to help run a company that helps people invest and choose what to do with their money in a way that's going to earn them returns. People are always going to be looking for ways to make money for themselves and invest in other businesses to help things grow. As long as we have some form of capitalism involved with our governance structure in our country, that will always be something that people are trying to do. It's not real estate. You're, you beat me there. Everyone will need a house. Maybe we won't need money where we're going in the future, but we will need houses. So you got me on that one. But yeah, just focus on these core needs and then look for ways that They're able to make people's lives better and easier and solve problems

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 56:14

Yeah, for sure. Makes sense. Okay. As we're wrapping up here I wanted to ask you for anyone who wants to find out more about what you guys are doing, maybe get in touch with you what's the best way for people to do that?

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 56:26

Yeah we have a very robust learning center with a lot of information. Our website is Equivesto. com, E Q U I V E S T O. com. That's the portal as well as the information and everything is there. As I mentioned, there's a learning center. We actually have courses on different subjects, how to do due diligence, look into a company. That's all there. I'm on Twitter. I'm on Instagram. So is Equivesto. So you can follow me there. LinkedIn all over the place. The information that we provide is all free. It's all available on the platform and all of our accounts are free. So it's not like you have to pay to sign up and get access to the deals. It's all there. But yeah, happy to chat with people, add me on LinkedIn, shoot me a message, happy to have a conversation.

riverside_stephen_simpson_raw-synced-video-cfr_stephen_simpson's s_0006: 57:12

For sure. Yeah. And we'll put all that information in the show notes as well. So people can get can get access to that get in touch with you if they want. So Alex, I really enjoyed the the conversation today. I think our listeners learned a lot about what you guys do and how to get more information on these different markets and different types of investments that might be interested in. Yeah. Thanks again for being on the episode. I really enjoyed it.

riverside_alexander_raw-synced-video-cfr_stephen_simpson's s_0005: 57:33

Thank you for having me. I enjoyed the conversation.

57:35

Hope you got some value out of this podcast episode. I invite you to like and subscribe to the podcast, leave a review, leave a comment. Let us know what you think. And for any other information about us, what we're doing and the types of investments we're into, please visit focuscapital. ca, focuscapital. ca. And on there, you can find a ton of information, additional podcasts and a lot of free resources. That's it for this podcast episode. Bye for now.