Wealth & Finance International - February 2017

Wealth & Finance International 56 Interaction in Investing escribed by the co-founders as the “e-Harmony for real es- tate fundraising,” Peloton Street is focused on how technol- ogy can make the process of marketing deals and deploying capital more efficient by helping the investment community focus only on the opportunities that are right for them, so they can close more deals faster. Across the corporate landscape, data-driven solutions designed connect people have been hugely successful, with everything from flat sharing to dating supported by a range of online platforms created specifically to support users in connecting with one another. However, so far nothing of this kind has been offered for the private capital markets and specifically commercial real estate finance industry; which is where Peloton Street comes in. Peloton Street’s online platform uses data science and machine learning (a subset of artificial intelligence technology) to help facilitate actionable results and engagement between members of the investment communi- ty – a solution analogous to how online dating platforms helps 41 million Americans find “friends, dates, and relationships, and everything in between.” By reliably collating the criteria used by investors when eval- uating and deploying capital into such deals, both sides of a transaction are better ensured the outcome they are seeking. Investors are shown only the deals that they most likely to invest in, while dealmakers can focus their marketing efforts on the leads that are most likely to invest in their deal – instead of “carpet bombing” everyone out there when raising capital. Tabish explains, “The process of raising private capital is not all that different from dating and searching for a soul mate – except, that the first date in context of what we’re doing is meeting with an investor.” Peloton Street’s artificially intelligent matching platform looks at thousands of professional investors and calculates a match for deals based not only on an assessment of investors’ preferences and similarity to other deals that they may have participated in the past but also their interaction with any new deal flow presented to them through the platform. “We believe that this behaviour is foretelling of how an investor feels about a particular deal – it’s just like the first date… if he or she is just not that into you from the get-go, then you’re probably better off looking elsewhere.” Drawing on a vast wealth of expertise by working professionally in commercial real estate finance and investing for over 12 years, Tabish has a strong knowledge of the industry. It is how he and his technical co-founder – Neville Jos, a 20 year old computer science prodigy with a passion for data science who has been coding since the age of 12, conceived the idea for Peloton Street. Originally founded in 2013 as a crowdfunding platform with a different team, Tabish and Neville pivoted Peloton Street to the current value proposition about a year ago after restructuring the company. “We learned the hard way that syndicat- ing private real estate investment opportunities online was not really a scalable business model” – at least, not one that necessarily benefited from the use of technology to generate revenue. “We found ourselves dealing with all of the same social and regulatory ‘mishigas’ that tradi- tional investment bankers have to deal with when marketing a deal. It just wasn’t going to work; and, rather than burn through our seed round raised from friends and family, we decided to pivot and not have to deal with a lifetime of awkward dinner table conversations.” Together, they are still working on the original mandate of helping investment capital flow to the most deserving deals, but by tackling an- other problem that is becoming increasingly prevalent in the commer- cial real estate industry. “Discretionary capital for investment is the Holy Grail, but it’s gotten a lot harder to raise today. Investors have become smarter and are more sophisticated; and, so many of them like to call the shots.” Tabish explains that the new regulations introduced follow- ing global recession are inadvertently responsible for this new norm. According to him, the financial services industry “underwent a disag- gregation that no one really likes to talk about;” however, the diaspora of financial professionals displaced during recession “have seeded a whole bunch of new companies, instead of seeking gainful employment elsewhere.” Smaller players, such as boutique private equity firms and family offices, are gaining market share and are now at the helm of an increasing number of transactions each year. The increasing number of finance professionals “hanging their own shingles” is in part likely responsible for why capital from private un- registered securities now outpaces the amount raised through publicly registered securities (totalling more than $2 trillion in 2014). “More and more people are chasing after private capital, which in our opinion has actually made it harder to raise capital and do deals,” Tabish surpris- ingly explains. “While the market is seeing more activity, this deal flow lacks homogeneity and creates a steeper learning curve for investors.” The definition of a “good deal” is highly subjective, often based on the divergent investment criteria. This environment has motivated even more investors to eschew the fund format in favour of deploying capital on a deal-by-deal basis, simply to stay in control. Peloton Street sees a significant market opportunity in using its technology to help facilitate more actionable engagement between these “users” and “providers” of capital, as players on both sides scramble to source deals and deploy capital. Peloton Street is a FinTECH start up that uses big-data to help real estate dealmakers and investors come together and transact. We caught up with Co-Founder and CEO Tabish Rizvi to learn more about this innovative and dynamic firm. D 1702WF54