Here’s the pitch deck used by LEX Markets, a new marketplace aimed at opening up commercial real estate to more investors
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- LEX Markets is a startup aiming to make commercial real-estate investing more accessible.
- Users can buy and trade shares of individual properties through LEX’s trading system or app.
- See the pitch deck LEX Markets used to raise $15 million in Series A funding here.
Drew Sterrett was structuring real-estate deals while working in private equity when he realized the inefficiencies that existed in the market.
Only high-net worth individuals or accredited investors could participate in commercial real-estate deals. If they ever wanted to leave a partnership or sell their stake in a property, it was difficult to find another investor to replace them. Owners also struggled to sell minority stakes in their properties and didn’t have many good options to recapitalize an asset if necessary.
In short, the market had a high barrier to entry despite the fact it didn’t always have enough participants to get deals done quickly.
“Most investors don’t have access to high-quality commercial real-estate investments. How do we have the oldest and largest asset class in the world and one of the largest wealth creators with no public and liquid market?” Sterrett told Insider. “It sort of seems like a no-brainer, and that this should have existed 50 or 60 years ago.”
Sterrett reached out to Jesse Daugherty, a friend working as an engineer at Google, with his idea for a marketplace for commercial real-estate securities.
The result was LEX Markets. Both accredited and non-accredited investors can create and fund an account to purchase shares in individual buildings through LEX’s alternative trading system, which uses Nasdaq technology, or its mobile app.
Earlier this month, LEX Markets announced a $15 million Series A funding round led by Peak6 Strategic Capital. Khosla Ventures, Two Lanterns Venture Partners, and MUFG Innovation Partners also participated, bringing the total capital the startup has raised to $27.5 million.
LEX launched its first real estate IPO on the platform in November 2021 for 286 Lenox Avenue, a retail and office space in the Harlem neighborhood of New York City. Shares are priced at $250 at the time of a building’s IPO, and shareholders receive quarterly distributions of income generated by the property.
LEX makes money in two main ways: through underwriting and placement fees it assesses to place a property and through an annual fee equal to 1% of the distributions of the asset. LEX does not charge any additional account fees or commissions on trades.
The company says it currently has over 12,000 users in its system and that around 1,600 have created brokerage accounts to invest.
While the concept might seem similar to real estate investment trusts or offerings by other startups in the space, LEX is unique in that it gives access to non-accredited investors and shares can be purchased and traded in an individual property as opposed to a collection, according to its deck.
While smaller retail investors may not be as familiar with real estate, Sterrett says that he hopes LEX can help users realize that real estate is more intuitive than other investments.
“The beautiful thing with real estate, and especially individual assets, is you’re dealing with a hard, physical, tangible object, right? And it’s actually much easier to understand than why a certain public company’s stock is trading at a certain price-to-earnings ratio, right? The fundamentals are straightforward,” Sterrett told Insider.
Sterrett and Daugherty say they plan to use the new capital from the Series A round to continue to build out their marketing and sales teams as they aim to increase awareness about LEX Markets. They’ll also look to grow engineering and real-estate teams to increase deal volume.
The company also plans to invest in producing content for both potential retail investors and established real-estate professionals to better understand investing with LEX.
The cofounders plan to grow the company’s headcount from 30 current employees to 55 before the end of 2022.
“We’ve been building a bridge. The bridge is finally open. People can now come across it and become real-estate investors,” Daugherty said.