How Avestor Hit $40K MRR Managing $60M in AUM With 100 Funds on Platform (Interview with CEO Badri Malynur)

Introduction and Company Overview

Nathan Latka

00:00Folks, he launched avestorinc back four years ago in 2019. They've got a 100 paying customers today, minimum $400 a month. These are all GPs managing their own funds. LPs can sign up, pick individual deals these GPs have brought to market. He also makes money by taking 30 to 50 bps on total AUM. Today, that total AUM is about $60,000,000 on the platform across 30 active GPs that have raised at least a dollar and are doing deals.

00:25He's looking to grow that. Again, making money on the BIP model, also making money on a minimum fee for a membership if you wanna learn from other GPs and do cross deal promotion, etcetera. So we'll see what happens next. Hey, folks. My guest today is Badri Malynur. He's a cofounder and VP at a company called avestor, a technology platform focused on end to end solution for sponsors to build customizable private funds. Badri, ready to take us

00:46to the top?

Badri Malynur

00:47>> Absolutely. Let's go, Nathan.

What Is a Customizable Private Fund

Nathan Latka

00:49What is a customer private fund?

Badri Malynur

00:52>> So let me step back a little bit. Today, the private fund industry is almost overtaken the public markets. Are trillions

Nathan Latka

01:02of Badri, my audience doesn't know what private funds are. Give me an example of a private fund today, the well known one.

Badri Malynur

01:08>> Know, are BlackRock, there are several private equity funds, but to get to your question very quickly, a customizable fund is a private fund where you can pick and choose your investments. Think of it as if you go to Fidelity and say, I like this mutual fund but I don't like this 20 stocks, I want this other 10 stocks. So you pick and choose your investments within a private equity fund or a private real estate fund and

01:36>> that's what a customizable fund is.

Why GPs Offer Investors Deal Choice

Nathan Latka

01:37Why would a GP of a fund like BlackRock or a little small REIT in Dallas, Texas, why would the GP of that fund want to give individual LPs the ability to opt in or opt out of individual pieces of real estate they're buying? Doesn't the GP want sole discretion over all that to move quickly?

Badri Malynur

01:51>> Great question. There are different classes of GPs. There are two answers to that question. One is passive investors prefer to have the choice. So if you want to let it be driven by passive investors, what we have found is 95% of our investors really prefer to pick and choose which deals you want, which asset classes you want, which timeframe you want.

02:16>> So for example, just very quickly in our fund and the company owned fund, we let investors pick and choose between self storage, retail, hospitality, multifamily, student housing, RV parks. So different people prefer different asset classes. So it starts from the passive investor. And as far as the GP is concerned, BlackRock is perhaps not the best example. You asked me for the best known fund. But if you are somebody starting out, investors feel uncomfortable giving you the

02:48>> choice of saying, okay, whatever deal you're investing in, I'm in. Investors want to see the deal and then pick and choose the deal. So that's the somewhat long answer to your question.

Revenue Model: AUM Fees and Membership

Nathan Latka

02:58I like that you're eating your own dog food. What's the size of the company run fund?

Badri Malynur

03:02>> The company run fund is less than 5,000,000, about $5,000,000. It's less than the intent of that fund was never to grow the fund. It was purely to test out large volumes of transactions. We allow people to invest, do micro investments in that. Yeah.

Nathan Latka

03:18How many

03:19individual LPs are in that fund?

Badri Malynur

03:21>> There are about, I have to check the numbers, about 60 in that fund.

Nathan Latka

03:26Six zero?

Badri Malynur

03:27>> Six zero, yeah.

Nathan Latka

03:28Okay. And then I guess what's your revenue model? How does a investor make money?

Badri Malynur

03:33>> Okay, let's get to that. So the way, what we have done is we built that fund and now we offer that same platform for people to create their own funds. It could be in real estate, it could be judgment liens, music streaming rights. We have a wide range of asset classes and then what we charge is based on the assets under management. We have more than 100 funds now and based on the assets under management, we

04:00>> charge AUM fee which ranges from 30 basis points to 50 basis points of the AUM.

Nathan Latka

04:07A monthly,

04:10quarterly, bi annual, annual basis?

Badri Malynur

04:11>> It's paid out monthly. It's calculated daily, but paid out monthly.

Nathan Latka

04:15So Okay. And you said 30 to 60 bips? 30 to 50 bips. 30 to 50 bips. Okay. What's the average fund size on the platform today?

Badri Malynur

04:24>> So we opened it to other funds just a little over less than two years back. And so many of the funds are growing. Funds are between 1 to 5,000,000, some are 10,000,000, but there are several funds which are growing pretty rapidly. So

Nathan Latka

04:39Okay. So the largest fund is about 10,000,000. 13, yeah. Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access

05:04this in a second, but you log in, you connect your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on

05:28who's doing the buying of your SaaS company, you're gonna get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole

05:50thing outright. Now what's cool about this is this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that

06:15have been acquired the valuation and the multiple. Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right, we're gonna go

06:39back to the YouTube video here in a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. Or if you go to founderpath.com and hoveroverproducts, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to

Churn and Platform Stickiness

Nathan Latka

07:05see you there. Alright. Let's jump back into the interview. Do you have, like, a naturally built in churn problem? And what I mean by that is this. If you help an individual GP get their first fund under their belt to build confidence with investors, eventually, they're not gonna wanna give investors the ability to pick and choose deals. They're gonna go raise their own private fund where them as a sole GP have full discretion over every deal,

07:25which by nature makes the investor platform, I think useless, then they churn.

Badri Malynur

07:30>> In fact, it's strange that you mentioned that. We have probably the lowest amounts of churn, less than 5% for a SaaS business. I'll tell you why. Once you've got 5% on what basis? What's that?

Nathan Latka

07:445% on what basis?

Badri Malynur

07:46>> Less than 5% of the people have suspended their funds. They're not yet canceled it, they've just suspended it.

Nathan Latka

07:51Lifetime, monthly, quarterly, annually?

Badri Malynur

07:53>> Lifetime, lifetime.

07:55>> So let me tell you the reason we are the only platform in the world which offers a customizable fund and a customizable fund is an evergreen fund. So what you don't, many people don't realize is each time you do a fund or each time you do a deal going through the private, the PPM process can be very expensive. Here you create one PPM and you can add new deals within minutes. So very naturally the barrier to

08:22>> add new deals is very, very low. And once you add a deal, typically these deals are three to seven years. So you can't really get out until the deal exits. And let's say in year two, you add another deal, then you have another seven years. So it's a very, very sticky business model, which might be of interest to many of you or SaaS co founders.

Total AUM and Active Funds on Platform

Nathan Latka

08:44I see. Okay. And I guess, so what's the total AUM today under management across all customers on avestor?

Badri Malynur

08:51>> It's still low, growing. It's about 60,000,000.

Nathan Latka

08:54Okay. About 60,000,000. You mentioned you have a 100 funds on the platform, correct?

Badri Malynur

08:58>> Yeah. A lot of the funds are about to be in the launch stage.

Nathan Latka

09:02How many actually have closed a fund and done their first deal?

Badri Malynur

09:07>> So about 30 funds have done their first deal. 30 funds have launched, still waiting for their first deal. The market has become a little more challenging, the real estate market because of high interest rates, you know that. 30 funds are in the process of launching, give or take a few, so roughly.

Nathan Latka

09:25Yep, So just to be clear, we're recording this at the end of August here, 2023. There's 60,000,000 in AUM across 30 funds that use your platform. You're taking on the high end 50 bps, right? And I assume that's annualized, right? So in other words, that'd be 300,000, right? 50 bps on 60,000,000 is 300,000. You're not taking 300,000 here in August, you're taking 300,000 divided by 12 in August, right?

Badri Malynur

09:48>> Correct. But we have other sources of revenue too. Just to be very clear, it's not just the platform, we help them with all aspects of marketing, launching and scaling their fund. We help them with legal, regulatory, we do free fund bookkeeping and background checks, accreditation checks. So without getting into the details, the ARR model is just one element, but we have other sources of revenue coming into.

Nathan Latka

10:11Well, I heard that you do a bunch of free stuff is what you just listed. Where else do you make money outside of the 30 to 50 bit model?

Badri Malynur

10:19>> So there are the background checks is additional source of revenue. If you do blue sky filings, that's an additional source of revenue, but it's fair to say the vast majority of our revenue comes from the BITS model.

Nathan Latka

10:33Okay, and would you say over 90%?

Badri Malynur

10:36>> Yeah, today, but we want to diversify. And the other point I want to make is it's not a straight BIDS calculation. There is a minimum of $400 per month, even if you have. So we have kind of converted into a membership model where you have to pay $400 because we have a mastermind where people can interact with other fund managers and that $400 a month includes access to the mastermind plus it includes the first million in

11:05>> AUM, if that makes sense.

Nathan Latka

11:07Yeah, but just it's very easy to clear that hurdle as a fund manager on investor, you'd only have to raise a $100,000 and 50 bps of that is $500 already, right? Or are you saying $400 a month is the minimum?

Badri Malynur

11:17>> $400 a month is the minimum.

Nathan Latka

11:19Oh, I see. I see. So you'd have to be you'd have to be at like a

Badri Malynur

11:22>> $500 million dollars to breakeven.

Nathan Latka

11:25I see. I see. See. May 1. Yeah. Roughly. So what what what is this really like? Do you wanna be sort of like Tony Robbins, right, and lead an army of folks that wanna be investors and be in a boardroom mastermind every month? Do you wanna be a real sort of fintech AUM under management Robinhood like play?

Badri Malynur

11:42>> It's absolutely the fintech play. So but the fintech play with all the bells and whistles so that we are one of so fund managers can interact with each other, they can cross invest in each other's deals. And another very attractive feature of our platform is now since we have a 100 private funds, other sponsors want to come and pitch their deals in front of us and we negotiate preferred terms for our fund managers to raise money

12:10>> for them.

Nathan Latka

12:12People would want to get deals in front of your audience if your audience was big. So how would you describe your audience today? And maybe a good way to ask is how many individual LPs are there across the 100 funds on your platform right now?

Badri Malynur

12:24>> It's still less than a thousand. Okay. But again, I said, many of the funds have not launched and we do expect to grow rapidly once the funds launch.

Nathan Latka

12:36Do you help a GP raise money? Like are you effectively a marketing channel for a GP that's got a good deal but doesn't know who to raise from?

Badri Malynur

12:45>> I would say we help them with marketing collateral and we have a marketplace where people can browse through funds, but I think it would be misleading. We are not attempting to be a broker dealer. We are not attempting to raise money for them. It's really streamlining the legal accounting and platform processes all in one place where they have to go to multiple vendors right now. And then most of it is the money is coming from their

13:10>> investors who are private to them and they get exposed to a variety of asset classes. The funds investors get exposed to a variety of asset classes.

Nathan Latka

13:18So just to summarize so far, there's under a thousand individual LPs who have put at least a dollar making up a total of $30,000,000 of AUM sorry, dollars 60,000,000 of AUM on avestor. That 60,000,000 is managed by 30 active funds. You've got another 70 in the pipeline. And so you're making, again, average on the high end 50 bps on the 60,000,000 or about $25,000 a month right now in revenue. Is that about right?

Badri Malynur

13:44>> Without getting into the details, that math is correct for the AUM portion, but remember all 100 funds will pay a minimum of $400 a month. So, I mean, the math is better than that, but I wouldn't want to get into the exact details of our ARR right now.

Membership Minimum and MRR Calculation

Nathan Latka

14:00Well, you articulated that the BIP model is more than 90% of your revenue. So maybe it's 25,000 in MRR, maybe it goes up to $30, but plus or minus 10%, we're in the right range.

Badri Malynur

14:12>> But remember, of the BIPs model, there is a minimum of $400 So all the funds are paying $400 a month at least.

Nathan Latka

14:20I know, but I asked you how much, what percent of your total revenue is the BPS model and you said more than 90%.

Badri Malynur

14:25>> I kind of include the membership also, minimum as BPS I mean, because to us, because that we are already offering the 1,000,000 in AUM. So I include that amount in the BPS model too.

Nathan Latka

14:35Oh, see. Yeah, I see. Okay, well,

14:39100 funds paying $400 a month and as 40,000 a month minimum in MRR, you're doing more than 40,000 a month at this point then.

14:45>> Exactly.

14:45I see. Okay. And so we can understand your growth rate. Where were you about a year ago? Do you remember?

Badri Malynur

14:50>> We had less than, I would say 25 or

14:56>> 30 funds about a year back.

Growth Drivers: Podcasts, Referrals, and Paid Ads

Nathan Latka

14:58In terms of revenue growth rate, so you'd have been able like 20,000 a month a year ago?

Badri Malynur

15:04>> No, they were far lower than that.

Nathan Latka

15:06So because

Badri Malynur

15:08>> a lot of the funds were not yet launched and we hadn't done this minimum amount before. So that's a recent because now we add a lot of value from the mastermind. So people don't mind paying the minimum.

Nathan Latka

15:20Yeah, what's driven most of the growth?

Badri Malynur

15:24>> Organic marketing, I appear in a lot of podcasts, not podcasts like this, podcasts related to real estate, lot of referrals, that's really been the best source of business. I mean, we are rarely advertised, we have been to like one conference and we have not sponsored any conferences. It's word-of-mouth because people want to work with, lot of the GPs want to work with each other, they want to do co GPs. It's a lot easier if you have

15:49>> an evergreen customizable fund of funds which allows them to not only work with each other but expose different asset classes. For example, a multifamily GP may want to expose somebody else to a short term rental or a student housing asset class.

Seed Round and Valuation

Nathan Latka

16:03Yep, yep. Have you funded the business today? Are you bootstrapped or have you raised?

Badri Malynur

16:07>> We raised a little less than a million dollars, not because we really needed the money. We wanted to reward our early investors in our fund and the early fund managers. So they wanted to invest and so we raised that. I think we'll look at a series say maybe end of the year or early next year.

Nathan Latka

16:28So the million dollar seed was last year?

Badri Malynur

16:31>> No, a few months back.

Nathan Latka

16:33A few months back, okay, now is not good

Badri Malynur

16:35>> We didn't even complete the seed round because we are almost cash flow positive anyway. So we didn't need the money, so we didn't, I think now we have kind of cracked the formula on how to grow. Our Facebook ads are working. So now I think we are ready for the next stage in our growth. So

Nathan Latka

16:54just to be clear, sorry, how much did you raise in your seat around 500 k?

Badri Malynur

16:58>> It's a little less than 1,000,000.

Nathan Latka

17:00Okay. A little less than 1,000,000. Got it. So call call it 800 k, something like that. My statement is still the same. Earlier this year is a terrible time to be in the equity markets. Valuations are way down. So this means you're taking a lot of dilution. Most folks earlier this year closing seed rounds were selling 20% to 25% of the company. Were you in that same range?

Badri Malynur

17:15>> Not at all. Not at all. Are in the single digit range or less.

Nathan Latka

17:20Okay. So you sold under 10% of the business, which for 800 ks, which means you got a valuation of over $8,000,000 post money.

Badri Malynur

17:27>> Right.

Nathan Latka

17:28Interesting. What would what would I mean, if you're almost casual positive, why would you go, you know, test the, you know, very bad equity markets right now, you know, in December this year for a series a?

Badri Malynur

17:38>> I told you, it was rewarding our early investors and just And why

Nathan Latka

17:42would you in December of this year? You said you would look at raising later this year.

Badri Malynur

17:49>> It's not a given, we don't absolutely need it. We want to get more strategic investors so we can slow down the growth rate a little bit and be self sufficient. So it's really about turning on the engine, if you will. And if the multiples are not good enough and if the dilution is too much, we won't raise the money.

Nathan Latka

18:11What dilution would you consider too much as Founder?

Badri Malynur

18:16>> We have been so busy in growing the business. We haven't had a good healthy conversation on that. I'd rather not answer the question just because we have not talked about it and we haven't had a good discussion on this. We are having our first avestor user summit in September. About 60 people are flying from across the country to Portland, Oregon. After we go past that, we figured we'll have this busy conversation in the October, November timeframe.

18:42>> We haven't looked at what dilution we'll look at and all that. So it's not that I don't want to answer the question, it's just that we haven't talked about.

Facebook Ads and Paid Marketing Strategy

Nathan Latka

18:48You mentioned Facebook ads, how much did you spend last month on paid ads?

Badri Malynur

18:52>> Couple thousand.

Nathan Latka

18:53Okay. So it's not just organic marketing. You're you're you are doing paid

Badri Malynur

18:57>> started a couple months back. Yes.

Nathan Latka

19:00Okay. So 3 you know, a couple thousand, 3,000 a month, something like that on paid ads. Where are you marketing? You know, the bigger pockets, you know, Facebook group or what are your ads targeting?

Badri Malynur

19:10>> So we are targeting different groups, sponsors who are

19:16>> different, who are already doing syndication deals and things like that. And we tried Google AdWords to, I don't think it was as effective. We also tried YouTubes targeting people who help people create funds. But Facebook has been the most effective so far.

Team Size and Structure

Nathan Latka

19:33And Badri, how many folks are full time at the team today?

Badri Malynur

19:36>> There are about seven full time folks in The US and about dozen in India.

Nathan Latka

19:43Okay. So call it a 19 total there. Very good. Well, we're rooting for you. We're out of time, though. Let's wrap up with the famous five. Number one, favorite book.

Famous Five Rapid Fire

Badri Malynur

19:50>> Great Alley of Principles.

Nathan Latka

19:52Number

19:53two, is there a CEO you're following or studying?

Badri Malynur

19:57>> I like Satya Nadella. I mean, it's amazing what he's done with Microsoft.

Nathan Latka

20:01Number three, what's

20:03your favorite online tool for building a vester?

Badri Malynur

20:06>> You know, I don't know if it's my favorite, but we found that Airtable has been very, very effective for keeping track of different operations. It sounds like a trivial database thing, but we've been using Airtable very effectively.

Nathan Latka

20:20And number four, how many hours of sleep do you get every night?

Badri Malynur

20:23>> I get a minimum of seven. Mean, sleep is something I don't skimp on.

Nathan Latka

20:27And what's your situation, married, single, kids?

Badri Malynur

20:30>> Married with kids, love travel and always try to squeeze in travel while running a startup.

Nathan Latka

20:35Many kids, Badri?

Badri Malynur

20:37>> I wouldn't call them kids. They're all grown ups, but two. Two.

Nathan Latka

20:41Okay. Okay. And how old are you?

Badri Malynur

20:44>> I'm close to 60 now. So

Nathan Latka

20:46Alright. We'll call it 58 years young. What is something you wish you knew when you were 20?

Badri Malynur

20:50>> You know, I wish I had gone in the entrepreneurial route much earlier than waiting. I mean, I did start a company in my twenties, but it didn't quite take off. So I left Corporate America in my early forties. I wish I'd left that earlier.

Nathan Latka

21:01Folks, he launched avestorinc back four years ago in 2019. They've got a 100 paying customers today, minimum $400 a month. These are all GPs managing their own funds. LPs can sign up, pick individual deals these GPs have brought to market. He also makes money by taking 30 to 50 bps on total AUM. Today, that total AUM is about $60,000,000 on the platform across 30 active GPs that have raised at least a dollar and are doing deals.

21:27He's looking to grow that. Again, making money on the BIP model, also making money on a minimum fee for a membership if you wanna learn from other GPs and do cross deal promotion, etcetera. So we'll see what happens next. Badri, thanks for taking us to the top.

Closing Summary

Badri Malynur

21:38>> Hey. Thanks a lot, Nathan. And that's a great summary. I couldn't have done better.

Nathan Latka

21:41One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

22:07Central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big

22:29fundraise, a big sale, a big profitability statement or else. I don't want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up

22:51for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode. If you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We got

23:10to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.