155: TribeVesting

Buck: Welcome back to the show everyone. Today my guest on Wealth Formula Podcast is Mr. Travis Smith. He is the founder and CEO of TribeVest which is a group investing platform that is changing the way that we view and understand our financial opportunities and he and his brothers have come up with a very interesting concept. It’s in the FinTech space and that’s what he’s gonna talk to us about today. Travis welcome to the program.

Travis: Thank you Buck great to be here thanks for having me.

Buck: So start talking to me about where this idea of tribe that started, go before TribeVest what was the problem what was the issue that you’re trying to solve and then we can come up with the solution that you came up with.

Travis: It’s a great place to start. I say we formed the first tribe unknowingly twelve years ago my brothers and I were coming together on a vacation a trip quite frankly one that we couldn’t afford and there we had an awakening of such in that we knew that the current financial systems were outdated and we knew just by doing what we had been doing was never going to be enough and together we dreamed of you know financial independence and financial freedom and we always saw real estate as a way to hack well without having to give up our day jobs. And despite having no real estate investment experience that was part of it we wanted to learn we wanted to grow together and educate ourselves in that area and in that space.

Buck: How long ago is this now? 12 years ago years ago so you’re you’re basically thinking I’m you know we got to try something different real estate maybe I don’t know did you read a Kiyosaki book or some what happened why why real-estate?

Travis: You called it yeah we were both we were all really impacted by the book Rich Dad Poor Dad as I know most of your audience was as well and that was really the moment where we thought gosh guys we’ve got to be looking at things differently and then finally on this trip was where we actually had a chance to collaborate on it.

Buck: Yeah and the problem of course with people who read that book a lot of times because you know I talk about the suit because I had that aha moment with Cashflow Quadrant and it was literally a month of cash no no I wasn’t a month it was like a week after I finished training and I I thought well gosh all I really need to do is buy a bunch of real estate and it’s sort of like monopoly right and then you start thinking about the fact that wait a second you need a bunch of money to buy real estate and that’s where I think a lot of people get stuck right because there’s a lot of real estate shows that love to talk about how you can get rich on real estate but one of the problems is you actually need money to buy some in the first place and I suspect that’s where you were headed with your idea.

Travis: Exactly in fact we had had these conversations before as millions of other people are having right now as we speak around the dinner table at happy hour at any sort of social events people are talking about these things and we were having that conversation again and quite frankly getting frustrated with ourselves that we were just talking about it and finally over a few beers on the on the last night of the fishing trip that we were on we had a breakthrough and we said listen guys let’s let’s have let’s let’s agree to a monthly and manageable contribution of $500 a month and that was it. It was a stretch for us at the time but 500 times four of us was $2,000 a month that was $24,000 a year one investment turned into another turned into another and by forming and funding that small group we secured a future we could have never ever dreamed of.

Buck: Okay when you guys did this obviously you’re brothers so there is a little bit level of trust although I’ve heard some of those go bad too but if were you actually in you know some kind of an LLC did you what would you do?

Travis: Yeah you know I think when you when asked why people don’t invest in real estate or some other type of private venture the first answer is capital we don’t have the money the second is we don’t know where to start and that was that was where we were at here we had come to this you know agreement that we were going to do $500 a month but then what and really when people started asking us about three years ago could we help them form a small investment group or an investment tribe and that’s when the lightbulb started going on that we had a business here and there was a void to be filled and a pain to be solved we we kind of went back and said gosh if we could do this again how would we do it because honestly the way we did it was through a lot of painful trial and error we didn’t have resources we didn’t have attorneys in our family we didn’t have attorneys at the ready in our network so really we just went out fortunately we figured out a way to do the automatic deposit and that was the start the start was let’s do five hundred dollars a month let’s open up a bank account and start and that was that was that was what we did and then the rest was kind of gosh we kind of stumbled through it.

Buck: Right okay so fast-forward you’ve created the you know the TribeVest platform yeah and so let’s talk a little bit let’s get into the weeds on that. So how does it work? I’m somebody who’s got a I like the idea do I first of all do I need to bring my own people to the group do I need to can I find others to be part of my tribe how does how does that part work?

Travis: Yeah great question initially it’s working with people you know like and trust. And yes you’ve already influenced our mission and now we’re talking about TribeVest but yeah right now it’s a platform that where you come together with people you know like and trust and you form a small investment group you pull your capital you pull your resources your network and you invest in things you wouldn’t or couldn’t on your own and that’s that’s what we do and we do that by making things that were difficult things that we didn’t know where to start and making them very approachable

Buck: The nuts and bolts of this though now you’re not dealing with brothers now you’re dealing with partners and of course you know partners you may know like and trust them but you still need to deal with the legal implications of that so at this point what are when you break off into these tribes are they broken off into individual LLC’s or how are they formed?

Travis: Right so it’s you know one of your core principles is take action now and you know Mark Twain said you know the secret of getting ahead is getting started right and then a lot of us are challenged so what we came up with and it’s an interesting story how we came up with this I’ll go ahead and share it we had we were we were just starting to roll this out with our initial 5 proof-of-concept customers and tribes in 2017 and somebody said hey I have this I have the social network we all met each other at our preschool and like our kids preschool we play poker together we do fantasy football our families hang out over the weekend and I think if I ask this group of sixteen dads I could get like four or five of them to join and when he pitched the idea of forming this tribe all sixteen of them raised their hand and said we’re in yeah so what was my challenge and was this the worst first customer or the best first customer and it depends how you look at it but what I was challenged with was how do I make sixteen people come together and make sure that they’re all aligned and I can’t do that with 16 by getting them on a conference call and talking I needed to come up with a way to make sure that they were qualified to do this together and what came out of it is a 29-point tribal line survey where each individual comes and answers their their profile independently and then we serve up an anonymous third-party alignment report that it doesn’t say hey Buck answered it this way and Travis answered it this way it just says hey collectively on a point graph how did we answer these questions and are we a good fit and that becomes the basis for a conversation right before we jump into it let’s get a tribe alignment and have a conversation around this.

Buck: Okay so now you’ve got you realize maybe you get let’s just a you know four or five guys together and they are aligned what’s the next step?

Travis: So one of the big lessons when we went back and said gosh what would we do differently it was definitely I wish we would have talked about and agreed on the rules upfront all those how much how long it’s important that this is time-bound and two then what and all the what-ifs that are super uncomfortable to talk about especially with friends and TribeVest makes that very approachable and even kind of a fun thing but we first of all we’re in that we’re in the business of we think tribe investing is a way to broaden markets and participation in places where people haven’t been able to be so wherever you form your tribe we’re happy but if you’re going to do it on the TribeVest platform you need to agree and vote on the rules of the game upfront so that’s step 2.

Buck: Right so now you okay so now you’ve got your constitution how you’re going to approach you know money issues what you know what happens if somebody isn’t putting in money how you’re gonna choose deals what is the you know what is the process by which you determine which you know which opportunities to invest in right so now you’ve got that going now what?

Travis: So now we’ve taken that off the table and by the way we’re just as proud about the groups that came in and got to this point and decide not to form a tribe as we are the ones that go on to form the tribe. So next the next step now is you’ve agreed on to how much and how long. So you take my brother’s example and this is a pretty average tribe is five people the average monthly contribution is about four hundred to five hundred dollars a month and once we’ve agreed on those rules of the game you pull up and you actually link your bank account to your FDIC insured TribeVest account and you start saving together on a monthly basis.

Buc: Okay got it and that’s getting pulled into a single bank account which is an LLC?

Travis: Well and let me stop you. Well LLC’s coming and by the way and you have you have a very sophisticated audience you already have LLC’s we’ll make sure to point out where they would just come in services stuff yet. Keep driving me to where I need for sure but I think just important thing to point out is part of this initial steps is you’re actually opening up an individual bank account for yourself. So you’re not commingling these funds yet. But a little bit of the magic is when you’re looking at your tribe view dashboard at it you’re seeing everybody’s you know their commitments they’re seeing where we’re reaching so to this point you’re still not you’re not going you’re not married yet although the social peer pressure is pretty strong.

Buck: Right because people can see if you’re doing your part or not and if you’re not maybe in your constitution you get kicked out right.

Travis: Exactly right. So now then I know it’s coming then what? So now we’re saving and this is just a popular one for us or either saving for a threshold of fifty two thousand dollars or a hundred thousand dollars into a syndicate or they’re saving for a vacation home is a really big sweet spot for us so now they’ve saved $50,000 for their $200,000 vacation home a down deposit and and now it’s time for them to form an LLC and on our platform we have a partnership with a number of legal firms that help us automate this whole process and you go in and you dedicate who the officers are who’s the president who’s in charge of tax matters who’s the secretary because you’re operating like an LLC and that’s really important part of this and of course all those everything you agreed to before is also part of that Constitution which now becomes part of your operating agreement.

Buck: Okay got it so now you have an LLC and let’s jump in to the LLC part because now you’re navigating into a scenario where you’re you know you’re raising capital. You’re not raising it per se it is a joint venture but usually by definition not by definition but usually when you’ve got like a lot of different sources of capital something triggers that makes it into a security so these are not registered and they’re not reg D securities these are LLC’s these are just general partners how have you have you addressed that with SEC counsel and how that works and what conclusions have you come up with?

Travis: Yeah you bet and I was anticipating this and it’s when we start to work with more and more sophisticated investors they start to see this as a tool and they want to see how far they can you know what problems does this tribe investing solve and you know really with the help of your audience we’re actually learning more but I just want to take a quick step back because this is a really important distinction you know we are not an investment company we aren’t building investment products we’re not selling investment products we don’t get fees or referrals or any types of things like that so no more than uber right is in the taxi business or owning in the business of owning taxis or Airbnb is in the in the business of owning real estate that’s a little bit like TribeVest we’re not in the business of selling or building investment products so that’s just number one but if you think about it there’s nothing to stop us if we already know each other we’re acquaintances we know like and trust each other to forming an LLC and pulling our capital together to go make some kind of transaction now as you get more and more sophisticated depending on what you’re investing in we’re gonna advise you to talk to your attorneys and everything else like that but if you’re buying a vacation home together it’s just the best practice it’s a best practice to form an LLC put operating agreement in place and go buy a vacation home together.

Buck: Right right I mean I guess part of that you know in this situation I’m just thinking out loud about how that works and then there’s obviously there’s not a distinction between a general partner and a limited partner typically these have to be these would have to be all general partners in a business activity I guess and the business would be of investing I’m curious have you I hate to beat this but I’m just I mean what potential hazards have you contemplated with that kind of model?

Travis: Well we you know we’ve uncovered a few things that are really important right. So the operating agreement has to be in place you do have to have an officers assigned that are playing specific roles. So you have to play by the rules you have to act and look like a real LLC business right now the other thing is is that are all these investors active and yes they should be and by the way on our platform and our tribe view dashboard you actually have a voting tool so if before we make any major transactions we’ve already voted what the threshold the voting threshold is to make a purchase and now we’re just going to have it on record showing that each member has come in and voted on that which is by definition very active in this decision-making process. So those are just some of the things that we’re doing to make sure that we’re staying within and there’s no and we’re not getting into any clouded area. The market is way too big for us to really start to start to play with those things and it makes sense in a lot of cases because sometimes there’s a person like in your group and your in your audience these are all really smart driven people they’ve found their travelling quite frankly like if my brothers and I would have had a Wealth Formula tribe we would have been listening to you guys but we didn’t have it but you know these these people are motivated they’ve gone out there and they’re learning how to find these investments their networking they’re finding them and now in a lot of cases it’s how can I participate in more of them right and so if you come together and you pull your capital instead of doing one a year you know maybe you’re doing five a year and you’re spreading the in diversified but when you start when you start to bring other people along where you want to get compensated for it right like you want to because you’re the one that’s doing all the work yeah that’s when we kind of say listen you got to really talk to your own attorney about that and figure it out.

Buck: Right. Because then you’re starting to become a security at that point. Yeah I can’t say that I really know you know that I can say one way or another you know I’m not a SEC attorney but I yeah but I do understand you do need to be part of the process you can’t be passive investor you have to be sort of an active person at the very least it is a tricky space. Now the next the next question becomes in my mind is and I’ve actually run into this already I believe was somebody in your group which is okay so when you have a group that wants to invest in things there are guidelines that for example we restrict restrict certain investments to accredited investors right? So in those situations do you have a criteria do you have things on your site that help people you know either verify or make sure that each other are accredited investors because typically the way it works is that for an entity to invest into like a Regulation D 506 B or you know C you have to have you know everybody in that LLC needs to be accredited individually. I mean the other way you could do it is if the you know corporation or whatever has like over five million dollars in assets but typically most of us who are doing this now LLC’s are doing it individually or partnerships or entities that all the members are accredited so can you talk to that a little bit and you know your experience with that so far are you seeing people kind of segregate into accredited groups and non-accredited groups and that kind of thing?

Travis: Yeah definitely you there’s just too much interpretation and so our first thing is the cleaner the better and you know I know you have an investment group that is designed around accredited investors and therefore you’re talking about and accredited investor opportunities. So anytime you’re coming together with fellow accredited investors of course you’re in really good shape. You can start to look at the rules more granularly and that for example if you have five million dollars in net worth amongst the you know all of a sudden your entity could be considered an accredited. Now we are not I want to be really clear we are not giving any advice or guidance or anything else we’re really a platform we got to know this stuff don’t get me wrong Buck we got to know this stuff because that we’re helping these people achieve what they’re trying to achieve and they need to understand the guidelines and rules but we do see and we’re digging more and more into you know is there opportunity for more people to participate in different types of investments? Maybe but right now if you’re accredited and you want to get together with another accredited investor you can become an accredited entity and therefore participate in everything that comes with that.

Buck: Right and just to just to be clear I mean that’s basically how you know our approach is an investor club is there are people who want to come in and we actually believe did have somebody coming in through TribeVest it wasn’t I don’t know if it ended up happening for sure or not but it was a you know it was on the voting block yes and the first question I had to ask was is everybody accredited and so on our own forms we’re gonna have you know how is the entity why is the entity accredited and one of the things basically that’s checked off there in that situation is is that everybody individually within that LLC is accredited so typically that’s what you’re going to need to do in a 506B. The trigger step is going to be when you have Reg D 506 C that at that point requires you know now now everybody in that group is gonna have to have you know proof of being accredited vis a vis you know tax returns or maybe you individually go to one of these online platforms and get certified you into as an accredited investor. So anyway there are some challenges there but it’s a very, very interesting concept. So how old is the business how many groups do you have and kind of get into that a little bit?

Travis: Yeah so we’re onboarding to our so we had our you heard me talk about our proof of concepts we had our version one in 2018 and we realized that this was a business that could scale right. We know that by these groups forming and funding their small groups that it’s changing their lives they’re investing and building wealth like they never knew they could and if we can do that at scale we don’t just change you know some lives we could ultimately change the world and so we went out and we built our version two which is in the middle of a private beta launch and I’m inviting anybody you know here to participate in this into our what we’re calling as our Founders Club but our private beta launch is with our first thousand tribes and our founders clubs are there’s a Hundred Founders Club members and again we’re inviting some of your group or whoever here because what we’re doing in this beta in in this exercise that we were doing right that we were doing before Buck and just kind of thinking about where this could go and what do we need to be concerned about you know this is our customers are taking us to places we never knew right and as we start to see paths forming and more and more people going down a certain path we want to start building education and services around those those areas in fact that’s one of our revenue models is to be able to be there when they need different services but long story short is we’re onboarding our first 1,000 customers for a public launch in July.

Buck: Got it. So how do you as a business obviously it’s nice that you’re doing this but how do you make money?

Travis: Yeah thank you so it’s five dollars per individual per month. And then and then I did touch on what gets really exciting though Buck for us as you think about it these groups they don’t look much like a business initially we call them micro businesses in a lot of cases but as they accumulate capital as they accumulate assets they start to turn into a real business like my brothers and I and then they need bookkeeping right then they might need some attorney services they might need insurance they might need property management connections you know so all those types of things and we don’t have those all built in right now but we’re betting on the success of these tribes and in the future while they’re on our platform while they’re looking at their tribe view dashboard and looking at all their documents and be able to vote and chat and seeing their balance and all the activity and they want to they want to they need a bookkeeping service or they need whatever it might be we want to be able to introduce them to someone that can help them out that understands them as a small group.

Buck: Yeah that makes a lot of sense interesting so yeah it’s basically some different verticals that are you know that they that can potentially be complementary over time to build out your own business. Certainly makes a lot of sense I do like the idea a lot and you know I think you know hopefully well how do how do people reach out to you if they’re interested in getting involved with the beta if they want to you know potentially talk about forming their own tribe I can pretty much guarantee you there are people in this group who are going to want to do this. What’s the next step and what’s the advantage of being in the beta?

Travis: I can confirm you’re right there are people in this audience that want to do when they’re actually in our founders club and you know the idea there with a couple of them is again I can maybe move s in one or two a year or can I invest in five or six a year with my group and in and that’s it’s been really awesome to see. Contact me directly and I’ll give you a number of ways to contact me but [email protected] and anybody in this audience please reference you know Wealth Formula and we’ll interview you for the Founders Club and it’s free services for life for you and your tribe so no five-dollar fee you get a hundred dollars off your first LLC formation and you become a very important part of our company and that you’ll actually be invited to do all of our VIP networking events and everything else so you’re in a club so to speak. Now what’s the catch? The catch is by being one of these early customers and tribes we’re gonna we’re gonna ask you for feedback. We’re actually going to schedule time with you we’re gonna ask how things went where you’re going we’re gonna have your members do really short surveys all in the spirit of getting the solution to where we want it to be going forward.

Buck: Got it. Well this has been fantastic and definitely we’ll put all that information in the show notes. Travis good luck to you my friend. Great concept and thanks for being on the show.

Travis: Buck, thanks for all you’re doing out there really appreciate it and glad to be here.

Buck: We’ll be right back.