InvestX introduces miners to PE crowd-funding

The $40-million investment that private equity firm Resource Capital Funds announced in privately held TMAC Resources and its Hope Bay gold project in Nunavut is exactly the kind of deal entrepreneur Marcus New wants to offer retail investors long shut-out of the private equity marketplace.

Last year the president and CEO of Stockhouse Publishing set up InvestX Capital, a private equity platform syndicated for retail investors in Canada and the U.S. that proposes to give its members access to some of the same private company deals that until now have only been available to institutional investors and private equity firms.

“We need to democratize that asset class so that retail investors can have private equity in their portfolios,” the 43-year-old entrepreneur says, adding that “it is a high-performing asset class” that has averaged a 16% annual return over the past decade.

“Institutional investors today have 15% of their portfolio in private equity, whereas retail investors have zero,” he says. “We wanted to bridge that gap … that asset class was only built for institutional investors and it has million-dollar minimums.”

“What we do is collect small checks from accredited retail investors and aggregate them, and then we write the multi-million investment cheque alongside the institutional investors,” New continues. “Nothing like this exists.”

Using the InvestX platform, members can access, view and invest in high-quality, thoroughly vetted private companies at minimum investments of $2,500, he says. To qualify for membership, however, investors must earn over $200,000 a year or have over $1 million in assets.

The platform offers smaller investors the research private equity firms have done on a target company. So far InvestX has partnered with Pathfinder Asset Management, U.S. Global Investors, Meridian Fund Services and Mutual Capital Alliance.

The company says InvestX members are given unlimited access to private equity “deal rooms.” The deal rooms provide confidential information on each investment, which might include financials, a video road-show, background on the management team and other key material.

“The institutions are doing the due diligence, negotiating professional terms and going through the selection process to find the best investments — and they have a bankroll that is able to support it,” New says.

It is also mandatory that the private equity firm that sources a deal invests in the same round of funding and on the same terms, as InvestX members.

But unlike many institutional investors — who will often insist on negotiating certain terms like the number of board seats — InvestX brings “unencumbered capital that doesn’t ask for board seats and doesn’t negotiate terms.”

New argues that pooled funds from retail investors will become a much-needed source of capital for the markets — especially at times of depressed commodity prices and a downturn in mine finance.

“Mining finance is about as dry as we’ve seen in a long time, and this is really a new source of capital for this market,” New says. “We just launched a month or so ago, but I suspect over the course of this year that we’ll have five or six mining company investments on our platform.”