Alternative Investing Report - October 24, 2024

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Happy Thursday. A challenge to the accredited investor framework, a $22 billion unicorn goes to zero, existing home sales continued to decline, and AI’s use cases in healthcare. Let’s dive in!

Today’s issue is brought to you by Betterment, who can help you choose where and when to retire.

📈 DAILY MARKETS

*as of 10/23; Sources: S&P, BTC, FTSE, DJRE, CL50

📝 INVESTOR TEST

Most investment opportunities in private markets are only open to accredited investors, those with at least $1 million in net assets not including their primary residence, or a yearly income of $200,000 as an individual or $300,000 as a household. New proposed legislation seeks to allow any investor who can pass a test of “financial sophistication” to become accredited, regardless of their income or net worth. The test would be administered by the SEC or another regulator, and quiz people on topics including types of securities, liquidity and leverage risks, financial statements and corporate governance.

TAKEAWAY: The accredited investor standard excludes many sophisticated and experienced investors and prevents them from accessing some of the highest-reward - and highest-risk - opportunities in asset classes like real estate, venture capital and private credit. The status quo strikes many as unjust, as investors who don’t qualify can purchase memecoins and lottery tickets, or speculate on the outcome of an NBA game, but cannot invest in a friend’s startup. Opening up the standard would be beneficial for everyday investors and investment managers along with platforms that cater to them. While the legislation is not going to pass anytime soon, getting the discussion started is a step in the right direction.

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📉 BYJU'S FAILURE

The edtech startup Byju was once India’s most valuable startup, with a valuation of $22 billion. Just two years ago, it was considering an IPO at a $50 billion price. Now, its founder says that the company is worth nothing. India’s top court struck down a potential settlement with a major creditor, which sends the company back to bankruptcy court, where it owes more than $1 billion in debt.

➨ TAKEAWAY: Even the highest-flying unicorns can come back to earth, and Byju is not the first company whose valuation soared during the pandemic only to flop once the world returned to normal. The company aggressively expanded its online tutoring business during COVID but demand fell post-pandemic and the company ran out of cash, left unable to secure additional funding.

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📰 NOTABLE NEWS

🏡 Existing-home sales still slow: September showed a 1% monthly and a 3.5% year-over-year decline in existing home sales, but current inventory levels rose by 1.5% monthly and are up 23% year-over-year.

🪙 Unrealized crypto gains tax: Denmark is going to start taxing unrealized crypto gains at a 42% rate starting on January 1, 2026, and will count retroactively to Bitcoin’s creation in 2009. While it is not imminent, if it is implemented successfully, expect other countries to follow suit.

🤖 Anthropic’s new model: The AI startup released an upgraded version of Claude 3.5 Sonnet, which can now control a PC, mimicking a person using a computer, another step towards a fully functioning AI assistant.

🏢 Public REIT record: Publicly-traded REITs have raised nearly $65 billion so far in 2024, setting a new record and surpassing the last two years’ total combined.

🎨 Egon Schiele death mask: A sculpture of the famed Austrian painter’s face taken shortly after his death sold for almost $25,000, well above the high estimate of $2,600, as the unique, but morbid item sparked a bidding war.

🚀 New VC firm: Chemistry, a new early-stage venture firm founded by alums of a16z, Bessemer, and Index Ventures, announced its debut fund of $350 million.

🤖 AI CORNER

In the healthcare space, AI is not only helping with medical tasks, such as spotting broken bones in X-rays, but with more mundane administrative work as well. GE Healthcare announced a new AI-tool that can analyze health care data and help cancer doctors save time digging through medical records. Salesforce and Blue Shield are teaming up on an AI system that will review insurance claims, but with human supervision for now. The AI healthtech startup Tennr, which deals with both medical records and insurance billing, just raised $37 million. Healthcare has been a space where AI has shown a lot of promise, and investors should remember that not every AI startup is a Generative AI company.

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