About a year after it launched its first paid beta, Cincinnati-based AKRU closed a $2.2 million seed round in the fall of 2021. CEO and founder Mohsin Masud says that funding will fuel across-the-board growth for the tech startup.
We spoke to Masud about his vision for the company, the potential of blockchain technology to manage the full cycle of “democratized” real estate investments, and the support his new venture has enjoyed in the Cincinnati area.
Do you acquire the properties that you offer shares in, or do you act more as a broker between both sides of the transaction?
Masud: We’re not a real estate broker. But we don’t acquire the assets, either. What we do is we securitize these assets. We fractionalize these buildings and maximize the economic interest within these programs. So technically, we move these assets into a new SPV (a special purpose vehicle, a subsidiary company created explicitly to facilitate the investment) where the current owner retains whatever percentage of ownership they want to retain. And we sell those shares for the new entity to the investors on the platform.
Is the investment always equity in the property or can it include a share of generated revenue?
Masud: All investments are pari-passu with the current owner of the asset. What that means is that, just like you have a share of depreciation within the asset, you have a share of the income generated from the asset as well. We coordinate distributions for every asset on the income.
How does being based on blockchain/token technology set you apart from other investment services?
Masud: Crowdfunding is a big part of what we do, and yet it’s a very small piece of it. Blockchain enables us to improve a lot of the inefficiencies. So we don’t use blockchain to have access to crypto, or have any kind of exposure to crypto. We’re actually the complete opposite. We just use it as a general-purpose utility. Just like electricity is used to light up a bulb or power a hairdryer. We use it to power up our platform.
Some of the biggest differentiators between us and crowdfunding platforms is the fact that we’re not just doing initial offerings. We’ve got a secondary market, which is key because you’re able to add liquidity in illiquid asset classes. So now not only can you buy into real estate at 1,000 bucks, but you can also buy, sell and trade that after a 90-day hold period or so. That’s a major differential.
And then there’s also added-on servicing that comes into play as well. So this is not just your cap table, per se, that has been digitized, but your investor management, compliance reporting, your document delivery, all of that is happening in one streamlined mechanism. And it’s on an immutable ledger. If we stopped paying the bill for AWS tomorrow, that’s not going to affect your ownership stake because it’s recorded on an immutable ledger that really, really sets us apart from the others.
Do you anticipate another round of fundraising in the foreseeable future?
Masud: Startups are always all about ‘you close one round and you start raising the next round,’ right? I’m a first time founder, but that’s what everyone’s always told me. … We’re uniquely positioned to start being cash flow positive very, very quickly. However, the purposes of future revenue can be global expansion, can be expansion in product lines, and so on. So yes, we will do more fundraising.
What has it been like building a tech startup in the Cincinnati area?
Masud: I always say AKRU is headquartered in Cincinnati on accident, because I was based in Cincinnati when I started this company. However, AKRU has stayed in Cincinnati because of all the support that we’ve gotten from organizations like Cintrifuse, gener8tor, and Queen City Angels – that’s the only Cincinnati-based venture capital that we received. It’s usually very, very difficult to find the right kind of investors in the Midwest who would value your company appropriately and who understand the product.
And then, of course, being in a smaller city provides a lot more access, and it’s always all about the access. So having those high-level meetings with those tier-one banks. Or having those high-level meetings with some of those other service providers. If you’re in a larger city, we don’t have that kind of access, and we love being based in Cincinnati.