Ray Sturm - AlphaFlow

Ray Sturm, AlphaFlow

As co-founder and CEO of AlphaFlow, Ray is obsessed with ensuring that users have a good experience while getting up to speed within the real estate investing space. He created AlphaFlow to empower real estate investors with the data, transparency and tracking that used to be accessed only by investment professionals.

Ray is a leading entrepreneur in financial technology (FinTech). Prior to launching AlphaFlow, he founded RealtyShares, one of the industry’s top platforms for real estate investing. His early career in finance included investment banking at Bear Stearns, Lazard Frères and CCMP Capital and serving as Director of Business Development for SmartDrive Systems. Ray has a BBA-Finance from the University of Notre Dame and a JD/ MBA from the University of Chicago.

Outside of the office, Ray enjoys hiking, camping, and working on his small pinot noir production in Oregon.

Originate Report: How have you seen AlphaFlow grow and expand in the last few years? Ray Sturm: AlphaFlow has always been a relatively lean firm, but we’ve grown from a firm focused on accredited investors to now investing on behalf of some of the top asset managers in the world. The key to making that possible was the discipline to grow more slowly and maintain a strong track record in the face of investing additional volume. We’re still under 20 people though, so in many ways we’ve stayed small and want to maintain that culture.

OR: What has been one of your biggest successes and one of your biggest failures in your career? RS: An early career failure that felt deadly at the time was failing to secure an offer during my summer internship

with Lehman Brothers while in business school. This was 2006 and an absolute bull market, but I completely blew the numbers on an important client pitch. Lehman aside, it was still an incredibly valuable lesson in teaching me the importance of having great attention to detail and it’s made me a better investor. My biggest success was probably leaving a potential career in private equity for the startup world. Large cap PE can be enthralling, as you’re intimately dealing with some of the world’s best companies and their management teams. However, I found that I was chasing perceived achievement vs actual fulfillment. I’ve launched two companies and I can’t imagine doing anything else, so I’m grateful for the support I received in taking that leap.

OR: What have you learned this year that will be game changing in the next year? RS: As an investment manager, I can’t give away our edge before we’ve put it to work! We learned a tremendous amount in the last six months that is driving our technology roadmap and we’ll make much of that public later this year. Much of that should fundamentally transform real estate bridge lending!

OR: How has your company vision evolved from Day One to Today? RS: It’s funny to think back to when we launched almost 4 years ago, starting in a small shared workspace down the street from Facebook in Menlo Park. One thing that has been consistent since then though is placing data at the core of our company. We launched as a reporting platform, then created online investing’s first multi-platform real estate funds. From there we built the first automated investing platform, so a lot has changed but the core of each step has been using data to drive decisions. Today most of our capital comes from some of the world’s largest asset managers, which could not have happened without embracing data as the engine for driving credit decisions.

OR: What are some of your goals for 2019? RS: This year, AlphaFlow is focused on massively increasing our lender partnerships. Our relationships have been very successful as we’ve strived to be a reliable and transparent capital partner, and with the addition of new capital, we need to expand our lender network to grow while continuing to provide great performance to our investors.

OR: What is something that most people don’t know about your company? RS: AlphaFlow is highly driven off of proprietary technology and as a result, our team is much smaller than many people assume. In summer 2018 we were still a seven person company and even today, after massive increases in our committed capital from institutional investors, we’re have fewer than 20 people. To stay this lean, we’ve built our company on technology we developed in-house to help with everything from underwriting to algorithmic portfolio creation and rebalancing.

OR: What does success look like for you? RS: I grew up in mortgage offices, with my mom building her own traditional mortgage company and my father

working in bridge loans. We all know the differences in cost between the two, and much of this comes not from increased risk but rather a lack of capital markets access for hard money lenders. Success to me is working with my team to build AlphaFlow from an investment manager into a larger capital markets force that transforms the industry through lower cost of capital, sale options closer to traditional mortgage, and greater general access to funding sources. We have a long way to go, but we’re off to a good start!

OR: What is one piece of advice you have learned and carried with you throughout your life? RS: One of the best pieces of advice I ever received had to do with people. When you come across great people, make sure to find a way to work with them. Hire them... bring them on as an advisor...partner with them...invest in them...Just find a way. Those relationships eventually make your career. That’s certainly been the case for me and speaks to how I’ve tried to build the team at AlphaFlow.

OR: What mistakes have you seen others make in this industry? How does AlphaFlow avoid making those same mistakes? RS: In the online investing world, where companies are typically fueled by venture capital, volume often trumps credit. If you have a need to grow in order to raise new money or justify a previous round, the easiest way to do so is often by lowering your underwriting standards. We’ve seen this countless times and can often tell when a company is out to raise money by seeing a measurable drop in their deal quality. We made a conscious decision at AlphaFlow to not grow faster than the volume of quality deals we could source. To do so, we needed to stay lean and raise less venture capital (we’ve raised less than $5M today, almost 4 years since launch) and as the CEO, I needed to set an example of never putting volume over credit. It took time, but the result is that our delinquency rate is a fraction of what investors typically see elsewhere and we are now turning away institutional capital. Your track record is oxygen in this space, and embracing that reality has helped to make us a resilient company.

OR: How do you feel that AlphaFlow has changed the world of real estate investing? RS: AlphaFlow’s main contribution to date has been to give investors a way to access the real estate bridge loan space in a way they can’t get anywhere else: totally passive, professionally managed (we are a registered investment adviser), and built using institutional-quality underwriting tools we built ourselves. We’re just getting started though, as we’ve found that traditional lenders have a huge need for a capital partner who can also help them to grow their businesses strategically and improve their underwriting. I can’t share too much yet, but we’ll be doing a lot this year to help build those partnerships and give lenders access to world-class tools.

CONTACT: AlphaFlow.com | (415) 910-0713