Serial Entrepreneur Jeffrey Schwartz Targets Hedge Funds With New Startup, Hedgez
After several decades in marketing, serial entrepreneur Jeffrey Schwartz is taking on the hedge fund industry.
But instead of starting a fund, Schwartz launched a new website, Hedgez.com, that is designed to bring investors and hedge funds together.
"Every fund you talk to has a different strategy," Schwartz, who understands the challenges that investors face in picking an appropriate hedge fund, told Benzinga. "We hope to be able to touch and cover every strategy out there so whenever investors are looking for information we're gonna be a solution. That's our goal, first and foremost -- to be the authority site that investors will come to when they want fund information."
In attempting to achieve that goal, Schwartz and his team knew that Hedgez would face a significant challenge of its own.
"It's just inevitable that 60 percent of these people [who visit the site] are unaccredited investors," said Schwartz. "As such, we can't show them hedge funds."
To prevent unaccredited investors from viewing hedge fund details that they are not legally allowed to see, Hedgez asks its users to answer a number of questions. The second question is designed to verify that an investor is accredited.
If he or she is not accredited, Hedgez will show the investor an alternative list of companies (asset managers, mutual funds, etc.) instead.
"It's absolutely free to the user," said Schwartz. "We sell the lead to the hedge fund for $200. We can't participate on the backend. We're not broker-dealers. It's a straight transaction. We deliver the lead to the fund in real time."
Leads for unaccredited investors can also be profitable, but they are worth a bit less.
"We sell that lead for a much lower amount based upon the amount of money the prospect says they want to invest," Schwartz explained. "If it's $100,000, it's one price. If it's $20,000, it's another price. If it's $5,000, it's another price, down to $10 for the lead."
Schwartz, who is also the founder of Digital Direct Advertising (which Hedgez spun off from), said that this is a low-volume, high-margin business. Ideally, he would like the company to be able to offer ancillary products and services, such as seminars, published materials and videos. This would allow Hedgez to profit beyond the initial transaction of a lead generation.
"The goal is to generate between 1,000 and 3,000 quality leads a month for a complete cross section of funds," said Schwartz. "If I can do that, I really have done quite a bit for the hedge fund community.
"And if you do the math, it's a nice little business. It's not bad to make a couple million dollars a year off of one website. I've owned and operated hundreds of website -- they always evolve. Where we end up, who knows."
Schwartz referred to Hedgez as the "perfect tuck-in kind of business for a sophisticated database company, a big data company, or a lead-generation company."
"This is not going public," he said. "This will be a tuck-in one day for a strategic investment."
In other words, Hedgez may be an independent startup today, but don't expect it to stay that way forever.
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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