The online business sector is full of opportunities to capitalize on. WebStreet is an investment platform leveraging these opportunities by connecting accredited investors with top-tier portfolio managers to tap into the most promising ventures in the digital marketplace.
Recently, WebStreet hosted a webinar discussing the launch of the highly anticipated Fund 9. The team shared detailed insights about the upcoming fund, introducing the investment strategy alongside the experienced portfolio managers who will lead the management and growth of the fund’s diversified portfolio.
We’re excited to welcome back some familiar faces and introduce new talents as the key players for Fund 9. XO Capital, Kevin Petersen, Jonathan Magasanik & RJ Theodore, and Mohit Tater have partnered with WebStreet to drive the upcoming fund’s success. With proven track records of delivering strong returns and achieving high growth, each will bring their unique expertise to maximize investor returns across various online business models.
Investors can expect Fund 9’s target allocation to reflect a strategic focus, with 60% dedicated to SaaS businesses, 20% to Amazon FBA, and 20% to agencies and service-based companies. This fund structure ensures diversification that alleviates the impact of any risks and maximizes the potential for high returns. With a target internal rate of return (IRR) of 20%, Fund 9 is positioned to offer investors a rewarding opportunity to benefit from the growth and profitability of the digital economy.
If you missed the webinar, don’t worry—you can still catch the full session here:
During the webinar, investors posed some insightful questions, and we’ve compiled a comprehensive list of the most frequently asked questions (FAQs) along with our detailed responses.
Whether you’re considering an investment in Fund 9 or just curious about how it works, this recap will provide you with all the information you need.
Frequently Asked Questions
1. Where will Fund 9 businesses be purchased from?
WebStreet sources online businesses from a variety of channels. These include well-established business brokers, deal-sourcing agents, and private off-market opportunities. Additionally, portfolio managers will leverage their personal networks and receive inbound leads from potential business owners looking to sell. The goal is to acquire businesses that are profitable and aligned with the fund’s focus on SaaS, e-commerce, and service-based companies.
2. Can investors help the fund identify potential companies for acquisition?
We welcome investors to assist in providing any possible acquisition targets for the fund. If investors have a business for sale or know of one that might be a good fit, you can reach out to the WebStreet team and we will evaluate the opportunity to see if it aligns with the fund’s investment strategy.
We review thousands of businesses to ensure we select the best opportunities. The more potential targets we have, the better our chances of identifying high-potential acquisitions to maximize our returns for investors.
3. Is WebStreet structured as a fund-of-funds? Do investors have direct ownership of the businesses?
WebStreet is not a fund-of-funds structure; instead, WebStreet has direct ownership of the businesses acquired through the fund. When you invest in a WebStreet fund, you own a share of the legal entity that directly holds and manages the portfolio. This structure ensures that investors have a direct stake in the success of each business, with profits flowing directly to them. Ownership is consolidated into a single K-1 form for tax purposes.
4. Is there a unified exit strategy for all acquisitions in the fund?
There isn’t a single exit strategy for all acquisitions within the fund. We emphasize that each business is evaluated individually to determine the optimal time to exit, with the goal of maximizing returns.
5. What is the expected lifetime of Fund 9, and what are the determining factors for if and when portfolio companies are sold?
The expected lifetime of Fund 9 is typically between 3 to 5-years. However, the exact timing of when portfolio companies are sold depends on a variety of factors. The timeline for capital return is influenced by the growth and performance of the business, market conditions, and the potential for favorable exit valuations. While most exits are anticipated within a 3 to 5-year timeframe, there is a minimum holding period of one year to ensure favorable tax treatment for investors, particularly to qualify for long-term capital gains.
6. How are distributions calculated and paid, and how is profit divided between investor returns and reinvestment?
Distributions are calculated based on the profits generated by the businesses—primarily from the cash flows—in the fund’s portfolio. After covering operational costs and any necessary reinvestment for growth, the remaining profits are distributed to investors.
Typically, two-thirds of the profits are returned to investors, while one-third is allocated to the portfolio managers and WebStreet as carried interest. The exact proportion of profit that is reinvested into the business versus distributed to investors varies depending on each business’s growth needs. However, WebStreet ensures that a balanced approach is taken to both support business growth and maximize returns to investors through regular distributions.
7. Why is there a discrepancy between Fund 4 and the other funds? What is driving its performance?
Fund 4 was one of our strongest performing funds to-date because of the focus on recurring revenue models, such as SaaS and subscription-based services, which have more predictable cash flows compared to other business models. Undoubtedly, this performance is also due to our skilled portfolio managers, who were able to effectively identify and capitalize on growth opportunities.
Similarly, Fund 9 is expected to perform strongly, as there will be a focus on businesses with recurring revenue streams and significant growth potential. Additionally, we have confidence in the strong team of portfolio managers for this round, so we anticipate Fund 9 will deliver robust returns for investors.
8. What is the ratio of successful exits for all companies purchased by Funds 1-5?
Many of the businesses acquired by Funds 1-5 are still in the growth phase and our focus is on ensuring that each investment delivers strong returns for our investors. Our portfolio managers are committed to carefully managing these businesses to maximize their potential and secure favorable exits.
Although it’s still early to provide a precise ratio of successful exits, the performance so far has been promising, with several companies already showing significant growth and profitability. As we continue to monitor and strategically time our exits, our top priority is to ensure that investors receive the maximum value for their investments.
9. The portfolio appears concentrated. How sensitive is it to search engine algorithm updates?
While online businesses can be vulnerable to search engine algorithm updates, Fund 9’s portfolio sensitivity to these changes is minimized because of the strategic focus on businesses with strong recurring revenue streams, such as SaaS, Amazon FBA, and service-based companies.
The business models we are focusing on this fund are less dependent on search engine traffic for their revenue, reducing the overall exposure to algorithm changes. Although some businesses will have exposure to search engines, the majority of the portfolio is designed to thrive independently of search engine fluctuations.
10. How does the funding process work for retirement accounts? If I open an account with Alto, can I move the funds, or do they need to handle it?
If you’re investing through a retirement account like Alto, the funding process is straightforward. After opening an account with Alto, Alto needs to move the funds directly to WebStreet.
You won’t need to handle the transfer yourself. Alto will coordinate the movement of your funds into your WebStreet investment account, ensuring a smooth process that is in compliance with tax regulations. If you need assistance during this process, you can contact WebStreet and Alto for support.
11. For retirement accounts, is there an option to automatically reinvest distributions instead of having the cash sit idle in the account?
Currently, there is no option to automatically reinvest distributions for retirement accounts. When you receive distributions, they are deposited into your retirement account, where they will remain as cash until you decide how to allocate them. However, you can manually reinvest these funds into new opportunities as they become available, either within the WebStreet platform or through other investment options in your retirement account.
12. How are distributions and sale proceeds taxed for U.S.-based investors?
For U.S.-based investors, distributions from the fund are typically taxed as ordinary income, which means they will be subjected to your regular income tax rate.
On the other hand, sale proceeds from the exit of businesses are usually taxed as long-term capital gains, provided the businesses have been held for more than one year. Investors can expect to receive a single K-1 form for tax reporting purposes, which consolidates all relevant tax information from the fund.
13. Does an investment automatically get diversified across all portfolios, or can investors choose to invest in specific managers or portfolios?
When you invest in Fund 9, your investment is automatically diversified across all the portfolios included in the fund. This means that your capital is spread across a variety of online business models and strategies managed by different portfolio managers.
For this round, there is no option to invest in specific portfolios within Fund 9. This unified structure is intentionally designed to spread risk and maximize returns through the collective expertise of all portfolio managers, ensuring a balanced and diversified investment approach for all investors.
14. Where is the fund/LLC registered?
The fund and its associated LLCs are registered in the United States—either Wyoming or Delaware. These states are chosen for their strong legal protections and favorable business environments, making them ideal for structuring investment funds like Fund 9. The specific registration details for Fund 9 can be confirmed with our Investor Relations team.
15. How much effort is made in growing the businesses acquired versus selling them off after a certain number of years?
A significant amount of effort is dedicated to growing the businesses acquired in the fund. The portfolio managers are deeply involved in the day-to-day operations and strategic planning of each business, focusing on enhancing profitability, scaling operations, and unlocking growth opportunities.
Additionally, we provide our portfolio managers with extensive support, including resources and guidance, to help them do the best job possible in growing these businesses. While the fund typically has an expected lifespan of 3 to 5 years, the decision to sell a business is not based solely on time. Instead, it’s driven by achieving the best possible returns for investors, which often means holding onto and growing a business until it reaches its full potential.
WebStreet’s Fund 9 offers the opportunity for accredited investors to gain direct ownership in a diversified portfolio of high-potential online businesses. Accredited investors have the opportunity to participate in Fund 9 with a minimum investment of $60,000. The fund is set to close on September 27th, 2024, making this a timely opportunity to engage in a carefully curated selection of online businesses positioned for growth.
