California-based Heron Financial, a registered investment advisorbuilt on blockchain technology, launched this month to provide accredited investors easy access to private credit assets.

Heron is a robo-advisor that focuses exclusively on the growing private credit space, explained co-founder Mike Sall.

“We think it’s going to be particularly compelling to the retail investors who have been oozing confidence in the stock market and have been looking for alternative investment opportunities,” he said. “They haven’t had access to that space in the past, but we think that we’re about to hit a tipping point where a lot more folks are going to be thinking about it and want to participate in it given the value of it.”

Since the regulations surrounding credit changed in 2008 after the financial crises, many banks pulled out of the credit space, allowing private companies to fill the void. That, coupled with higher interest rates, have made private credit an attractive asset class, according to Sall.

To participate in Heron’s platform, a user needs to be an accredited investor, otherwise, $100 provides access to Heron's services. Clients will not need to actively manage their portfolios or have any professional experience in private credits as the robo-advsior handles all the heavy lifting, according to Blake West, another co-founder of Heron.

“The platform will recommend a strategy to them,” he said. “From there, they choose the money, and the platform can help them build a portfolio that automatically rebalances over time when that portfolio is filled with a number of different private credit opportunities.”

There is a credit team that evaluates all the private credit arrangements to ensure their quality and that they have a good track record, Sall said. The investments will pay monthly interest, which an investor can then turn around and reinvest back into the portfolio, if they wish, according to the firm.

Since the platform is in its early stages, the portfolios are customized around two strategies: standard and aggressive, according to West. The firm expects to offer more options over time, he added. 

Heron is built on a blockchain infrastructure. Its founders identified three main advantages of the blockchain system. The first is reduced transfer costs as transferring any amount of money anywhere around the world on blockchain can cost a fraction of what it will cost using other methods, the firm said. The second is enhanced transparency as every transaction is fully public on blockchain. Finally, it offers greater interoperability.

“By layering financial products on top of an interoperable, blockchain-based platform, many different companies can spring up to operate on the same underlying platform, thus fostering more competition, and ultimately creating more value for the user,” the firm said on its website.

While many associate blockchain with cryptocurrency, that is not the case with this platform. It does not invest in cryptocurrency, just private credit opportunities and investors do not need to have experience in crypto or blockchain to effectively use the system, the firm said.

“Clients don’t need to know anything about gas fees, or seed phrases or crypto wallets even though it’s still fully onchain,” West said. “For clients, all the complexities of crypto have been abstracted away, thanks to Heron employing the latest technology.”

The two men have more than 10 years of experience in the technology industry, with West most recently serving as a senior engineer at Coinbase, an American publicly traded company that works on the cryptocurrency exchange platform. Sall was previously head of Product Analytics at Coinbase, as well as head of Data Science at Medium, an online publishing firm.

They are optimistic that Heron can open the private credit market to a new group of investors and offer them easy access to it.

“What we really hope to do is we see a whole new wave of more folks wanting to invest in this asset class and they haven’t been able to do that before very easily,” Sall said. “Our goal here is to open up access to this new kind of investor base who are going to really benefit from being able to participate.”

The firm has opened a waiting list for those who are interested in participating. The purpose of the waitlist is to allow people to learn about the product and complete the onboarding process while the firm finalizes the first investments that are available.

The firm anticipates launching those investments in a few weeks.