Aug. 16, 2022

What is an SPV with Jeremy Neilson



 Jeremy Neilson is the co-founder and CEO of Assure. Assure provides fund administration services for private equity funds, including private equity groups and crowdfunding platforms. Assure’s team manages more than 3,500 special purpose vehicles and produces more than 30,000 K-1s annually. Mr. Neilson has provided support and leadership for some of the most innovative and dynamic industry initiatives in the U.S.—including launching and managing the State of Utah’s $300 million Fund of Funds program and providing due diligence and advisory services for the U.S. Small Business Administration’s $1-billion early-stage venture capital initiative. Today we learn what an SPV is!

Transcript

Josh
 Good day, fellow dealmakers. Welcome to the deal scout. This is such a fun show because I get to talk about deals with dealmakers ranging from like NFTs. We just interviewed a guy who, did a bunch of stuff in NFTs to SPACs and people raising capital and all sorts of topics about building growing deals. Right? What we wanted to do is we've been hearing things about special purpose vehicles and, were like, what the heck is that? We did a bunch of Googles and this company, this guy came up time and time again. We're like, why not ask the deal, make an expert. Would that Jeremy, welcome to the show, 


 Jeremy
 Right? Thank you, Josh. We're going to be here. 


 Josh
 Absolutely. Before we dive into SPVs and what the heck they are, where are you guys located? 


 Jeremy
 We're in salt lake city, Utah. 


 Josh
 Okay. Right on, right on. At the time of this recording, we're in July, 2022, you're in salt lake. Right? Did I get that right? Okay, cool. And you're building this business. Tell us about the business that you're building. 


 Jeremy
 So assure is a SPV expert business. If you will. SPVs have a lot of character, a lot of texture, a lot to it and what we are today and what we've become. The origin story, the founder's story is long, but we're a FinTech platform. So SPVs are done best with technology. 


 Josh
 Cool. All right. What that gives an SPV, let's dive right into the meat of this. What is an SPV? 


 Jeremy
 Yeah. SPV, it's an acronym for special purpose vehicle and you step back and really kind of peel the onion back. SPV is a structure and entity structure. Out there in the entity structure world, there's like C Corp and escorts and sole proprietor and LPs and LLCs and SPV is either an LP or an LLC structure. What you do is you go to Delaware and you say, Hey, I want an LLC of my very own. People use LLCs for everything businesses and otherwise. Typically someone will set it up for a business, barbershop, cleaning software, whatever it is. Right. The special purpose vehicle acronym kind of came in, whereas like, okay, I'm setting up an LLC, which typically is used for business, but I'm not setting up a business. I'm going to use it for a very special purpose, a very unique one time stripped down purpose. 


 Jeremy
 All I want to do is I want to aggregate some people's money and we want to go invest into a startup company or buy some real estate or get some secondary shares. It's not this operating business with retail space and payroll and employees and time off and a company fleet of cars, right. That's complex. It's like, all I'm doing is I'm grabbing some of my buddies money. We're going to put it into this little entity. We're going to hold some shares. We're just going to sit there quietly and hope that this company goes public someday or has a great exit. The special purpose is I just want to do this investment and I need a vehicle to do it. I need an LLC. So that's where the acronym came from. I'm going to go do LLC for a very special purpose. I'm going to call my LLC a vehicle SPV. 


 Josh
 Okay. Now side-by-side right. I own a few LLCs. Right? Side-by-side, if I was to go, I want a special purpose vehicle SPV, to let's let's use this example. We have a project that we want to knock down some capital. You're like, Hey, I'm going to throw in some money. Me too. Maybe a few of my other buddies. Right? We're going to throw in some money to do a deal. Side-by-side what are the differences between the LLC over here and the SPV over here? 


 Jeremy
 Structurally nothing, you both go to Delaware, you both felt the exact same form. You both get a registered agent. Everything looks identical. It's really after that, how you use it, why you use it becomes different in how and why you use it ends up manifesting itself through documentation. If you're going to set up an operating business, you're going to open a hair, salon your documentation around that. It's going to be very different than the documentation around. We're going to do a project. We're going to throw in a few dollars. We're going to buy a real estate piece of property. 


 Josh
 Okay. Why in the world did you like how big of a need is this to be, to become the experts in SPVs? Like what, how did you know that, Hey, there's enough need out there that I'll build a business around that, like walk us through how that ha how that came to be. 


 Jeremy
 Why didn't actually know there would be a business there kind of fell into it. So my background is lawyer MBA. Here in the state of Utah, they ran a program good. 15 years ago called the Utah fund of funds. It had an economic development aspect and I was hired to launch it and run it. So I got exposure to it. I had this unique background of deep private equity, venture, capital experience, lawyer, MBA. I was out there trying to grow my own business after leaving Utah fund to funds. I got a phone call from angel list and Angela says, Hey, do you guys know, how can you figure out how to do funds in bulk? At that time, SPVs and syndicators and SPEs and rolling fund, like all these terms that we hear weren't invented yet, angel says, can you do funds in bulk? That's because if you step back and SPV looks a lot like, and functions almost exactly like a venture fund and have another kind of side-by-side interesting comparison. 


 Jeremy
 I said, yes, I wasn't exactly sure what I was saying yes to, but I was interested in growing my business and I just thought, it'd be like, maybe there's a little revenue here. Right. A little side project, little side hack going on. So AngelList send us a few deals. My co-founder who was my wife, I did kind of the legal, the sales, the structuring stuff. She did all the organizational marketing, finance stuff. And, and Angeles started off. We started doing SPVs and like the very next week got a phone call from SeedInvest. They're like, Hey, can you do that for us? And the phone just started ringing. We just like, oh, this is kind of cute and fun. A little extra revenue, maybe it's a little bigger than we thought. It actually wasn't until 18 months later that my co-founder and I just looked at each other and just said, there's something here, there there's a need here that we didn't realize and understand. 


 Jeremy
 The way I kind of described that need is affordable structured vehicle services. 


 Josh
 Yeah. Cause in the way of the past, right before angel list the team over at AngelList, reach out to you, how worth, how were things done in the past when it came to, funds in bulk or, Hey, we have all these investors and they want to get together and they want to do a deal, but man, it's complicated, right? Like how are things done in the past? 


 Jeremy
 In the past you would go out and you would have to build all of your services by yourself. You would go hire a law firm. When you hired that law firm, you would spend 30,000 to 150,000 just on the documents that you would need to do this special purpose vehicle. You would need to hire accounting. You need to hire a tax firm. Tax firms would be charging you anywhere from a thousand to $10,000 per year per entity. You start putting all this money on the table and you're looking at 300,000 just to do the, get a close. You're looking at 300,000, kind of an ongoing administration costs. You're looking at saying, if I don't raise $3 million or more, this makes no sense. It makes no sense. Right. So do you look at that? You say, who wants to, who does $3 million SPV deals? 


 Jeremy
 Well, there's some people out there and it's real estate deals and stuff like that. When you come down into the startup land, you may be raising a hundred thousand dollars total and you can't spend 300,000, obviously, you don't have the a hundred thousand dollars left because you've spent it all on fees. And so there was no one-stop shop. There was nobody that pulled all those things together. In addition to that, there was complexities like, do I need to do a security filing? Do I need to do taxes? Do I, what do If a document comes in, do I sign it? Do I don't do I need to be registered? All of these kind of scary ish questions, we've got the IRS, the sec, the state of Delaware, your home state, all these kind of government agencies that are going to call you, send you letters. 


 Jeremy
 You're like, I don't want to step into this. This is, this is a little too much for me. And so everyone, nobody did it. Just, it just wasn't a thing. Yeah. 


 Josh
 Yeah. Yeah. Because I mean, if it costs me 300 to raise a hundred, it doesn't really make sense unless you're maybe in silicone valley, you know that, you know, some of the deals that they work on out there make absolutely no sense to me. We're learning this, like this world of capital raising, unless it's like, unless it's a certain value investment bankers, aren't gonna help you raise the capital or groups are. There was a threshold and you said maybe the 3 million mark. 


 Jeremy
 Was minimum. Okay. 


 Josh
 Anything under that, you just had to go to grandma and ask her for money or go try to borrow money for a banker SBA or try to figure it out on your own. There was a lot of missed opportunity in that little bucket under there. Right? 


 Jeremy
 Right. Absolutely. That that's the structuring side. The flip side though, is who can invest in a $3 million deal like you're going to right. I'm raising three or five or 10 or 50 or a hundred million to do a project. Well, I don't know about you, but I am an accredited investor, but I don't have a hundred thousand dollars laying around to do one deal. I may have a hundred thousand dollars to do 30 deals. The minimum check size in a $3 million or a $10 million deal is a hundred thousand, 200,300,000 minimum check size on a hundred thousand dollars deal is five grand, 2,500. Not only was there keeping deal makers out, syndicators, people that do the deals, they just, they couldn't figure it out. They didn't want to figure it out. You had to raise so much money. It also kept the investors out. 


 Jeremy
 Those people that only had five grand to invest or 10 grand tuning to invest. They were out too, because minimums were so high. 


 Josh
 The SPV opened up the, the bucket of capital because let's just say, you and I have 100 grand each to invest, but I don't want to put it all. This is a, I'm going to go a little risky in the startup world, but I want to diversify my risk and maybe do 10 investments, right. Or 20 investments. The SPVs were a gateway that allowed a credit investors to make these kinds of diversified risk through. Now, does that mean that they had to do like 20 different SPVs? Or could they put it in one SPV and the SPV could do investments? How does that work? 


 Jeremy
 Yeah. There's multiple structures that goes back to the deal organizer, the syndicator, right? The syndicator going to do an SPV, which we, which you described as a multi-asset SPV. So I set up one SPB. I'm going to put in five assets. As soon as you start complexity, it will start. As soon as you start adding complexity cost goes up. So sure. We start adding in costs. Like you want to assets, a little extra, you want three assets, a little extra. That's just because on the backside taxes, distribution, admin, all multiply every time you add another asset. Many times it's cheaper to go single assets, single asset than it is to go one SPV, stick in 10, one SPV, stick in 10. Ultimately how much are you gonna raise? What are the assets? What is your investor base look like? All of these are decisions for a deal organizer to make today. 


 Jeremy
 The products are out there, single asset multi-asset micro VC fund, where 15 years ago, it was a very expensive single asset SPV or a very expensive venture capital private equity fund. Those were your two options. 


 Josh
 Since your inception, so you and your co-founder AKA your wife, right? You guys are building this and 18 months later, you're like, wow, this is actually a real business here because in the meantime you were doing other deals, you were a lawyer fund to funds. You were doing other stuff. At one point you had to go, do we turn this into an actual business? Now, what did the conversations around the dinner table look like there? 


 Jeremy
 Yeah. We just were going along thinking, maybe there's a little lecture revenue, maybe there's a lecture revenue, but the business continued to double like just every kind of quarter. If five phone calls came in and one quarter 10, the next then 20 number of deals, we're doubling the number of phone calls coming in. The other thing was, is weren't really advertising for the business. We kind of had this like a sure general a website up, but are all the entities were assure fund management. It was kind of this kind of subsidiary, long name we set up in order to be sitting on all these documents to do these deals. A sure fund management did not have a website, did not have a LinkedIn profile. Yet it was just doubling every single quarter. Were like, there's something here and we should drop all these other things and just kind of go in. 


 Jeremy
 Yeah. Some level you build a business, gets a little scary or I do, we do. We dump these clients, we're making revenue on, do we stop advertising for these other products kind of fingers crossed, but obviously all the signals were there to say, you should double down on this. 


 Josh
 Yeah. When it comes to focus, right. You guys, holy moly, this thing keeps doubling, let's see where we can take this. You said you had to start saying no to things or saying goodbye to things. What was the hardest thing to start saying no or goodbye to, yeah, obviously you can't do, client names and such like that. Like, what was the thing that you were like, you held on the longest too, and then you have to pull the trigger. Yeah, 


 Jeremy
 That's a good question. One of the businesses that we had that was something that I created and was working closely with the clients is it was an outsourced fundraising service for like venture capitalists. Basically, when you fundraise anybody that fundraises, there's all this interaction, all this followup, all this documentation. For many fundraisers, they really hate it and they want to do it as little as possible. If you're going to be a good fundraiser, be it syndication or like venture private equity fund, you need to do it all the time, year round all the time. The very best did it year round as our service, wasn't let us help you. Like what kind of do those edge things that you don't like to do and follow up and aggregate stuff into a database. Right. It's very involved and these clients were using us to help them fundraise, which is the bloodline for their businesses. 


 Jeremy
 I just knew that couldn't keep doing that one. Calling the clients was the first time ever, just to call a client, say I'm no longer providing this service, which is a unique thing to do. And, we hear stories of lots of people doing it, but when you actually have to make that phone call, it's a little different than just listening to someone say, yeah, I called them and said, I'm not doing it anymore. You go, oh, that was very smart. When you're on that phone call going, Hey, so-and-so, we've been hanging out for years and we're integrated with you and I'm going to pull the plug on this. Those aren't necessarily comfortable phone calls. 


 Josh
 No, we had to do that recently where we had to call a client and just say, we're doing a pivot in the business. We see the better opportunity over here and the service that were providing, we're no longer doing that. I was so anxious. Like, I mean, I've done a lot of deals in my life. I made a lot of, I've had some fun and had a lot of failures, but that was tough for me to do because like I was tied to their business. Like I I've invested in their people and like I, I was anxious about it. Like how walking up to that? What were some of the conversations? Because, there was that last client that you're like, well, we really liked them, but we got to say goodbye. Like, how did that work out? 


 Jeremy
 Yeah. I did have a team member that was really lead on it. I'm like, do you want this business? I knew that the clients really were attached to me as I had the longer experience, it was my product that I came up with. What made it a slightly easier for me was this CLA this employee says, yeah, I'll take the business. I employ with spin out and no longer be out of sure. It kind of gave them of a lighter landing that someone would help wind it down. These personalities that we deal with that assure our investors and GPS and fund managers, they have strong personalities. They have, type a red personalities cause they're out there, eating what they kill and they don't mince words. Right. You, you call them and they're gonna tell you exactly how they feel. So, but yeah, you just have to kind of bite the bullet and just do it. 


 Josh
 Yeah, absolutely. Like I'd be tempted to be like, just send a text message, ? Like you gotta, sometimes you just got to face the music and be like, man, we're moving on, dude. Well, cool. All right. You, you talked about like you mentioned some acronyms and some different players in the game that are involved in an SPV, right? Who, if you had to build out like the, the people involved in an SPV, what does that look like? Yeah. 


 Jeremy
 You have the deal organizer, syndicator, that's kind of the client of assure that may be a listener here on this podcast who finds the deal, finds the investor. Then you have investors, right? Those people that want to participate in addition to two other investors into that deal. That's kind of like, step one, right? Like, are we going to do this? Do I have an asset, an opportunity that's interesting for other people. Once those two parties connect and are in agreement, now we get into the structure. Here in America, structures are state by state, Utah, Nevada, California, Colorado, Delaware, New York, right? You pick, you pick a state, but you don't have to live in that state. You can kind of borrow any state. You want structure, Delaware's considered the best, a little, it's reputation, kind of a great marketing campaign on their side, but everyone's really comfortable with it. 


 Jeremy
 Most people just go to Delaware, sign up, they take fax still. You fax in your paperwork and they will fax back or email your receipt if you will. That's one thing is like getting your structure that state-based once. For there, you're kind of done unless you raise money. If you're going to do a capital raising SPV now, other agencies and other groups start to be interested in that every state that one of your investor comes from each state feels responsible for their citizens. They will perk up and be like, did you just call one of my citizens and ask them for money? Right? So like, are you, is this appropriate? Are you, are you licensed? Or was this person an accredited investor? Everybody that puts money into a capital raising SPV should be accredited, which is kind of a wealth standard. You make a bunch of money or you have a bunch of money, again, 300,000, a million dollars, kind of these, a certain numbers of they have is the standards for the requirement to be an accredited investor. 


 Jeremy
 States are mostly concerned about don't sell it to grandma who may only have 50,000 a year on a fixed income. Each state agency is kind of leaning forward that you need to be careful about. And then you've got your federal agency. The sec in Washington, DC, they want you to tell them if you have raised money, it's just a, a simple reporting. There's really just like, raise your hand. Hey, I did this. I just want you to fill out some paperwork and tell them, and then there's the IRS, which is, if you raise money now you've got it. You've got an entity, right? So we did that structure. Because you did that structure, taxable events are happening inside. So the IRS now is leaning forward. Say, I want you to tell me about what you're doing, how much you raised, and they're really interested on income, right? 


 Jeremy
 If you made the investment and it all goes south and no one made any money, the IRS, and I was like, okay, walking away here. If you make money, get dividends, you've got money coming in. You have a great exit now, they want their piece of that. They want you to report on that. Those are, mostly the, the groups that are kind of government, if you will, that are going to lean forward when you do a capital raising SPV. 


 Josh
 Got it. So, kind of a state by state situation, right? How in the world, right. Let's just say, I'm a deal organizer. I'm like, I want to Jeremy, I want to start a SPV one, raise a couple hundred grand. Cause there's a cool project that I want to invest in and that other people want to invest in to listen. I'm not a, you know, series seven. I'm not an investment banker. I don't, I'm not licensed with FINRA or sec, how in the world do we make this work? Like, I'm sure you get asked that kind of question every single day of your life. 


 Jeremy
 Yeah. So that's another group, I suppose. I didn't mention it does. It is the sec or FINRA rights, kind of the securities and exchange agencies. They want to make sure that people aren't breaking their rules when it comes to raising money. For the most part, people think like if I raise $1, I've kind of stepped into this regulatory regulated world. That's not necessarily the case kind of going back to the earlier part of the podcast when were talking about what the environment was like before SPVs, because every SPV or fun was of a certain size. Everybody was living on this side of the line, which was regulatory line. Nobody was raising a hundred thousand dollar SPV. No one was really exploring the regulatory requirements for a very small single asset SPVs. The mindset has always been, you raise money, you gotta be, regulated with FINRA on all this stuff. 


 Jeremy
 That really was the case back in the day because everybody was raising lots of money. If you're raising, so it is state by state. Just to step back the federal government, the sec steps in when money gets big, 150 million, a hundred million, when you get big, the sec is like, now I'm interested. I don't want to get out of bed for a hundred thousand dollars SVB. We'll let the states regulate between zero and a hundred million. Let's say so, if you're down here doing a couple of hundred thousand dollar SPV, you go to the state that you reside in. Not Delaware, but where you live and you figure out, Hey, am I allowed to do this? Basically nearly every state will have some exemption and exclusion that allows you to behave within rules without being registered for not very much money. Let's say 25 million or less 10 million or less 15 million or less, or it could be, 10 deals a year. 


 Jeremy
 Every state's different, but you can kind of get a theme or a thread through all of 'em that says, if you're going to do a few SPVs few hundred thousand and everybody's accredited, don't bother us. They're kind of, I don't get out of bed either until you're at 15 million or 25 million. There's this white space forever for nearly everybody against state, by state to do some SPVs without stepping into that regulatory world. 


 Josh
 What's what's. We talk about, it's the tipping point where it's like, oh man, maybe SPV makes sense because investment bankers aren't paying attention to these smaller deals, right? It's it doesn't incentivize them that much. You're starting to see, these smaller deals like get really good interest and traction. What's the floor where you're like, what, it's probably not enough money to justify the cost and the amount of work needed for an SPV. 


 Jeremy
 Yeah. So that's kind of twofold. One is how much does a shirt charge? Right? If we charge a hundred thousand and you've got a different floor than a for sure charges, five grand. Out of share with our technology platform, people click a few buttons and all these things happen, right? Entities and EIN numbers and bank accounts. People can run SPVs on their own by using software, but we still do taxes. We do assistance. We do KYC checks or we're there to help along the way. We charge ourselves software fee, if you will. Plus our administration fee, we have different fee structure. One of our lowest fees is about $4,500 for a small $50,000 SPV. For us, we have some fee arrangements and products that we hope that allow people to do really small deals. That's one of the things we like to give back to the ecosystem. 


 Jeremy
 The other side is you as a deal organizer and your investors. If you, as a deal, organizers say, I don't feel comfortable. Anything less than 1% of the raise going to service providers or the technology that we use, maybe you say 5% is of sufficient. Maybe you say 10% is sufficient. So that's kind of a personal decision. I've had people say, assurance fee is too high for a million dollar raise, which I scratch my head. I have people say, your fee is perfect for a hundred thousand dollars raise. It's really kind of a personal decision and a relationship you have with your investors of how much of their money, or maybe you pull that out of your own pocket, goes to fund administration, professional services around your SPV. We're seeing SPVs a as small as 20, 30,000 on our platform and as high as hundreds of millions of dollars. 


 Josh
 Cool. Since your inception around what date was it? Okay. 


 Jeremy
 Angel is called, was July of 2013, 


 Josh
 How many SPVs have you guys run since then? 


 Jeremy
 We've run around 9,000 SPDs, 


 Josh
 9,000 SPVs. Awesome. If we equated a dollar value to that, because you guys have to track that kind of stuff, like w w what kind of volume have you guys done over 9,000 SPVs. 


 Jeremy
 Or AUM is over 11 billion, 


 Josh
 11 bill. What keeps you up at night? 11 billion things, right? Holy moly, 


 Jeremy
 What keeps us up at night, software breaking, wanting people to have that smooth experience, investors, not having a good experience. Those are kind of the, the light things. The things that keep you up is lawsuits, or like allowing a KYC, AML check wasn't successful. You've got, you got dirty money and do an SPV. The sec calls right now, big regulatory stuff is the scarier as a scarier things. It, it's not, it's possible, but not probable because of everything we put into it. And, and the systems that we have built, but it is still, it is, it is possible. 


 Josh
 Yeah. You do anything 9,000 times, things you're going to learn. You're going to learn a few thousand ways not to do something, right. Let's, let's talk about the dirty money topic, right? A investor goes to make an investment, that you have to do a check to see, are you accredited, not accredited? Like, all right. There's certain things that we're going to involve right off the bat. Do you guys bundle that in with your service and how do you guys approach that? 


 Jeremy
 Yeah. It's in the software. People will, so there's two ways to do accreditation. There's a 5 0 6 B, which is self verification, which means we get the, we get to trust the investor. If you, as a deal organizer, absolutely. No, somebody is not accredited. You choose to look the other way, then you're, you can be in trouble for doing that, but you get the chance to trust your investor. If it's a 5 0 6 C offering, people have to prove that they're accredited and that's built into the system, as well as people show a tax return or a bank statement or something like that. That's, that's creditation, people need to self verify or prove that they're accredited and that's built inside the software. 


 Josh
 All right. I'm running, let's just say a $10 million SPV. I've been doing really good, but we found out that there was a non-accredited investor who, put in a hundred K what happens then? Because this is now an issue, especially we're about to deploy money, but we got a little notification, Hey, by the way, Josh is not, or Josh is whatever the case may be like, what, how do you approach that? 


 Jeremy
 If the deal hasn't closed yet, then that's much simpler. You basically, in the software, you can basically just cancel return. Their money goes back to their bank account. They're out of the deal. You know? On the software side, simple, you may need to have a phone call, which may be harder to, to deal with. If the deal is already closed, then you need to basically buy out their position. Either you need a, you need to find someone say, I need to a hundred thousand, I need a hundred thousand from somewhere to buy Josh out. 


 Josh
 Wow. That's super cool. So, since you guys have started this, what has been the biggest advancement in the world of SPVs that you guys have seen, whether it's technology or a law or something? What is the biggest like we did it like it was a wind. 


 Jeremy
 I think there's a number of smaller ones, but I will say that the biggest win is the, I guess, the progression or attitude change or the knowledge transfer to just everyday accredited investors. We started with SPVs, it was seasoned investors, institutional investors. The new group of investors who now could write a check where before, like we said, a a hundred thousand million dollar minimums now people can buy, write a thousand dollar check. So, so the fact that they were coming along and loving it and learning it and experiencing it was the biggest innovation. There's some examples where, when we first started, everyone filled out their paperwork by hand, they wrote it out and then they would mail us a check. Just, that kind of sounds kind of funny, but on the administration side, were trying to read people's handwriting. This is important stuff. Like we're doing taxes on this stuff, we're doing security filing. 


 Jeremy
 Cause they're like, we need to know what is your name? Like, I need to be able to read it and, weird, like call people. Like, I can't read your handwriting. They were typing it into spreadsheets and then into like databases and stuff like that. We're sending their taxes to them and the information's wrong. Now they're like, you guys are clowns. Like you don't even, you got my stuff all wrong. It's like, well, we're not really clowned. We did get it wrong, but it's cause I was trying to read your handwriting and stuff like that. Today people just, they don't even think about it. They just click. Right. And they just, it just happens. The other one is banking. When we first got started, everyone wanted to know what bank it was like, I'm not sending my money to any like Tennessee Backwoods bank. Like I it's gotta be Wells Fargo or chase that's it. 


 Jeremy
 Those are the two that I'll, send my money to. And, and I had to walk into the bank every day and set up a new bank account or do the wires. Yeah. Today nobody asks what the bank is, where it is. It's just in the system, they just click a button. They linked their bank. Accounts, money gets kind of sucked out of their account. I had a funny conversation with someone who's like, your system is too fast. It actually creeps me out because before the old way I'd have to walk to the bank. I would actually take a couple of weeks as part of my due diligence process to think about it. I, I signed the docs, but I I'm still holding onto my money and I'll do that next week. I'm kind of continuing to think about it. He goes, I went onto your platform. 


 Jeremy
 I signed in and the money got sucked out of my account within like 30 seconds. He's like, he's like my whole process has been destroyed. Now I have to like mentally be ready for it before I even like log in. Those are the advancements just really are the people's mindset around. Let's do SPVs. Let's invest in private assets. I can do this with small checks. Is, is the large advancement that I've seen. 


 Josh
 Yeah. That's super cool. Yeah. I promise you Jeremy, if I sent you my handwriting, there's no way you'd be able to read it. It's like terrible. Like I could only imagine getting 9,000 pieces of paper with Josh's hand-write and trying to figure that crap out. Austin technology has definitely increased the velocity and speed of deals, right? For you guys, like the guy picked, send, and holy moly, I'm in the deal now, right? Like that quick in your, in your vision of where things are going, what do you see happening in the future with SPVs, with investing in business, start ups, private businesses. What are, what are your thoughts? 


 Jeremy
 We have a phrase here is SPVs are gonna eat the world. What we mean by that is that investors love SPVs. The reason that investors love SPVs is it, they get to be a participant in building their own portfolio. It's a lot like logging into your Schwab or E-Trade account. And I'm going to pick apple. I'm going to pick Microsoft. I'm going to pick, some other company that I think is awesome SPVs or the same thing. I'm going to pick, space X, I'm going to pick this great startup down the street. I want to get some secondaries over here. I want to do some real estate getting to build your own private asset transaction, portfolio and diversify it. That's what people like, and I know that people say, well, you're not as experienced as me and you should just give me money and I'll make all these investment decisions, like a mutual fund. 


 Jeremy
 There's some legitimacy to that. The fact of the matter is investors say, well, how am I ever going to learn? If I just keep giving you a hundred thousand dollars checks, I need to wait in and start picking. So, because of that, we believe that SPBs are just going to be ubiquitous. They're going to just be everywhere. As we build the technology and make it easier and easier, it's just on your phone. Like Robin hood is like, Hey, you guys want to do a deal? Sure. Josh, why don't you lead it? Right. Click. Okay, guys, within five minutes deals up monies in, you guys are onto. 


 Josh
 Deal-making. 


 Jeremy
 Yeah. Next deal. Next conversation. Next round, whatever it is. 


 Josh
 Do you think, so this model, do you think that this will create a SPV secondary market where it's just like, . Maybe not good at choosing, but I'm really good at managing and growing. Do you think you'll see that? 


 Jeremy
 Absolutely. There's a number of groups kind of really flirting with that, but we have plans to have that in our platform in the next couple of years where you can then trade those interests inside SPVs. Like I did a thousand dollars over here. I'll, I'll pay 2000 for Josh. Sounds good. Know, I'll take it. Right. You swap out and someone else swaps in there's regulatory stuff. Right. There's there's, it's not that simple. We, we can come up with great ideas that the IRS and the sec don't, they haven't contemplated and don't really support. We have to work on that type of stuff. But yes, absolutely. There, there already is a secondary market. We get, we get the benefit of just at the end of the year, people saying, oh, we traded everything. Like we did all this activity and we're like, okay, here we go. 


 Jeremy
 Let's figure this out. It's already happening kind of behind the scenes and to have it more formalized in a platform is forthcoming. Yeah. 


 Josh
 I'm sure that there's some states that are really pro investor really pro startup really pro business. There's some states that are probably pretty damn difficult to do deals with. Now, when in your experience with SPVs and such like that, what are some of the ones that are like, Hey, these are really like business friendly investor friendly states that make the process pretty smooth for let's just say a million dollar deal. What, what have you seen in your experience? 


 Jeremy
 Yeah. On that question, I really focus in on that FINRA regulatory world, because doing deals, there's really no bad state for investors. Like investors can invest their money into private assets if you're accredited and in, you're not, a bad actor and been sanctioned by FINRA for some bad act in the past, the states don't stop you from taking your own personal money and going into SPV. It's really about the organizer, the syndicator, there are certain states that are, make it super easy to say, it's hard for you to cross this line and have to become registered until you hit that hundred million federal number. We're not going to mess with you. I'd say Nevada is the very best in the state. They have the best kind of state-based regulatory environment. California is really good as well. One of those rare things, of course, if you're in California, they're going to tax you to death, but they make it really easy for you to deals and be, on to, to be in the regulatory framework correctly. 


 Jeremy
 Other states, I mean, New York has a really great structure for zero to 25. It gets really weird and hard until you hit a hundred million. So, every state's got a different, and that's where I would hope to see growth in the future is both kind of the accredited investor definition. More people could be considered accredited and then it'd be nice for states or I don't know, the federal government to kind of step in and say, if you behave this way, you only have to fill out this paperwork and blah, blah. That allows this to be less, every state's different. I have to figure out my local rules and regulation. 


 Josh
 Okay. Super cool. So I'm a deal organizer. I'm going to syndicate a deal like when I'm walking into the deal, I do have to say it's a single asset deal. Right? Cause there's different structures and such like that. Let's say I'm doing a single asset deal. Do I have to set what the amount of the project will be? Or can it flux up? Like if I'm like, I'm only going to do a million and then, at 1.5 came my way, do I have to say no to 0.5? Or can I let it, let it go where it goes? 


 Jeremy
 No, not from our side. We basically do flat fee pricing, a million raise to a $10 million raise. You're going to pay the same amount of money on those deals. Does it, doesn't affect us at all. Work that happens on a sure side would be the number of investors. If if you go over a certain number of investors now I want to charge you more because now I got to do that many more K one, then not many more distributions and that many more membership transfers, but AUM for us doesn't matter. 


 Josh
 Okay. The deal organizer am I allowed to, so let's just say, there's a deal organizers who's not accredited, are they allowed to participate in the fund as the, or the SPV not fund as the operator, like the one who puts the deal together, syndicates the deal and runs the deal. 


 Jeremy
 Yeah. That's one of the cool things is you do not need to be accredited to be a deal organizer. 


 Josh
 Cool. Can they get paid and compensated for their work within the SPV and what can they not do? 


 Jeremy
 Yeah. Everyone needs to be careful around that compensation piece. That's another one of those things where FINRA and the sec and the state regulators lean forward is around this compensation. You'd most definitely can take carry. That is, that is a form of compensation, but industry standard by far. Yes. We do see a no large number of our clients taking a small management fee. It tends to be kind of a one-time at close. So 5% raise. If you raise a million dollars, I'm going to take 5% of it for my efforts. Plus 20% carry. If the deal closes, plus we're gonna need to pay a sure, 10, $15,000 one time for their service. Yes, you can take a management fee. You can take carry, even if you're not accredited. 


 Josh
 Okay. For, there's a lot of work being done in the capital space, right? There's the sec has a finder designation. They have investment banker capital acquisition broker. They have a finder, right. Some states go, Hey, like the state of Florida, I'm sorry. Sec might say you're allowed to be a finder. State of Florida says, no, you're not allowed to be a finder, but let's just say I have a large network. I'm great at putting deals together. I have a, I do a bunch of real estate deals and here we found one. An SPV can give a deal-maker a, another vehicle essentially, to do more deals. Right. 


 Jeremy
 W. 


 Josh
 W what advice do you have for the syndicators out there? We've interviewed a lot of cap razors and, deal originators and such, like, what advice do you have for us, or some guidance to make sure that we stay based on the 9,000 deals that you've done, like stay in the right, right. Stay in the right zone. What's some, what's some things that we should focus on. 


 Jeremy
 Yeah. Where we find people that get in trouble or start crossing lines, get into gray areas. When they're overly concerned about immediate compensation. If you're playing for Carey, we don't see people getting into trouble. They, they, their interests are aligned. Investors, get it, everyone gets it, but that we're putting together an SPV. We're all gonna win it on the back end. If you do try to get some compensation upfront, make it modest, make it reasonable. Take one time at close, not annually ongoing. That's where again, you want to perk up the ears of regulators, take lots of money, take annual money, take percentage of money. That's where people will start to kind of ask questions. Always just accredited investors. Never don't ever take money from non accredit investors. I've heard all the arguments just don't do it. 


 Josh
 Yeah. So there's crowdfunding, right? Someone who's going to raise 300 grand, they might explore crowdfunding, right. Going to the open market. Non-accredited investors, let's get five bucks from a million people, right. Versus, you know, over here at SPV. The founder of the organizations exploring which route to go to help raise, 


 Jeremy
 And they can go both, right. They can go to a crowdfunding platform and they can do an SPV through you as an organizer. Crowdfunding continues to come up as a topic. I think it's a great topic to talk about, but you're required to have an, a FINRA approved platform. Yeah. Do it. You, so just you and I saying, Hey, we syndicate all the time without a platform where you just, you can't just do a crowdfunding deal that you have to walk through this process, almost like becoming a broker dealer. If you will, to then be authorized to do crowdfunding raises for people. 


 Josh
 We've, we've explored opening in our own platform and going down that route, we decided heavily against it. There's some people doing a great and good for them. For us, were like, man, this is brutal. The financial model for that is, is challenging. Some people are doing it really well. We couldn't, we wouldn't have the economies of scale to be able to do that. That's, I think that it's saying is, don't take money from non-accredited. I think that's a, a good piece of advice that I've heard myself. Do you want to talk, I'll give you the fork in the road. You get to choose the direction we go. Do you want to talk about the accreditation status and why, like the history of it or why it's there and, maybe the good things that happened because of it, and maybe the challenges that might need to be addressed. 


 Josh
 That's a topic we could go, or we could go into the topic of, what the blockchain and the crypto and where that's going to go in the world of clicking a button and starting an SPV. Like you choose your path. 


 Jeremy
 Yeah. History or the future. 


 Josh
 You got it. Nice. I did that accidentally. 


 Jeremy
 Well, let's go blockchain, just because I think it's a little more fun. 


 Josh
 Cool. All right. Already, right now, through a shirt, people aren't faxing stuff with you with, chicken scratch, hieroglyphics on it that you have to interpret and hopefully get it right. Now you guys have become the world renowned SPV leader, the experts in the industry for, for doing this for angel list and all these other platforms. SeedInvest awesome job. How is blockchain and crypto NFTs and in this world of digital currencies and stuff that I fully don't understand, how is this gonna affect the future of investing? 


 Jeremy
 Yeah. It's kinda one of those things about GP up at night. That blockchain thing is really something that I wonder if it's complete disruption of our business and a lot of other businesses, some of our clients that do web three, basically describe, the internet as the information revolution and web three or blockchain is the banking or finance or funding revolution to the world. I think blockchain is going to be a big player in the future. I don't know if that's next year and in five years, but the fact that you could eventually do a couple things. One is kind of used as a universal identity. I'm not like doing identity checks and KYC with every platform. Every time that there's some linkage between this is who I am, and I just have to put in a code or scan my face or put on my thumb on my phone or something. 


 Jeremy
 And it just immediately identifies you. I think that is impactful for speed, for safety, for all of us that are trying to live within the rules, be within the lines, take appropriate money and we can feel safer. Otherwise, there's this kind of this fear of did I do it right? Did I do enough? Am I going to get tagged because some money slipped through. I think there's some safety and excitement there Movement of money is pretty exciting because as someone that's been working with banks say, they're the worst. They're the worst to work with the. 


 Josh
 Worst, with money, 


 Jeremy
 They're the worst. And, I know that they're really heavily regulated and it's not so much what they want, but it is what's being imposed upon them to be able to like, just have crypto or, fiance or whatever, and just be able to push buttons and convert and move and just do things really smoothly. Instead of this, I have to have this formal bank account. I have to like type in my numbers and log in. That would be amazing too. All this increases speed, which is what people want as well, increases smoothness. And, and so we're seeing some companies pop up that have some of those features of invest with whatever you have and we converted automatically and stuff. And so that's really cool. The third thing about blockchain that we're seeing that we're starting to see some companies come out with is to kind of digitize an SPV and put the membership interests up on the blockchain. 


 Jeremy
 And that allows for trading. 


 Josh
 Liquidity, secondary market. Yeah. The liquidity that's. 


 Jeremy
 I think that the regulators are going to step in, like, they're always got a five years behind, I think that's going to happen. I think they're going to step in and really shut it down or regulate it. What we've seen with innovation is they don't really shut it all the way down. They may come in and slow it down, but there'll be some real benefits from that. Those are the things that we're seeing in the next three years. We'll see, coming as part of, kind of the deal-making ecosystem. 


 Josh
 It's exciting. It's a little scary, right? It's like, it's so like, there's so many cool things that could come from this. It can also flip on the other direction where it's, legislation comes in and it crushes deals, or it makes it so difficult. Nobody could do a deal. Let me ask this question. You're a deal guy. Right? You're, you've seen 9,000 deals come across the table for these SPVs. Like how in the world do you like put guard rails up to make sure you don't get inside every single deal and like, oh, I'll invest in that. And like, invest in that. Like, how do you protect yourself from going investor, crazy. But then these, 


 Jeremy
 Yeah, we I've, I've set a policy that we just really don't mix business with pleasure because for us in finding investors is so hard, it's very, very difficult. Maybe the hardest thing to do when it comes to investing, finding deals is hard, but finding investors tend to be even harder. If I step into like one of my clients, like, Hey, can I come into one of your deals now? Now, now they talk and like, oh, Jeremy, he's in my deals. Like, why don't you come in my deal? Like, so we have like a thousand clients and I, I really worry about what you're favoring this client over this client. I'm very quiet about the deals that I do. I don't, I try not to mix that so that I don't get sucked into this. 


 Josh
 Of. 


 Jeremy
 Unsuccessful relationship. 


 Josh
 Yeah. That I would have a challenge in that because I like deals. If I'm seeing all these deals come across the table, I'm like, Ooh, I like that one. This one's interesting. Let me ask you this question without getting too involved, or maybe even throwing some money at it. What is, what are some deals that you have seen? You're like, man, those are my favorite. Those deals like tuned me up. Like I really like to see, I like being involved in them or I like seeing them happen. 


 Jeremy
 Yeah. So we have so many deals happening. It's very difficult for us. It's almost like a ticker tape that they come across so quickly now. So when we first started sure. I saw every single one and I like to go look them up and I'd be like, oh, that is really cool. And that's interesting. Even today I can remember a large number of them, but when went from kind of eight per month to 150 per month, it's it just, it's now white noise almost across the line. I'll talk to some of the team members, he'll be like, I just looked up this deal. That was really interesting. I'm like, I remember those days when I used to look up all the deals and like, w I get no work done. If I, if I sat there and looked up everybody's deals. What I, what I find interesting today though now is to watch the organizers of the syndicators and their success, because I'm seeing their exits on the back side and seeing where they placed money. 


 Jeremy
 What's most interesting today is watching the crypto deals that happened in 2018 exit. Some of them are massive and those are really fun for us to look at and kind of watch the money go out the door. 


 Josh
 Yeah. Let me ask these questions, personal question. I grabbed her phone and I scrolled through your songs that you played over the past 10 years, right? Let's just say you've never updated to the apple 2000, whatever. Right. You have the original, what song is the most played on your playlist. 


 Jeremy
 Songs? Most play on my playlist. That's a tough one. I get tired of songs. I binge them. I get rid of them. I'll, I'll go with, I have four kids, we kind of share the Spotify account. We get in the car, they grabbed the phone, they did a, I'm going to say that the, the band I've listened to the most over the last 10 years is one direction. 


 Josh
 Can you do the dances? Like they do. You got all the songs that, okay. Got it. All right. What does, what was the first major hire that pivoted the business forward? Like, you're like, okay, we're doing this 18 months later. We're like, wow, we have a business doubling every quarter. Like, what was the first strategic hire that you're like, and you don't have to name the person's name, but like position or function that like, you're like, we accelerated traction because of it. 


 Jeremy
 I would say there's probably three. The first one was my very first intern that turned into a hire in that he was a recent college law school grad. When you do SPVs, it's very legal, it's legal entities. It's legal structures. It's legal documents. It's sec. Right. It's all legal. And, and he was someone that came in and really brought quality and attention to detail. So I'm not a detailed guy. I don't like to write detailed letters. I don't like to do detailed processing. That's what a co-founder Katie does really well. He came in with that legal mindset and he, I'd say, let's just write a letter and do one line and he would do the header and the full legal and like, just make it look perfect. Like, like we're a real thing. He made it look amazing. He came in and brought in that the other two would be technology, just building the right tech with the right team is very difficult. 


 Jeremy
 And it's, it's so hard. Taxes tax is such a big part of SPVs is having the right tax person. Even though I got that first legal hire right enough, because I'm a lawyer. I, I knew exactly there, the tech took a couple of hires before I got that really good one. The tax took two or three hires before I got that really good one. And, once you get 'em, you're just like, it's like the lights, all the lights go on. And you're just like, I didn't know. It could be so bright in here. So amazing. I got the right person. 


 Josh
 To now. Right. Since you started to now, what are some of the milestones? You mentioned 11 billion in AUM. That's pretty cool. How many employees are, what other metrics can you share with us that you guys are proud of? 


 Jeremy
 A number of deals has always been a big, a big part of it. AUM has been a big part of it. Number of clients, big part of it, revenue, hitting those million, 10 million, $20 million revenue milestones, or our amazing employees. We've been as high as 200 coming down as we build technology, we don't meet as many people. Where people used to do the faxes and read the agreements, right. I don't need as many people to do those things. So, having money come down and today, what we're really focused on is, is gross profit margin. The technology will help us drive that to a very large number. That's the next big milestone that we're focused on. 


 Josh
 How old are you Jeremy? 


 Jeremy
 I am a 48. 


 Josh
 All right. 30 years from now, you'll almost be 80. You and I are sitting on the front porch, on a rocking chair. We're looking back at, some of our business accomplishments or life accomplishments, and we go, Jeremy, we did it. How do we know we've won? Like, what are some of the things that looking back, you'd be like, I was proud of that. I'm proud of what we did or that, how do you measure success? Essentially, 


 Jeremy
 For me, it would be that the structuring and admin costs and complexity don't stop anybody from doing a deal. I really feel like the minority groups, those that are underserved, there's the ones that get hurt the most by large fees, large regulation. It's almost like a flat tax, which is, if I go out and do a deal, the fees are the same. If it's a $50,000 deal as if it's a $50 million deal by way of like regulatory costs by way of filing with entities, all that stuff we would love at assure to be able to say, it doesn't matter. If you can find three people that love your deal, and you can only raise 10 grand, that you can still do an SPV and allow anybody from anywhere, for whatever cause or interests that they find interesting to them. What's great about the world today. 


 Jeremy
 Social media, these different platforms is there's somebody out there that has passions like yours, right? If you love the environment, there's people that have that passion. If you want to save a unique species in some jungle someplace, there's other people that have that same passion. If you, because of these different networks and the flattening of the world, if you will, through technology, if you find those passions, why not be able to then bring your collective passions if interested money to then move, whatever that passion is forward. For the most part, I mean, you could write thousand dollar checks, but if you wanted to bring in people and aggregate them in some structure, too high, a fees, too bad of technology means you can't do it. The success for us is that it just becomes ubiquitous that when you and others with scent with like-minded passions, want to do something, you can pull that off with a couple clicks on your phone. 


 Josh
 Yeah. When two or more are gathered to do something amazing things happen, right? Like there's this law that happens one plus one equals three. Right. I love the idea of SPVs and I'm really thankful that you clarified and educated me on the power of them. Let's do this Jeremy, if someone's in the audience and they're like, man, I'd really like to learn more and see if SPV is right for me. Where could they go to get more information and maybe do a deal with you? 


 Jeremy
 Yeah. Let's say three different ways. It could be interesting. One, our website assured out CEO, you can email sells at a shirt out CEO and quarterly. We do a, a free virtual two day conference on all things SPVs. You can find that on our website, there banners throughout our different or different properties. You just click sign up for free. We have on demand or live sessions that you can come and really dig into all things. SPVs structures, taxes, post-close activity, exits all those different things that you may be aware of. You want to hear an expert talk about for about 30 minutes. 


 Josh
 Super cool. What questions should I have asked you in this interview that I completely screwed up and did not ask you? 


 Jeremy
 Yeah, I don't think any. I think, I think we're good. I'm, I'm SPV it out. I think we're good. 


 Josh
 I'm tapping out SPV. Awesome. Fellow deal-makers thank you for listening in on this conversation with Jeremy about SPVs and all the opportunity that it could open up for you and your deal as always reach out to our guests. All their contact information will be in the show notes below, reach out to them, say, Hey, heard you on the deal scout. I want to find a way to do a deal with you. If you're working on a deal or looking at a deal, and you want to talk about it here on this podcast, show, head over to the deal. Scout.com. Fill out a quick form. Maybe get you on the show next till then. We'll talk to you all on the next episode. See you guys.