Her CEO Journey™: The Business Finance Podcast for Mission-Driven Women Entrepreneurs

Weekly show where my featured guests and I explore the financial and business challenges women face on the entrepreneurial journey to success. You'll hear them talk about the money side of their businesses in ways you've always wanted to know about, but wouldn't dare ask. They openly share their disappointments, failures, successes, and everything in-between as they grew sales ranging from 6 to 9 figures. Knowing where your business stands financially helps you make critical decisions with confidence. It's simply the best way to be sure you grow a business that fuels the life you want to live.

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episode 118: Using a Special Purpose Vehicle as an Option for Capital Raising - The Journey of Katie Neilson (Alternative Capital Raising Series) [transcript]


As a business owner, you need to raise capital to grow and scale your business. I always believe there are many different ways to raise capital. However, it is easy to get lost because of the various options. If you want to raise capital and get the flexibility to control outcomes, a special purpose vehicle (SPV) may be your answer.

Today on Her CEO Journey, Katie Neilson discusses capital raising using a special purpose vehicle. She helps us understand this investment vehicle and the benefits this presents for founders and investors. Katie also shares some options you can explore if you’re thinking of using SPV to raise capital.

If you are a mission-driven founder who is looking for a different method of raising capital, this episode is for you.

3 reasons why you should listen to the full episode: 

  1. Determine the difference between a special purpose vehicle and venture capital.
  2. Learn how a special purpose vehicle can help founders raise capital.
  3. Find out the benefits of a special purpose vehicle in capital raising.

Episode Highlights

  • [05:47] Katie's Journey in Co-Founding Assure
  • [08:19] Katie and Her Co-Founder's Background
  • [08:57] What Is a Special Purpose Vehicle?
  • [11:50] What Is an Organizer?
  • [12:41] The Difference Between SPV and Venture Capital
  • [15:42] How Assure Managed to Lower the Cost of SPV
  • [18:03] Hybrid Fund: A Combination of SPV and Venture Capital
  • [23:51] The Benefits of Special Purpose Vehicle for Founders
  • [26:32] Preparation for Fundraising
  • [28:34] What Is a Syndication?
  • [30:34] Key Takeaways in Fundraising through SVP
  • [33:00] How to Set Up an SVP or Work with Assure

Enjoyed This Podcast?
Write a review and share this with your friends.

Connect With Me
Ready to transform your purpose into an impactful business financial story, profit, and joy? Schedule a chat with me at any time.

Resources
Visit Christina Sjahli’s website for more stories on entrepreneurial journeys to success on the Her CEO Journey podcast.

  • Episode 117: Thinking of Capital Raising? Address These 5 Business Finance Misconceptions First
  • Download this Action Guide to help you understand the value of an SPV in raising capital.
  • Getting ready for capital raising? Identify your financial gaps first by addressing these five business finance misconceptions. Download this quiz

Interested in setting up an SPV or working with Assure? Check out these options:

  • BoomStartup
  • Assure Syndicates


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 2021-06-03  34m
 
 
00:03  Katie Neilson
There's several
00:03
differences, and one of the
00:05
biggest ones is what we call
00:05
blind pool investing versus deal
00:09
by deal. These funds are blind
00:09
pool investing, which means that
00:15
an investor is handing their
00:15
money to a general partner, GP,
00:21
and that general partner makes
00:21
the decisions of investment, or
00:25
the that fund over time and
00:25
invest into the companies that
00:30
they choose. Now an SPV gives
00:30
flexibility to investors, where
00:36
they can invest deal by deal.
00:40  Christina Sjahli
In 2007, I was
00:40
still this nerdy auditor, and at
00:45
the time, I was performing an
00:45
audit for one of the
00:49
subsidiaries of a well-known
00:49
Japanese company. And that was
00:53
the year I heard about special
00:53
purpose vehicle, or SPV, for the
00:59
first time. Back then, it was a
00:59
complex accounting treatment
01:04
plus long legal documents I had
01:04
to read with much legal jargons
01:09
that hurt my brain. My brain
01:09
almost exploded. Let's just say
01:13
it was days of sleepless nights
01:13
to figure out the best way to
01:17
account and report a special
01:17
purpose vehicle.
01:21
Fast forward a few months ago,
01:21
when I heard there is a special
01:27
purpose vehicle specialist. I
01:27
was intrigued. Even more
01:31
intriguing when I found out
01:31
about forming a special purpose
01:35
vehicle for capital raising. I
01:35
thought, whoa, this must be
01:40
complex. And who is crazy enough
01:40
to specialize in SPV? And, thhat
01:46
was me thinking back to the
01:46
complex accounting treatment, I
01:50
have to figure out in 2007, I
01:50
was curious, what is the benefit
01:55
of SPV? How is this different
01:55
than venture capital? How can
02:00
SPV help the female founders in
02:00
my audience to raise capital?
02:06
Can this provide an easier way
02:06
to capital raising?
02:09
So here we are! To answer my
02:09
curiosity while educating female
02:15
founders about another strategy
02:15
to raise capital, I create this
02:19
Capital Raising Special Purpose
02:19
Vehicle podcast series for you.
02:24
I always believe there is no one
02:24
way fits all in raising capital.
02:28
I want you to understand your
02:28
option, and the best way to
02:32
structure your capital raising.
02:32
In this first episode of the
02:36
podcast series, I speak with
02:36
Katie Neilson, the co-founder
02:41
and chief Revenue Officer of
02:41
Assure, the special purpose
02:44
vehicle specialists. We dive
02:44
into the ins and outs of capital
02:49
raising using special purpose
02:49
vehicle.
02:52
In addition, over the next few
02:52
weeks, you will gain insight
02:56
into the legal side of SPV, the
02:56
organizer perspective, which is
03:01
the matchmaker between the
03:01
investor and founder; and a
03:05
female founder perspective, who
03:05
had successfully raised capital
03:09
through special purpose vehicle
03:09
with Assure. You are listening
03:13
to Her CEO Journey, the business
03:13
finance podcast for mission
03:17
driven women entrepreneurs, I'm
03:17
your host, Christina Sjahli. If
03:22
you are new here, a big warm
03:22
welcome. If we are not connected
03:26
on LinkedIn, please reach out
03:26
and say hi because that's where
03:30
I hang out and share my business
03:30
finance steps. If you have been
03:34
listening to this podcast for a
03:34
while, and you are a regular
03:38
listener, I want you to know I
03:38
appreciate you. My podcast won't
03:43
be around without your support.
03:43
This is a free weekly show where
03:47
my guests and I want to inspires
03:47
you to balance between mission
03:51
and profit, to create an impact
03:51
in this world, and to achieve
03:55
financial equality through your
03:55
business for good.
03:58
It is logical to think that
03:58
raising capital can solve all
04:04
your financial problem. But
04:04
let's challenge that though
04:08
a little bit. Before you rush
04:08
nd decide to raise capit
04:12
l, thinking it is the solution
04:12
to all your cash flow issue. S
04:17
op for a second. Think about
04:17
hy you need this extra cash. If
04:21
ou don't understand why, you
04:21
ay enter into a financing deal t
04:26
at can hurt your business in
04:26
he long run. There are five com
04:30
on business finance misconcepti
04:30
n, and as a founder, the sooner
04:35
ou can clear your headspace f
04:35
om this misconception, the bet
04:38
er you are in building a profita
04:38
le and sustainable purpose dri
04:43
en business. Find out more ab
04:43
ut this five business fina
04:46
ce misconception inside Episode
04:46
17
04:50  at https
//www.christinasjahli.com/herceojourn
04:55
Whatever the next stage is for
04:55
your business, your journey will
04:59
be easier with a robust tailor
04:59
financing strategy behind your
05:03
business plan. And we are here
05:03
to help you combining curiosity
05:08
and financial expertise in a
05:08
judgment-free zone. We are here
05:12
to answer any question you may
05:12
have. We get it. Business
05:16
Finance can be confusing, but it
05:16
doesn't have to be complicated.
05:21
Connect with us at
05:21
christinasjahli.com/let-s-chat.
05:26
Now let's find out Katie's CEO
05:26
journey.
05:30
Katie Neilson, welcome to Her
05:30
CEO Journey. So before we start
05:35
talking about capital raising
05:35
special purpose vehicle or
05:39
capital raising SPV, let's start
05:39
with your journey that led you
05:44
to co found Assure with your
05:44
husband.
05:47  Katie Neilson
Well, thank you
05:47
so much, Christine, for inviting
05:49
me here to speak about SPVs and
05:49
tell you a little bit about
05:53
Assure we got started in 2012,
05:53
and we looked very different
05:58
than we do today. We were doing
05:58
Investor Relations and due
06:03
diligence for the SBA. And then
06:03
in 2013, we received a call from
06:08
AngelList, who is a large
06:08
platform provider. They asked us
06:13
to set up funds in bulk, to
06:13
basically structure and
06:17
administer special purpose
06:17
vehicles on a volume basis. And
06:22
at that point, we were small
06:22
business, still struggling. And
06:26
of course, we said yes, and when
06:26
we headed out to figure it out.
06:30
At first it was a trial basis.
06:30
And then within a couple months,
06:34
they're working well together,
06:34
and we were able to make this
06:37
relationship work. We were able
06:37
to to really see that, after
06:42
AngelList, that we were heading
06:42
in a direction that was new and
06:45
different than the current
06:45
environment.
06:47  Christina Sjahli
When AngelList
06:47
came to you to assure that you
06:53
see an issue in the market that
06:53
you said, hey, you know what,
06:57
let's try this capital raising
06:57
SPV, and see if this is going to
07:03
work. Can you share a little bit
07:03
about that?
07:06  Katie Neilson
See, quickly what
07:06
they needed, which was they
07:09
needed a fast, affordable
07:09
one-stop shop to capital raising
07:16
administration. And we really
07:16
didn't see for about two years
07:21
after that, that that was
07:21
something that was actually
07:23
needed in the ecosystem as well.
07:23
Prior to Assure, to raise an SPV
07:28
was over $100,000. So was very
07:28
exclusive, not a lot of
07:33
accessibility. But what Assure
07:33
provided was a decreased cost
07:38
and the cost to administer these
07:38
funds by 90%. We also were able
07:44
to close these structured
07:44
vehicles within a short amount
07:49
of time. Prior to Assure, it was
07:49
about three plus months. And we
07:54
now average about three weeks to
07:54
close. And then there are
07:59
several different types of
07:59
expertise that you need to
08:02
manage a structured vehicle. And
08:02
we provided all that in house we
08:06
provided the tax the legal
08:06
accounting and compliance and
08:10
administration to really manage
08:10
these vehicles for the lifetime
08:15
of that vehicle.
08:16
So what is your background?
08:19
Well, actually, my background
08:19
was more in operations, my
08:22
co-founders background was in
08:22
the industry. So he was in
08:25
private equity, had managed a
08:25
$300 million fund, funded funds
08:30
for the state of Utah and so he
08:30
had the industry knowledge and
08:34
then I jumped in with him
08:34
whenever we first got s tarted
08:38
because of the operational
08:38
experiences and the two the two
08:41
together have really given us
08:41
the the to grow the business he
08:45
can we can each focus him on
08:45
vision and and strategy and
08:50
myself on the operational
08:50
processes, and and basically the
08:54
the day to day of how to run the
08:54
business.
08:57  Christina Sjahli
So let's go
08:57
back a little bit. Can you share
09:01
what is exactly capital raising SPV?
09:05  Katie Neilson
An SPV is a
09:05
special purpose vehicle. And
09:09
basically what that is, is the
09:09
legal structure that is set up
09:13
for managing an investment into
09:13
an asset, a startup company or
09:19
some type of object that gains
09:19
value. Now, many of your
09:24
listeners are familiar with
09:24
legal structures of businesses
09:28
such as a C Corp, an LLC, a B
09:28
Corp. And what Assure does is,
09:35
this special purpose vehicle is
09:35
basically an LLC, and it gives
09:40
the ability to pull investors
09:40
together into an entity and hold
09:46
all those investors and manage
09:46
those investors into a
09:49
structure. Now every business
09:49
has a structure. They have
09:52
rules, regulations and
09:52
guidelines that govern their
09:55
business. This is the same type
09:55
of thing. It's the rules and
09:58
regulations and guidelines that
09:58
govern that legal entity that is
10:02
used to pull investors together
10:02
to invest into an asset.
10:07  Christina Sjahli
So, if I'm
10:07
thinking about this correct,
10:10
right, so this legal entity will
10:10
have a balance sheet, a profit
10:15
and loss, just a normal
10:15
financial statement. And the
10:18
asset of this entity, are the
10:18
fund being pull from different
10:24
investors. Is that correct?
10:27  Katie Neilson
Actually, it's
10:27
it's more simple than that. An
10:31
SPV has very few transactions,
10:31
the biggest transaction is all
10:37
of the funds coming in from the
10:37
investors, and then that funding
10:41
event of the portfolio company,
10:41
and it hibernates for several
10:46
years until it comes to the end
10:46
of the life of that company. And
10:51
then there is either a
10:51
distribution, or there's some
10:54
type of exit event that, again,
10:54
has another transaction. So
10:59
there is not ongoing
10:59
transactions every year for an
11:02
SPV. It's more simple than that.
11:02
It just has basically a
11:06
transaction a beginning and a
11:06
transaction at the end, at the
11:09
end of that company.
11:11  Christina Sjahli
Can you use
11:11
SPV for both? Or is it
11:15
specifically only for equity
11:15
type capital raising?
11:19  Katie Neilson
Definitely, we
11:19
see that on a daily basis, we
11:22
have all different types of
11:22
different structures, you know
11:26
that convertible notes saves,
11:26
kisses, all different types of
11:30
structure, of equity, and debt
11:30
financing. And so yes, it is
11:35
available for all types.
11:38  Christina Sjahli
Earlier you
11:38
mentioned about organizer. What
11:41
is an organizer? And how does
11:41
this lead into an SPV?
11:49  Katie Neilson
An organizer is
11:49
someone that has the
11:50
relationship of the investors
11:50
and the company or the asset
11:55
that they want to purchase. For
11:55
our benefits, organizer makes
11:59
sure that everybody, that he's
11:59
maintaining the relationship
12:02
with investors as well as the
12:02
relationship with the portfolio
12:05
companzy. And we see that. an
12:05
organizer definitely can be an
12:09
investor as well.
12:10  Christina Sjahli
So when you
12:10
talk about portfolio companies
12:13
over here, to give context to my
12:13
audience, who are founders,
12:17
portfolio means are the
12:17
founder's business, the
12:21
founder's company. The organizer
12:21
is basically collecting all the
12:26
investor that want to invest in
12:26
that founder. Is that correct?
12:31  Katie Neilson
Yes, that is
12:31
correct.
12:32  Christina Sjahli
What is the
12:32
difference, though, between
12:35
capital raising SPV and venture
12:35
capital?
12:39  Katie Neilson
There's several
12:39
differences, and one of the
12:41
biggest ones is what we call
12:41
blind pool investing versus deal
12:45
by deal. These funds are blind
12:45
pool investing, which means that
12:51
an investor is handing their
12:51
money to a general partner, GP,
12:57
and that general partner makes
12:57
the decisions of investment, or
13:01
the that fund over time and
13:01
invest into the companies that
13:06
they choose. Now an SPV gives
13:06
flexibility to investors, where
13:13
they can invest deal by deal.
13:13
They can choose to invest
13:21
Now, typically, whenever you
13:21
have a blind pool investment of
13:21
And the other difference, the
13:21
last difference that I wanted to
13:24
a VC fund, those investors of
13:24
course, are always there, you
13:28
know, are buying into that GP's
13:28
thesis on his fund. So they do
13:33
have the opportunity to of
13:33
course to make the choice. But
13:35
deal by deal investing gives you
13:35
the chance to try out several
13:37
point out is that SPVs can be
13:37
smaller now with Assure versus
13:40
different organizers. Another
13:40
thing is that an SPV fund is
13:45
more simple than a VC fund. I
13:45
think we talked about earlier,
13:50
some of the VC fund structures,
13:50
and VC fund requires more
13:52
previous to about eight years
13:52
ago, the smallest SPV that
13:55
administration on an annual
13:55
basis. SPV funds do not; they
14:00
typically have action and work
14:00
up front and then they hibernate
14:05
over a certain time until
14:05
there's an event.
14:07
Assure has configured is
14:07
$15,000. And prior to Assure,
14:20
the cost was so enormous that
14:20
you would not have been able to
14:36
invest into a company with that
14:36
amount of money, which means
14:51
that this ability to invest
14:51
smaller amounts gives the
15:05
ability for more companies to
15:05
get funding to be able to raise capital.
15:23  Christina Sjahli
So eight years
15:23
ago, you said that if somebody
15:26
wants to create an SPV, it's
15:26
going to cost them $100,000. So
15:31
what exactly the process that
15:31
you guys improve over the years,
15:37
over the last eight years, to be
15:37
able to manage the lower costs.
15:42  Katie Neilson
So one of the
15:42
biggest things that enables us
15:45
to be able to manage this is
15:45
having all the expertise in one
15:49  place
the tax, legal,
15:49
accounting, compliance,
15:55
administration. Having all of
15:55
that in one place, provides a
16:00
more simple structure for
16:00
investors to manage, which also
16:05
for us on our side, having all
16:05
that one place, decreases the
16:08
cost, because we do not have to
16:08
go and work with all of the
16:12
different service providers.
16:12
This is an example of one of the
16:15
costs for a service provider is
16:15
legal. We hear this all the
16:19
time, actually, that documents,
16:19
costs around $40,000, to have an
16:25
attorney drop those documents.
16:25
So what Assure did to decrease
16:30
that cost was we worked with
16:30
several attorneys to come up
16:34
with a set of documents that can
16:34
be used again and again, with an
16:38
SPV.
16:39
There's about 15 terms that
16:39
change. It sure has, uses the we
16:45
have technology that helps us
16:45
extract those 15 terms, but use
16:50
the same terms over and over
16:50
again in the documents. So we
16:55
have provided document
16:55
templates, and by providing that
17:00
we are saving our client's time
17:00
and money because they have some
17:04
place to start. Often we'd have
17:04
clients come in with VC fund
17:10
documents for an SPV. And they
17:10
have spent tons of money, like I
17:15
said, $40,000 on documents, and
17:15
they were so happy and proud of
17:20
these documents. But when we get
17:20
them, we need to, have to say
17:24
I'm sorry, these don't work.
17:24
These don't work for SPV. And so
17:28
that is just one example of
17:28
where Asscher has provided a
17:32
solution by providing templates.
17:32
And the clients can take that to
17:35
their legal counsel and gives
17:35
them a place to start and
17:38
decreases the cost for those
17:38
investors in this organizers.
17:42  Christina Sjahli
I also noticed
17:42
when I was listening to one of
17:45
Assure podcast episode, there
17:45
was a talk about hybrid fund,
17:50
which is a combination between
17:50
capital raising, SPV, and a
17:55
venture capital fund. So can you
17:55
elaborate a little bit about
18:00
when does hybrid fund make
18:00
sense?
18:03  Katie Neilson
So let me give
18:03
two perspectives here. From an
18:06
investor's point of view. It's
18:06
the structure of your fund
18:12
determines what type of
18:12
structure you use. So for
18:15
instance, we have certain
18:15
clients that weren't able to
18:19
raise the $5 million or the $25
18:19
million that they were hoping to
18:23
raise with their fund. And they
18:23
have a deal that's in mind. And
18:26
so they have a first close with
18:26
their fund. And then they take a
18:31
portion of that and drop down an
18:31
SPV. I also have different
18:35
clients that do what we call a
18:35
multi-asset SPV, which is
18:40
investing into more than one
18:40
asset in that SPV. Now, when we
18:47
start adding complexities like
18:47
this, it increases the cost and
18:50
the administration of these
18:50
types of SPVs. But it definitely
18:55
is more of a strategy aspect
18:55
here when it comes to investors.
18:59
Now on the other side for
18:59
founders, founders have the
19:03
flexibility to raise from
19:03
different types of individuals
19:08
or or groups. I'll give an
19:08
example for Assure. We did a
19:13
capital raise in 2019. And we
19:13
had two SPV syndications in that
19:21
capital race and then we had
19:21
about five direct investments.
19:24
So spvs gives flexibility for
19:24
the founder to be more strategic
19:29
in how they raise they have the
19:29
optionality to take money from a
19:33
VC fund, as well as SPVs. They
19:33
do not have to, the only option
19:38
out there is not a VC fund or
19:38
direct anymore.
19:41  Christina Sjahli
The hybrid
19:41
fund give more option for
19:44
founder to be strategic. Can you
19:44
elaborate a little bit more
19:49
about being strategic here?
19:52  Katie Neilson
That was a big
19:52
piece of this, this cap table
19:54
and the number of investors on
19:54
cap table is basically a ledger
19:58
of the ownership, company, and
19:58
SPVs. There's two options that
20:04
we see that the founders use
20:04
SPVs for, for starting out with
20:07
a clean cap table and pulling
20:07
all their family, friends and
20:11
family investors into an SPV.
20:11
And then the other option is
20:15
clean up your cap table. We find
20:15
that a lot of investors are
20:20
thinking more about the money
20:20
upfront and not about the how
20:24
and who is going to be investing
20:24
in them. So they are taking
20:29
small checks, but many of them,
20:29
and whenever it comes to looking
20:33
down the road to a strategic
20:33
exit at some point, or getting
20:38
private equity funding, we need
20:38
to have a clean cap table. And
20:42
SPVs really helped that. And it
20:42
simplifies the investor
20:47
relation. It is really great to
20:47
only have that one SPV lead that
20:52
organizer that they work with,
20:52
really, time and money are the
20:57
two things that founders are
20:57
lacking, and SPVs really helped
21:02
with that, because that
21:02
organizer typically takes care
21:04
of most of those.
21:06  Christina Sjahli
I love what
21:06
you said earlier about keeping a
21:09
clean cap table and the fact
21:09
that when founder raising money
21:14
at the very beginning, they are
21:14
pulling money from friends and
21:17
family. So at the end of the
21:17
day, there are like maybe like
21:21
10, people owning the business
21:21
right at the very beginning. And
21:25
then as they moving through
21:25
raising more capital later on,
21:29
there will be more people. And
21:29
then the cap table is just
21:32
becoming larger and larger.
21:34  Katie Neilson
That SPV holds
21:34
many investors, but that it's
21:37
just one line item on the cap
21:37
data table, which is more simple
21:40
for the founder and looks more
21:40
clean. It's an order whenever it
21:43
comes to your future and the
21:43
strategic decisions that you got
21:48
to make in the future.
21:50  Christina Sjahli
The first half
21:50
of this we're talking about
21:52
from the organizer perspective.
21:52
But now let's go back to the
21:56
founder and you touch on a
21:56
little bit already from the
22:00
founders perspective. Is there a
22:00
certain stage of business that
22:06
makes sense for founders to jump
22:06
inm ir should they consider SPV
22:11
from the very beginning?
22:13  Katie Neilson
Well, let me
22:13
first give you an example of a
22:15
sure we bootstrapped from from
22:15
the very beginning. And until
22:20
about 2018, we had a
22:20
catastrophic event in our, in
22:24
our business where we lost 60%
22:24
of our revenue. Wow, yeah, we
22:28
had to make a decision. And we
22:28
didn't even think about
22:31
fundraising. Before that we
22:31
didn't think that that was even
22:34
something that we wanted to do.
22:34
But that event made us realize
22:38
that we have two choices, we can
22:38
either close up shop, or we
22:42
could keep progressing and
22:42
realize the vision that we had
22:46
at that point. And this
22:46
fundraising seemed like the best
22:50
option for us. And it really did
22:50
bridge that timeframe from the
22:55
time when we lost that 60% of
22:55
revenue to the time where we
22:58
made it back up, which for us,
22:58
it was very beneficial on the
23:02
right move for us to make.
23:04
So we weren't the typical
23:04
founder that I'd say that goes
23:07
to this fundraising process. But
23:07
there are those that start from
23:11
the beginning that understand
23:11
how to raise capital, they have
23:15
either been a founder before.
23:15
And so they know how to keep
23:19
their business in order in order
23:19
to get to that to be more
23:23
attractive, attractive to those
23:23
investors. So definitely, it's
23:28
beginning, keeping your cap
23:28
table clean from the beginning,
23:31
and having that that house in
23:31
order. But everyone's will have
23:35
something like what is your
23:35
head, which is we need to bridge
23:39
this gap here and raise capital?
23:43  Christina Sjahli
Is there any
23:43
other benefit when founders
23:48
should consider capital raising?
23:48
SPV?
23:51  Katie Neilson
I think the
23:51
biggest thing here is you have
23:52
the opportunity to be deliberate
23:52
and strategic and thoughtful as
23:55
a founder, you get to control
23:55
the outcome. So SPVs gives that
24:01
flexibility to control the
24:01
outcome. So you can choose who
24:06
you want to invest into your
24:06
company, you can choose the
24:09
pathway you want to go if you
24:09
want to do well. Let me give
24:13
this example here. Whenever a
24:13
founder raises, there's
24:16
typically a lead investor, and
24:16
that lead investor puts in the
24:20
most money and helps determine
24:20
the terms for that fundraise
24:25
with the founder, if they have
24:25
that ability to set that round,
24:30
and then have that allocation
24:30
field. But then they also have
24:34
the ability to have the
24:34
allocation filled with smaller
24:36
check sizes, not just that large
24:36
amount.
24:38
So SPV has given the ability for
24:38
the founder to have different
24:41
variety and investors can get it
24:41
from different get the money
24:45
from different sources. One of
24:45
the examples that my team brings
24:49
up is that there are people in
24:49
your life that have been helpful
24:54
to you in your company, that hav
24:54
been supportive and SPVs give
24:59
hat have that flexibility to
24:59
pin up a small SPV in order to
25:04
ut those people in there, so
25:04
that they can have ownership in
25:07
your company, for a reward them
25:07
for being supportive to you as a
25:11
founder.
25:12
So say, for instance, a founder
25:12
wants to raise $500,000. And the
25:16
lead investor is putting in the
25:16
majority, maybe $250,000, while
25:21
you still have an allocation of
25:21
$250, left, so who is going to
25:25
invest into that $250? that's
25:25
where the founder gets to make
25:29
this, make this choice and, and
25:29
be strategic on who they're
25:32
going to allow into their
25:32
company, when you are working
25:35
with investors. And when a
25:35
founder is working with
25:38
investors, and determining who
25:38
is going to be an investor in
25:43
their company. This is a
25:43
relationship that is going to be
25:47
ongoing for the next 10 years,
25:47
they need to be strategic and
25:50
who they let in because they're
25:50
going to have that relationship
25:52
forever.
25:53  Christina Sjahli
It's like a
25:53
marriage for 10 years.
25:57  Katie Neilson
For instance,
25:57
with Assure the investors every
26:01
month we send them a monthly
26:01
update to those investors. We
26:04
have investors giving us
26:04
feedback from either their
26:08
experience working with assure
26:08
or their experience from, from
26:12
what they're seeing in our
26:12
numbers that we send out. The
26:15
founder has the ability to, to
26:15
let certain groups that have
26:22
different expertise into their
26:22
fundraising round, and they can
26:26
do so through SPVs.
26:28  Christina Sjahli
But that also
26:28
means they have to build a
26:30
relationship before that.
26:32  Katie Neilson
One of the
26:32
questions we talked about
26:34
before, prior to the podcast was
26:34
what needs to be prepared, what
26:39
the founder need to do to
26:39
prepare, and one of them is
26:42
networking. Definitely, in order
26:42
to be able to fundraise, you
26:46
have to be networking. And that
26:46
does take a lot of time.
26:51  Christina Sjahli
Time, energy.
26:55  Katie Neilson
To focus on
26:55
growing your business. So this
26:57
is actually probably a good time
26:57
to mention syndication, where
27:01
you have different leads. Let me
27:01
give you an example. Assure has
27:05
a group affiliate of our
27:05
company, it's called Assure
27:08
Syndicate. And this is, the
27:08
managing director match makes
27:14
investors with founders. So
27:14
there's opportunities out there
27:18
to decrease that time that it
27:18
takes to network but definitely
27:23
networking is one of those
27:23
things that is probably the
27:25
hardest thing for the investors
27:25
to do in order to prepare to
27:29
raise.
27:29  Christina Sjahli
Okay. So what
27:29
you are saying here that Assure
27:33
is not only providing the back
27:33
end administrative of setting up
27:38
SPV and managing SPV, but there
27:38
is also Assure Syndicate that is
27:44
helping founder to meet and
27:44
network with investors that they
27:50
do not know before.
27:51  Katie Neilson
That is correct.
27:52  Christina Sjahli
Okay. So
27:52
that's when the networking
27:57
becomes really important. And
27:57
then when a founder is setting
28:00
up an SPV to be strategic, if
28:00
they have a lead investor, and
28:06
then there is a remaining amount
28:06
that is not yet fulfill, they
28:09
can go back to the network, the
28:09
relationship that they have
28:12
built, and then they can choose
28:12
which investor they can invite
28:16
into that SPV.
28:17  Katie Neilson
Right, which
28:17
investor or which syndication?
28:21
Yes, there's many options now of
28:21
the different types of looks and
28:26
feels of investors coming into
28:26
your
28:28  Christina Sjahli
Now you
28:28
mentioned syndication a few
28:30
times. Can you elaborate a
28:30
little bit more what does
28:33
syndication mean?
28:34  Katie Neilson
Syndication is
28:34
basically a group of individuals
28:38
that agree to invest into what
28:38
the head of that syndication is
28:43
invested into, or to look at the
28:43
options. One example of a
28:47
syndication that isn't one of
28:47
our clients is called Launch.
28:50
The organizer of Launch is Jason
28:50
Calacanis, and he has about
28:55
three, well, I'm probably not
28:55
gonna get the right number. But
28:58
he has over 3,000 investors that
28:58
watch his deals that come
29:02
across. So he brings them
29:02
different deals, deal by deal,
29:07
and they can review those deals,
29:07
and then it choose to invest or
29:12
not. The investors have the
29:12
option to work with this
29:17
syndicate, the syndicator, the
29:17
organizer that is finding these
29:23
investments and then invest
29:23
alongside them in their
29:28
syndication.
29:30  Christina Sjahli
How is that
29:30
different than a venture
29:32
capital?
29:33  Katie Neilson
it's different
29:33
because it is deal by deal. If
29:36
you are an investor, that is a
29:36
part of the syndication club, if
29:40
you know this big group, you do
29:40
not have to invest in every deal
29:44
they find. Whereas VC fund,
29:44
you're basically investing in
29:48
every single deal that they find
29:48
that they choose to invest in.
29:51  Christina Sjahli
So in a simple
29:51
term, you go back to what you
29:55
said about VC, you kind of like
29:55
invest in a pool of asset. But
29:59
in In an SPV, you invest in one
29:59
asset, you have a choice which
30:04
asset you like, which asset that
30:04
you see the future best for you
30:08
and fit in with your vision.
30:08
That's where you invest. But in
30:11
a venture capital world, you
30:11
don't have that option. You
30:16
basically have to invest in
30:16
whatever ventures that they are
30:20
investing. We know that founders
30:20
need to network in order to get
30:25
the best investor to invest in
30:25
their company. But now, is there
30:28
any other thing that founders
30:28
need to think about when they
30:32
are doing this fundraising?
30:34  Katie Neilson
Yes, absolutely.
30:34
So I'm going to give Assure as
30:37
kind of an example. So you have
30:37
to structure your company
30:40
correctly. We were an LLC, we
30:40
had to change to C Corp. Most
30:45
SPVs invest into C Corp. You
30:45
also have to your financials in
30:49
order. At Assure we had we're
30:49
operating on a cash based
30:53
financial system, and we had to
30:53
change into a gap-based finance.
30:57
Yep. Accrual.
30:59
Yep. And then the team and the
30:59
team is a big part of this. You
31:03
have to make sure that your team
31:03
that you have in place is going
31:06
to be attractive to those
31:06
investors. Many times it's the
31:10
team within your company, but
31:10
also maybe your board of
31:12
directors that you need to make
31:12
sure is the right type of group
31:16
that's going to be appealing to
31:16
the investors. Another thing is
31:19
the valuation. The valuation
31:19
helps determine the terms for
31:24
this investment, what the cost
31:24
basis will be for those shares,
31:29
if it's if it's equity, or what
31:29
the convertible note will be
31:33
priced. That valuation is very
31:33
important. And the last thing
31:36
that I can think of that would
31:36
be very, that is very beneficial
31:40
that you have to have in place
31:40
is that the marketing materials,
31:43
the slide deck, you're out there
31:43
marketing your company to
31:47
investors, and you need to be
31:47
really buttoned up. You know,
31:50
many of these things, these
31:50
things that I discussed are also
31:53
something that Assure does, with
31:53
our accelerator called
31:56
BoomStartup. We help prepare
31:56
companies for their fundraise.
32:00
Now, in terms of costs to set up
32:00
SPV, is there a cost to the
32:06
founder?
32:07
There is not a cost to the
32:07
founder, what happens with the
32:11
Assure fee to manage it is added
32:11
on top of the fundraise total,
32:18
and each investor takes a piece
32:18
of that. On the founder's side
32:22
when it costs for them to raise
32:22
it. So there's no additional
32:25
costs when it comes to the SPV
32:25
for the founder's side. But for
32:28
the founder themselves, they do
32:28
need to have, you know, an
32:30
attorney in place and take care
32:30
of some of these these aspects
32:34
before, that we talked about,
32:34
you know, the structuring of the
32:37
company, the the marketing
32:37
materials, the financials in
32:40
order, all of those do take
32:40
money. But it's the preparation
32:44
money that they use to prepare
32:44
their business for funding.
32:48  Christina Sjahli
Now, for my
32:48
audience who are founders, what
32:52
can they do if they are
32:52
interested to set up an SPV? Or
32:57
to work with an organizer or
32:57
work with Assure?
33:00  Katie Neilson
We have a couple
33:00
of different options for
33:02
founders. The first one is our
33:02
Boom Accelerator, BoomStartup
33:06
Accelerator, and that prepares
33:06
the companies for their first
33:10
raise, for funding. The next one
33:10
is your syndicates and that
33:15
group is the matchmaker. So
33:15
you've already, you've gone
33:18
through most of the process of
33:18
how to prepare your company,
33:21
they matchmake the investors
33:21
with with the founders. And then
33:25
the final opportunity that we
33:25
have for founders is if they
33:28
want to spin up their own SPV,
33:28
if they have friends and family,
33:33
and they want to start off with
33:33
a clean cap table, which is
33:37
which is how you should start
33:37
off if you are planning to raise
33:40
funds in the future. They can
33:40
come in and run their own SPV.
33:44
We call this the founder SPV,
33:44
they are able to act as the
33:47
organizer and that they are able
33:47
to come in and become an
33:52
organizer for insurance
33:52
purposes, and then run the SPV
33:55
themselves for that fundraise.
33:57  Christina Sjahli
So Katie,
33:57
where can people find you?
33:59  Katie Neilson
They can find us
33:59
at assure.co. We are on LinkedIn
34:03
as well. And Twitter.
34:05  Christina Sjahli
Thank you so
34:05
much for being here. Katie.
34:07  Katie Neilson
Thank you so much
34:07
for having me.
34:10  Christina Sjahli
And that
34:10
brings us to the end of another
34:12
show. Thank you so much for
34:12
listening to another episode of
34:16
Her CEO Journey, the business
34:16
finance podcast for women
34:20
entrepreneurs, if you want to
34:20
create a proactive financial
34:24
plan and process for your
34:24
business, so you are ready to
34:28
weather the financial storm over
34:28
the next few months. Let's chat
34:32
and see what's possible for you.
34:32
Book in a time to speak with me
34:36
at
34:36
christinasjahli.com/let-s-chat.