FanVestor: Transforming Legacy Investment Model
I have previously written about how FanVestor is capitalizing on recent changes to the SEC rules around investing to democratize the way people improve their financial outlook, while connecting with the entertainment and sports figures they love. In this post I will expand upon that to discuss the way in FanVestor is using those changes to transform the legacy investment banking model.
Historically, issuer onboarding, or the way banks and other financial institutions bring in new business, has involved three phases. The first phase is all about building relationships with a select group of issuers by “wining and dining them” (a practice that is both time-consuming and very costly, and carries no guarantees), and the determination of structural finance products that will fit their needs (i.e. IPO, private placement, convertible, debt or asset-backed security).
The second phase involves price discovery and market analysis. This is a determination of the current market value of the product and identifying which investment bankers will be willing to underwrite the transaction.
Phase three is when the business actively seeks out investors — for example, family offices, hedge funds, long-term funds, and other accredited investors typically interested in that space. All of these processes are manual and, in most cases, do not yield the best conditions for the issuers.
For FanVestor, this is an exciting transitory period during which we are moving away from the traditional banking relationship model to one that leverages technology to automate and provide a scalable client (issuer) onboarding process that is more efficient and beneficial for all stakeholders. This follows the best practices structure with an account manager platform model that has been adopted by Google, Amazon Web Service (AWS), and Facebook for their B2B clients — whereby issuers onboard by accessing a menu of standardized services and options.
FanVestor has already automated phase two, meaning that once the issuer prices the instrument, the market is then allowed to confirm its acceptance of the issuer’s proposed investment terms simply by executing the fundraise. Moreover, through its robust technology, the FanVestor platform can onboard more than 100,000 investors per day, at the speed of over 2,200 transactions per second, with the horizontal scaling and the appropriate KYC/AML compliance.
Finally, phase three is partly automated, through a proper application of the revolutionary changes what have been made possible by The JOBS ACT, specifically the Regulation CF (Title III) and Reg A+ Reg A+ (Title IV) provisions. Reg CF, for example, permits all American citizens, regardless of their net worth, to invest. Prior to this provision going into effect, investors had to be accredited, meaning they had to have a minimum of one million dollars in assets or earn a salary of $200,000 ($300,000 per couple). This was intended by the lawmakers who enacted the Securities Act of 1934 to protect investors from fraud. While it might have achieved this goal of protection, it also had the effect of excluding the vast majority of people from reaping the benefits of investing in startups. Today, with a minimum investment as low as $10 (depending on issuer terms), anyone can have the opportunity to grow their wealth for themselves and their families. FanVestor takes this one step further by turning fans into owners, giving them unprecedented access to participate in the businesses and projects related to their favorite athletes, artists, and entertainment talent brands, while also providing them every protection under the SEC.
In addition, Reg A+ (Title IV of the JOBS Act) now allows smaller companies to raise up to $50 million from the public (increasing to $75M soon). Reg A+ allows companies to offer shares to the general public, not just accredited investors through a similar process as an IPO. This change has allowed FanVestor to eliminate the “wining and dining” phase. Instead of attempting to woo a select group of elite investors, they can reach out to hundreds of thousands of fans and invite them to become an investor/owner in the projects or businesses of their favorite celebrities and athletes.
Perhaps the most exciting change is Reg D 506C, which eliminated the prohibitions against general soliciting and advertising. This means Fanvestor is now permitted to use our innovative technology, combined with the issuer’s and influencers’ direct/indirect social media channels, to promote the offering to the masses around the world.
The FanVestor model also brings a number of incredible benefits to the participating talent, musicians, and athletes, who generate income for charities and other projects (i.e., creating their latest album), and oftentimes get paid an “appearance fee” for participating in certain events. Just as important, FanVestor also acts as their “ambassador,” helping them navigate SEC regulations around endorsements so they can avoid inadvertently violating regulations, and incurring substantial financial penalties.
A similar model is also being used in the philanthropic world, with great success. The primary disrupter here is Omaze, an organization that was created in 2012 after its co-founders, Matt Pohlson and Ryan Cummings went to a fundraising event for the Boys and Girls Club of America. The host was basketball legend Magic Johnson, and the main prize of the night was a dinner with him, to be followed by a Lakers game. Pohlson and Cummings, who are both huge Magic Johnson fans, bid as much as they could, only to lose the auction when the bidding topped out at $15,000. They left that night disillusioned with a model that ignored the contributions of all but the wealthiest donors. However, this disillusionment soon turned to inspiration. They envisioned a better way to both provide an equal opportunity for everyone to win such one-of-a-kind experiences and increase the amount of money going to worthy causes. Omaze cut out the high-end galas historically used as primary fundraisers (at thousands of dollars a plate and accessible to only the wealthiest potential donors) with online bidding and sweepstakes open to everyone. This dramatically decreased the overhead and operational resources needed to host major fundraising events, while giving all donors, regardless of their economic background, a greater chance to win these unique prizes. More importantly, it allows the market to determine the value of these experiences, rather than just the relative few — which meant far greater amounts of money raised for the charitable organizations.
In much the same way, FanVestor has disrupted the investing-for-profit model. It is a global one-stop-shop platform on both the web and app — for elite talent, musicians, and athletes, as well as entertainment, sport, and e-sport organizations. With the highest level of compliance and online investing sophistication, FanVestor offers a new way for fan to engage with their favorite celebrities and athletes through investment offering, called Initial Talent Offerings™ (ITO), merchandise and perks, called Initial Entertainment Offerings™ (IEO), as well as sweepstakes and fundraising for charities. FanVestor is unique from than other crowdfunding platforms, participants can receive an actual investment in the form of future dividends, as well as FanVestor exclusive perks and experiences such as priority access, enhanced fan experiences, and other benefits. FanVestor is also the only platform dedicated to celebrity talent brands.
In my next post, I will discuss how FanVestor’s model helps musicians build their careers, brands, and social media reach.
In the meantime, check out FanVestor.com to learn more, and see if it’s the right solution for your next capital raise.