Subscribe
Share
Share
Embed
Private markets are becoming mainstream. The conversations with the people building them shouldn't stay behind closed doors.
On the Augment Exchange, we talk with the entrepreneurs, allocators, and operators shaping the future of private capital markets. We dig into how these markets operate, the challenges, and the opportunities.
New episodes every other Wednesday, from Augment.
Intro
Welcome to The Augment Exchange. I'm your host, Max Melmed.
Today, we're sitting down with Jeremy Neilson, founder and CEO of Sally, and previously co-founder and CEO of Assure.
Jeremy was in his backyard pushing his child on a swing when AngelList called. They asked if he could do funds in bulk. He said yes, and that yes grew into Assure.
Jeremy and his team created a market standard that powered more than 9,000 SPVs and supported over 250,000 investors.
A structure that once cost $300,000 and took 6 months now gets done in a few days for a few thousand dollars. Thanks to the foundation created SPVs have grown to nearly 70% of secondary volume.
We get into that first call, what an SPV actually is, and why investors and market participants keep choosing them. We break down the violent ride: from 50 employees to 215 to zero, and the market collapse that took Assure down with it.
We finish with Sally, the fifth iteration of his software, and why he believes SPVs will eat the world.
Jeremy is candid and resilient. I got a lot out of this one and I really respect Jeremy for fielding every tough question head on.
I hope you do too.
Max Melmed (00:00)
All right, awesome. Well, thank you so much for joining me today, Jeremy. I appreciate it.
Jeremy Neilson (00:05)
Great, I'm happy to be here.
Max Melmed (00:07)
Yeah. So I guess as the, SPV OG, curious if you could walk me through a little bit of kind of how you entered the, the SPV market.
Jeremy Neilson (00:13)
Sure. Yeah, know, some of it has to do with my background. I went to business school, then I went to law school, then I got an MBA, and then I had some other work experiences. And all those kind of combined into a basket, if you will. And one day I was actually in the backyard. I was pushing my child on a swing and my cell phone ringed and
Jeremy Neilson (00:38)
didn't recognize a number and I answered it and it was someone from Angelist and you know I don't do great with accents and I also don't do particularly great with Australian accents and this person had an Australian accent and so I was there's a little bit of me like am I hearing everything right but this
Jeremy Neilson (00:56)
So this team member at Angela says to me, says, so and so said we should talk and he said, can you do funds in bulk? So funds in bulk, that was the terminology he used and that's because the phraseology of an SPV wasn't yet really used, right? So they needed to do these funds.
Jeremy Neilson (01:21)
but single asset funds, drop down funds, whatever phraseology we had at the time. And they said, can you figure out how to do funds in bulk? And because of my background, because of my personality, because of my education.
Jeremy Neilson (01:36)
One, I just said yes. And two, it turned out to be kind of a perfect combination of legal. did this Utah fund of funds thing for seven years and just all those experiences combined allowed me to say yes and just have that confidence. I really didn't know what I needed, what the piece, I just knew I had all the pieces. I knew I had all the pieces, but I didn't know what kind of like puzzle it was going to be and all those things. And so I just said yes and they sent me a
Jeremy Neilson (02:05)
SPVs a few days later and I just was in the deep end just trying to figure this thing out and ultimately figured it out.
Max Melmed (02:12)
That's great. That's great.
Max Melmed (02:14)
And I think it's interesting in certain markets where the terminology isn't quite there, but you're working on it and have kind of the pieces and saw like Fred Wilson talking about investing in the internet early days and they had a thesis, but then somebody called it Web 2.0. So you had this experience and the fund to funds background, and then people kind of calling it an SPV and kind of curious.
Max Melmed (02:38)
A, what is an SPV and when did the SPV terminology kind of come to market and stick?
Jeremy Neilson (02:45)
Yeah, so SPV was there. just wasn't.
Jeremy Neilson (02:48)
used that often and it could have been you know the Angelus team member that called me maybe it was his words or whatnot so SPV was there and SPV stands for special purpose vehicle it's an acronym and I actually really like the words used it's a vehicle and so what that means is you're going to set up a legal entity so most people go to Delaware and they set up an LLC with Delaware that's the legal entity that's the vehicle
Jeremy Neilson (03:16)
and it's set up for what reason, right? So a lot of people set up LLCs every day. It's for my hair salon. It's for my startup business. It's for whatever.
Jeremy Neilson (03:25)
Well, we're doing an LLC for a very special purpose. It's for aggregating money to invest into a startup, a secondary, a real estate transaction. All So it's private asset investing. And the special reason to set up this vehicle is to do something unique or different. We're not doing a hair salon. We're not doing a gas station. We're just going to aggregate some money, pool it together. We're going to invest into
Jeremy Neilson (03:52)
this private asset and perhaps even just go dormant, be really quiet while this asset that we've invested in progress. And so that's what a special purpose vehicle is. It's basically a Delaware LLC waiting for some exit to come back.
Max Melmed (04:08)
So AngelList gives you a call, you kind of say yes, and then they give you eight SPVs, and then fast forward, you launched and supported over 9,000 SPVs. What kind of happened from that eight SPVs to the 9,000 SPVs?
Jeremy Neilson (04:26)
Yeah, so when they called and they said, can you do this? I said, yes. And the prior kind of years before that is I was getting a business started and had plenty of failures and a couple of successes. And they said to me, we're going to find something better. You are a stopgap. We're going to continue to automate this. And so each month they would send me
Jeremy Neilson (04:52)
10, 12, 14.
Jeremy Neilson (04:54)
And each month I would just say to them, okay, what should I expect for the next month? And like, probably something similar. And I'm like, you're still working on like replacing me? And they're like, yep. You know, so for me, I'm just like a little bit of money, a little bit of revenue. But also in the meantime, I'm well, I'm not really advertising this. I really don't even know what it is. A lot of people be like, did you envision SPVs in your dreams? Did you have this great vision? Did you want one for yourself?
Jeremy Neilson (05:24)
couldn't find it so you invented it? The answer is no. I woke up one day, someone called and said, can you figure this out? And I said, yes. So it really wasn't something that I was trying to really push forward, if you will. And so Angelus was like, we're going to replace you as fast as possible. Four months, six months from now. So I'm like, all right, just pocket some money. Could be interesting. Well.
Jeremy Neilson (05:51)
As soon as Angelus launches and they push this product down to the marketplace, my phone starts ringing.
Jeremy Neilson (05:58)
And I don't have any advertisement really. So I don't have a website specific. I've got my Assure general website, but I don't have SPV on it. I don't have structuring. I don't have anything. And I actually set up a new entity. So the entity isn't anywhere. The entity doesn't have a LinkedIn page. People are like going to the FAQs in AngelList going, how are they doing this? This is amazing. Because before us,
Jeremy Neilson (06:25)
It was 300,000 in six months. Now it's a couple days and 8,000, right? So like we're like 95%, 99 % lower and 99 % faster. So people like, how are they doing this? So they find my name, they find my little company and they find me on LinkedIn, right? So I'm just getting hit and called and emailed. And so it's really interesting. It's interesting. You know, so we signed up a couple other clients
Max Melmed (06:50)
couple of
Jeremy Neilson (06:51)
and Angelus is like, you know, we're gonna, we're gonna replace you.
Jeremy Neilson (06:55)
No hard feelings, right? Thank you. All right, cool. Pocket of little money. And then in December, so I got called in July, August of the summer and they December, early December, I asked the same question as I did every month. How's it going? Good. I go, what should I expect for next month? And he says, we didn't tell you. I said, tell me what? He said, all of our other efforts have failed.
Jeremy Neilson (07:22)
Everything's coming to you.
Max Melmed (07:23)
Wow. Wow.
Jeremy Neilson (07:25)
So.
Jeremy Neilson (07:26)
I just, okay, so I actually went out and hired people. I went out and hired a couple people and just got ready for kind of a doubling and doubling. It actually wasn't until about a year after that point that my co-founder and I looked at each other and just said, this is something real because we do no advertising, we do no marketing.
Jeremy Neilson (07:46)
and they just keep calling and just doubles every year. Doubles, doubles. And so we're just like, let's push everything else, any other little side projects, little side businesses, any other side clients, let's just kind of wind them down, put them out in pasture, let's go all in on SPVs. And so that's what we did and just the phone calls just kept coming in.
Max Melmed (08:10)
And I mean, I think that's the definition of product market fit where it's getting pulled out of you. and before you were even trying to build the business. So was there a point prior to Angelus saying, Hey, we, want to do this where, you thought it could be a business or was it only once they said, Hey, everything else failed and you realize you're really onto something.
Jeremy Neilson (08:35)
It was actually a year after that. And that's just because Angel List was sending us a lot of stuff, which was great. But having one client...
Jeremy Neilson (08:47)
doesn't really feel safe. And we really did get into some of my backstory, but I went two years trying to find work and business and start a business. So I'm a bit, a little gun shy, right? I want to feel safe and whatnot. So just having one client did not feel like it was safe. So it wasn't until we got...
Jeremy Neilson (09:10)
number of additional clients and the calls just kept coming that we said, okay, this is not just an Angelus thing. This is an ecosystem. This is a marketplace. There's something here that we can really rely on.
Max Melmed (09:24)
Gotcha, gotcha, I mean, I think that move from your perspective, ultimately foundational for the business that we're in, because if SPVs didn't get used more broadly, if you didn't streamline the costs and kind of bring it from that $300,000 down to eight, 10 grand, it wouldn't make sense to establish an SPV. And you get into that weird situation where the deal needs to be so large to justify the SPV cost.
Max Melmed (09:53)
But then when the deals are that large, folks don't necessarily want to go into an SPV versus where you brought that price point down. think super interesting and kind of curious. We had Javier from CapLight on and he was talking about how in 2021 SPV volume was less than 15 % of secondary transactions. Whereas Q1 in 2026, it was about 70 % of transactions.
Max Melmed (10:20)
Did you think when you were getting going with AngelList that this would be almost revolutionary for private markets? Did you envision the kind of impact that we're seeing today or was it still kind of just like, hey, we're servicing them, we can make a couple bucks. Let's see where it goes.
Jeremy Neilson (10:35)
Early days, no. We were just trying to service the clients and we did get a number of SPVs that was nice, but for the most part it was was Angelus. Early days...
Jeremy Neilson (10:48)
80-90 % of our revenue was from Angelist and then we'd have onesie twosies, a bunch of onesie twosies, which was great. But Angelist just was this beast and they just grew and grew and grew. And so we were not envisioning early days how big this was, but the perspective changed. When we doubled and doubled and doubled and doubled, I became somebody that was starting to say, SPVs will eat the world.
Jeremy Neilson (11:15)
you know, stealing the phrase. And so the way I describe SPVs in a graphical way in my brain is I envision a meadow, if you will, with a number of large trees. And those trees are funds, venture funds, private equity funds. And then there's millions of blades of grass. And those are the SPVs.
Jeremy Neilson (11:37)
And so they both coexist. They're both needed. They both are important. But I just believed eventually that SPVs would eat the world because the ultimate reason is because those with money like them. Investors like them. Investors like picking deals. So as much as those
Jeremy Neilson (12:03)
organizers, syndicators, managers, GPs would love to do things a certain way. Over time and continuing over time and historically now, investors have really liked them. And so it's just continuing to grow and I think it will continue to grow here after.
Max Melmed (12:24)
And why would you say investors like SPVs?
Jeremy Neilson (12:29)
People like to pick their assets. They don't like blind pool as much as they like being part of it, picking it, evaluating it, building a portfolio. And lots of people be like, you shouldn't do that. I'm smarter. They're smarter. They have more, right? All could be true. And this is the second time I've seen it in my career. Back when I did the Utah fund of funds, everyone was saying, of funds are
Jeremy Neilson (12:56)
People were saying you shouldn't go into fund of funds you should go direct into the fund and people the fund of funds managers and everyone's be like the fund of fund managers they're really smart they know what they're doing they have access blah blah blah all true but the pension funds the foundations the wealthy individuals are like all true
Jeremy Neilson (13:16)
But I want to touch it. I want to evaluate it. I want to make the decision to go direct into the fund. Well, we're just under the next phase, which is you should go into the fund. You should go into the fund. I get it. But I like to touch it. I like to evaluate it. I like to be a part of it. And I just believe that they're just going to continue to grow and grow and grow because of multiple aspects. But that's one of the main ones.
Max Melmed (13:41)
Interesting. And do you feel like it's a cost where the cost associated with investing down a level is brought down in terms of investing into a fund you needed a certain minimum ticket that fund to funds could do it and give diversification. Now investing in an individual company, there's a certain minimum ticket. Is it a cost? Is it cultural?
Max Melmed (14:05)
Is it technology? it something else or what, what, what is ultimately the reason people want to go into the SPD and want to go direct beyond like touching it.
Jeremy Neilson (14:15)
Well, I think the...
Jeremy Neilson (14:16)
lower price point, if you will, the lower allocation requirement, minimum investment number is one of the key things that has driven SPVs that have allowed people to sample it. So now what you're creating is a large, huge base community of investors that perhaps maybe would have never got into private asset investing or it was years and years away.
Jeremy Neilson (14:44)
So if your minimum is $100,000 or $1 million, right? When we did the Utah Fund of Funds, $8 million, that's the minimum on many of the funds that we invested in. And so you're like, who has $8 million? Because you can't just do one, right? If you're going to build a diversified portfolio, you need to do five or eight or ten. Who has $100 million to build a private asset portfolio?
Jeremy Neilson (15:07)
very few people or groups. And so now you go SPVs and you're like 2500, 1000, 5000. Well, I've got 100,000. I could go build a portfolio of my of my own creation through SPVs and now I'm in private asset investing. Now I'm getting experience and exposure. Now I'm getting the bug. And why would I ever want to go back to blind pool investing?
Jeremy Neilson (15:35)
at a million dollars a pop when I can build something that's really interesting for myself.
Max Melmed (15:41)
And it's interesting you mentioned the bug. And I think the market in the world kind of got the bug of private markets investing and direct investing through SPBs right around COVID, post-COVID when we saw kind of wild peak 2021 days. What did that look like at a shore as the market was absolutely on fire 2020, 2021, and even maybe early 2022?
Jeremy Neilson (16:08)
Yeah, it was crazy for us. So, Assure had a little bit of technology, but had a lot of manual labor. So, the beginning of 2021, Assure had 50 employees. At the end of 2021, beginning 2022, we had 215 employees.
Jeremy Neilson (16:35)
So that's the craziness that we went through. So we more than doubled between 2021 and 2022. But as 2022 began, there was immediate softening that we felt and saw. And it was unsure how this was going to turn out, but we immediately felt it out of sure.
Max Melmed (17:01)
Yeah, I can imagine. know personally was gearing up to execute on more SPVs. I've done a couple. We were ready to invest in Flexport and Flexport secondary market was trading like 26, 27 bucks a share. We saw an opportunity at $21 a share and we thought, oh, great. Exciting business, COVID supply chain. Their CEO was just on 60 minutes.
Max Melmed (17:30)
We were excited about it. And then all of a sudden, Andreessen Horowitz came in to lead a massive round. We're really excited and think, oh man, we're going to need to move really quickly. We're going to lose the allocation. And we said to one of the partners, well, why don't we just check to see what the terms of that round are before we move forward? So we said, okay, let's just check, make sure. And we found out the terms of that round were like 14, 15 bucks a share.
Max Melmed (17:57)
And it was like an shit moment. Everything is about to be repriced. And then we kind of pulled the foot off the gas. And I think the rest of the market did as well. That was probably March, April of 22. What happened as you saw that from the inside of the shore?
Jeremy Neilson (18:15)
Yeah. So January, February were fine for us, which are always a little light just because everyone pushes really hard to close out year end. But March was off and we were starting to get nervous. April was off.
Jeremy Neilson (18:29)
and we thought we should do something here internally. So we instituted layoffs or we did voluntary and just, know, hey, you know, we just feel some softening here. We should we should shrink this. We should shrink the team. So we did a pretty large shrinkage of the team and.
Jeremy Neilson (18:53)
If anyone's run a company and done kind of large-ish layoffs, you don't get any value or benefit. When I say value, I don't know if that's the right word, but to see an expense decrease for about two months. And that's because of severance, that's because of paying people out. so it was May and we did this large workforce cut.
Jeremy Neilson (19:17)
And by the time the July time came around where hopefully things would stabilize, it was worse. And so what I termed at Assure at the time is we were chasing a bottom we could not catch.
Jeremy Neilson (19:33)
And so we did another smaller one in August. We did another one in September. The bottom had fallen out of the market for us and our business. And by October of 2022, our revenue was off 70%, which was a bit of a...
Jeremy Neilson (19:57)
a line for us. So we could survive and we had money in the bank at a 70 % decrease in revenue. But we had just kind of crossed past that or moved past that and we were like, I think we're done. And so...
Jeremy Neilson (20:13)
By the time November came, we were down 80%, 85%. By the time we closed our doors, we were down 90%, 95%. And so the entire market froze. Just your experience just across the entire market, right? Like everyone froze. And so we had planned for something like this, but it was so.
Jeremy Neilson (20:38)
So large, mean, was just so, it was so, and so fast that we knew we weren't gonna make it and we tipped over.
Max Melmed (20:48)
Yeah, no, and I think that was as an SPV organizer. I had also invested and had friends that were investing in SPVs, lots of different platforms, even off platform and all of that activity kind of came to a halt as well. So it makes sense. And I guess as an Assure customer, I know I got the notification.
Max Melmed (21:10)
I think it was the day before, day after, right around Thanksgiving of 2022. What was that like internally leading up to sending out that notification? I can imagine not easy, something you had built for over a decade, led an industry forward.
Max Melmed (21:29)
And then all of a sudden just a market collapse and then needing to pull the plug. And I'm guessing it didn't take it lightly, but curious what that was like and the timing of that announcement.
Jeremy Neilson (21:39)
Yeah, it was extremely painful for me. I know it was painful for everyone else and painful for employees. But me personally, I just, the only way to describe it was my spirit hurt. It just, it just ached and...
Jeremy Neilson (21:57)
shed lots of tears, I was just distraught, there was no way to save it. Scary, very scary. We wanted to make the announcement a little bit earlier than we did, about a month earlier. But I was nervous about having enough money to pay for a team to hang around. And...
Jeremy Neilson (22:15)
there was a group, a competitor if you will, and they offered a bunch of money to then be kind of the preferred referral if you will. And so we spent another kind of two, three weeks working out that deal and received that money. And so it was a little bit, there's never gonna be a good time, but.
Jeremy Neilson (22:42)
Our decision was we need to get this out so people can deal with it and then tax season. Tax season is a very big deal. It's very difficult. And we wanted to do it in October, but we did it. We did it in November.
Jeremy Neilson (22:56)
And then nobody was happy. We tried really hard, but we did have a team. There was multiple things going on. One, just getting people their documents. Two, wrapping up any remaining deals that were in flight, right? Like halfway through fundraising. And the other one was the money that we had in bank accounts. So we would set up a bank account for our clients for this SPB. We had over
Jeremy Neilson (23:22)
We had hundreds of millions of dollars in over a thousand bank accounts.
Jeremy Neilson (23:28)
and we needed to get that money out to our clients or close the deal and get it onto people. So we had these various teams working and I know people, everyone wanted a different solution or a different way or whatever and nobody was happy but we ultimately got everyone's money back. We got everyone their documents.
Jeremy Neilson (23:49)
everything got handed over. I wouldn't say that everyone was like that was wonderful or that was smooth. I know that it wasn't but we worked very hard to try to get things into people's hands and then I hung around after we had no employees so back to the numbers.
Jeremy Neilson (24:12)
50 employees at the beginning of 2021, 215 employees at the beginning of 2022, and zero employees at the end of 2022. I use the phraseology that was a violent experience for us, both on the up and on the down. And that was very extreme experience.
Max Melmed (24:39)
Oh man, I can imagine it's a roller coaster to say the least. And I think the both on the up and the down is interesting. I've been at businesses where you're scaling and even it's a good problem to have. It's a good problem to have, but it's still a problem over and over again. Um, and then the other way, uh, and I guess just from the perspective where I getting everybody their money back, managing it and managing the docs and the transition, um,
Max Melmed (25:08)
I know folks where they had prepaid expenses. So the assure model was basically a seven year life and then the ability to pay for that upfront, which worked well in some ways. Maybe the model had some flaws depending on ongoing taxes and reporting and ongoing costs, but kind of curious from.
Max Melmed (25:30)
the folks where they were able to transition, but they may have had to incur additional expenses or deal with some pain in the process, what would you say to folks there who are listening?
Jeremy Neilson (25:39)
Sorry. Yes, I understand. The model was that. The model was flawed. We knew of that risk. We were prepared to... We didn't think it would go down 95%. I don't know any business that can survive that. Maybe there are some. I've never heard of one. So we got tagged and...
Jeremy Neilson (26:00)
and we fell over. But the model wasn't one that could allow for zero revenue. And so what we were trying to do at Assure is we knew that the model was
Jeremy Neilson (26:12)
had had that issue. So we were working on technology for a lot of years and our very first technology release was 2018 and we'd been working on it with more iterations and more iterations trying to work on the scalability and to decrease the overhead of the business so that if something bad happened they're
Jeremy Neilson (26:37)
wouldn't need to be any sort of shutdown. So had we been able to survive another probably 24 months, I mean, we would have had the technology, things would have been a lot better, but we were.
Jeremy Neilson (26:51)
right there at the end of like hyper scaling and just throwing bodies at it. And we did have a team that was building technology, building an amazing system. So we'd made the right decisions. We had spent, we'd done the right things and we could have survived. I've often said that the only regret I have
Jeremy Neilson (27:17)
I have lots of regrets, but there was a regret that I constantly thought about, which was we had figured out so many great things and we were just there kind of rolling out so many accomplishments of hard, hard work. And it was sad and unfortunate that we kind of had to put all those things away and not share that with the ecosystem. But yeah, I apologize. It was not what...
Jeremy Neilson (27:47)
We wanted, definitely not what anyone else wanted either.
Max Melmed (27:51)
Yeah, no, makes sense. And I think remember around that time you were rolling out, Glassboard 2.0 and it was pretty cool. And I mean, even seeing with what's available in the market, what you guys were doing and building and what people could build on top of, it was pretty valuable system and solution, but I guess it is what it is and moving forward.
Max Melmed (28:17)
Adashore and you're doing over 9,000 SPVs, seeing that experience, what would you say you've taken from that as you go to build Sally and you hear the old adage and like the trading world, your first trading system is never the one that hits it. It seems like this is not your first or your second. Kind of talk to me a little bit about where you are, what you've learned, what you've taken from that experience.
Jeremy Neilson (28:41)
And so as we shut down Assure, as I received number of phone calls, both happy and upset, a number of people were saying that nobody was innovating in the space. I noticed that the ecosystem at large had copied the Assure model. The pricing, the marketing, the documents, basically everything.
Jeremy Neilson (29:06)
And what we were trying to do at Assure was...
Jeremy Neilson (29:08)
create the technology that would allow people to make decisions on their own. We just took all of our experiences, all of the frustrations, the complaints, the desires of our clients, and we were putting that into software that gave them more control, better features, faster outcomes. And so I actually had that system. It was being built and it was built, but I wasn't able to roll it out and
Jeremy Neilson (29:35)
that helped us survive. So as we shut down Assure, I actually tried to sell the software. Like, I don't know.
Jeremy Neilson (29:43)
what's going to happen and no one wanted it. And so I just kept it alive. One of the reasons I kept it alive was just because I couldn't sell it if it was dead. So I had a team member keeping it alive and whatnot. And I just kept getting lots and lots of feedback that just there's no innovation. And I just was like, really like you as P.B.s. I created this product in this market. I'd like to stay with it. And so I knew I'd take the arrows and I was I was fine with that.
Jeremy Neilson (30:13)
And so I just decided to keep the software and keep building on it and so the software that I have today is a fifth iteration and You know similar adage that you said you know you build it and throw it away and then build it again
Jeremy Neilson (30:24)
And so we did that. We did that at Assure. that's what Sally is today is the fifth iteration of all of those use cases and 9,000 SPVs and about 250,000 investors. And then the model needs to be different. And so the model today with Sally is both very, very low overhead.
Jeremy Neilson (30:46)
tiny, tiny overhead plus a reoccurring revenue. And so you're providing value and features and functionality that people will pay for. There's real reason to pay for it. And the upfront cost is much less. So a lowering of costs, an increase of control, features and functionality.
Jeremy Neilson (31:10)
And it's the vision that I always had at Assure, which is that SPVs can be automated. I have automated taxes or certain things like financials. There's tons of legal tax and accounting that's still needed, but...
Jeremy Neilson (31:26)
The 95 % of what SPV does and is and all the features and functions, edge cases, those are all built into Sally from the experiences that we have. And so that's the approach is software that can do everything.
Max Melmed (31:41)
And curious the edge cases you talk about, again, in the trading world, it's like, the down the middle is the easy stuff. It's all the edge cases where you end up spending a lot of time and energy. And that's where like systems break. What do the edge cases look like seeing?
Max Melmed (31:57)
over 9,000 SPVs, over 250,000 investors. What does that look like and what is the feedback from these sponsors or SPV managers for what they need or what they want to solve for these edge cases?
Jeremy Neilson (32:09)
Yeah. So what's unique about SPVs that would perhaps be different than the trading world is that every SPV you launch has variability to it. So SPV one may be maybe right down the middle with no edge cases. SPV two may have five edge cases or 10. And that's because the investors can be different. The asset is now different.
Jeremy Neilson (32:34)
And so I'll give one example. People sending in more or less money than they subscribe for. So they write in the documents $10,000 and then they send in $9,985. Maybe it was a wire fee, whatever. Tons of reasons why it's more or less show up. Being able to just solve that with the click of a button,
Jeremy Neilson (33:02)
is difficult. It flows through the entire database and is the most important piece of
Jeremy Neilson (33:10)
The documentation, how much did you invest and is it correct and do I have a source of truth to go to? Other ones are like side letters, someone that wants to increase their investment after investing 10K and deciding I want to throw in more money. Somebody wanting to invest through multiple entities. So I want to invest in this deal but I have two entities, an LLC and a trust. And so the list just goes on and on and on.
Jeremy Neilson (33:38)
investors, organizers, management fee, carry, tiered carry, flat management fees.
Jeremy Neilson (33:47)
Naming of entities, having a custom bank account. So there's just kind of this endless list and every customer is different, every deal is different, every investor is different, non-US, assets are different. So just having had those experiences and knowing what they are, a lot of people say, kind of just throw something together, release it in the marketplace,
Jeremy Neilson (34:14)
and then see what the market says. I didn't do that. I didn't follow that adage with Sally. It's like it has to have this minimum, these edge case, it has to have a complete system before I release it because the very first customer that asks is going to want this edge case and they don't even know they need it until they launch the SPV and an investor asks for it or something like that. so...
Jeremy Neilson (34:39)
Yeah, those are some examples of some edge cases.
Max Melmed (34:43)
Absolutely. And I think in the adage around move fast and break things, not in financial services. And I get that. I guess, curious to stories, what was the craziest SPV, most challenging, most interesting SPV that you guys worked on or solved for? yeah, one of the most unique edge cases from your perspective.
Jeremy Neilson (35:05)
Most challenging thing I would say would be clients that did work outside the SPV that didn't tell us. And so why that was difficult was because the taxes would now be off. And so we would prepare taxes and...
Jeremy Neilson (35:27)
and send it to them and then they would send it back and say it's all wrong. We had one particular client at Assure that really took advantage of us and
Jeremy Neilson (35:37)
was somebody that really hurt the business. They would do a lot of this kind of off-platform stuff and not tell us. And then we would prepare the taxes and send it to them. And like, done, right? Like, they had a lot of deals. And then every single SPB had three and four iterations. And so we basically had to do four times more work.
Jeremy Neilson (36:04)
because this client would not keep it clean, tell us what's going on, work on a system together.
Jeremy Neilson (36:10)
Then they would go to social media and badmouth us and then they would tell all their their investors how terrible we are and so Those those were very difficult experiences For us and and what's unique about taxes. It's a once per year Situation. It's not like deal one in January. Let's iterate deal two in February getting a little better deal three in March. We're smooth This is 2020
Jeremy Neilson (36:38)
tax year, right? And then we iterate and get a little better in 2021 and then we iterate, right? So these are these the tax season was very difficult. One of the unique deals that I always think about and remember was a client had access to a really hot startup pre IPO. And this startup needed needed to kind of bolster the balance sheet all of a sudden for for an IPO. And and so
Jeremy Neilson (37:05)
This individual launched four SPVs and raised over $100 million in each SPV in 48 hours. So they raised over $400 million in four SPVs in two days, which was incredible.
Max Melmed (37:22)
Wow. And the four SPVs where there's not integration risk across those, did they do a 3C1, a 3C7, a tax advantage, the reg S, like how did they do that? Or were they in a gray area?
Jeremy Neilson (37:43)
I think it was a 3C7, but they didn't have that many investors per, so they weren't raising 50 per as like, you five or six or less per SPV. So they weren't bringing in a large number of investors. But just for me, was that the SPV is an appropriate vehicle for $100 million, that it's an appropriate vehicle for 48-hour turnaround.
Jeremy Neilson (38:12)
It's an appropriate vehicle for a pre-IPO, high flying, going public here in the next three months or less. That's really what was so impressive for me. And maybe today we're like, man, that's old news. But back in the day, this was probably year 2000, 1999, when this happened, that was very memorable for us.
Max Melmed (38:40)
Absolutely. And I think where SPVs are being utilized quite a bit in the pre-IPO space, where you see the private company has a cap on shareholders, getting access can be challenging and the SPV use case fits really well. Certainly some bad actors in the market, some good actors, some with layers of SPVs. But I guess looking at where you are today, where you've come from,
Max Melmed (39:06)
what would you say from those experiences, how you've positioned Sally in the market, where it's kind of different, or you have these issues that have come up and you say, okay, now when we build going forward, that's not gonna happen, that's not gonna happen. And this is kind of how you enter the market. What does that look like for Sally in 2026 and beyond?
Jeremy Neilson (39:26)
Sally is software and that's the biggest difference between all the other SPV providers who are, the way I describe them, professional services with a little bit of tech. There are a large number of humans running around behind the software or tech or...
Jeremy Neilson (39:45)
whatever you want to call it, doing a large part of the work. So at Sally, I may do one or two things manually just so that I can figure out the right steps, but everything at a Sally has to be in software, has to be in code. So if something breaks or if something's not working well or we get feedback or we want to add a feature.
Jeremy Neilson (40:08)
All of those things, are no humans. We have developers and we have myself. And so I purposefully keep it that way because if I hired humans, I may be tempted to just say, let's just us do it. And so if I want to sleep at night, meaning I don't want to work 24-7, I have to do the features, right? We have to do the software.
Jeremy Neilson (40:34)
And so I'm purposefully requiring that every feature and function is in code. And I know already what they are. I've already experienced it. I've already seen it. When things kind of come up, I'll be like, yeah, I've seen that. I just was wondering if the clients would push back on that or if they needed that feature or.
Jeremy Neilson (40:58)
You know, we'll just need to tweak it this way. And so what's unique about Sally is its architecture and structure allows us to create build and augment very, very quickly. So as a client has a need or if I see something that should be fixed, we can do it in matter of hours or days different than a sure days, which was weeks, months, years are never able to do it at all on the the on the early systems that we built. And so our approach is
Jeremy Neilson (41:27)
is software and it is individuals platforms. It's yours. It's a white labeled system. It's even your URL.
Jeremy Neilson (41:34)
You have all access to all data, all features, all functions. There's a lot of automation, but there's plenty of buttons to click as well. You don't need admins. You don't need these experts, if you will. They've done tons and tons of SPVs because the system just works. It's automated and it's yours to do it how you want. You can run SPVs the way that you want to, and it's not
Max Melmed (41:59)
want to, it's not.
Jeremy Neilson (42:01)
the way other people require you
Jeremy Neilson (42:03)
do it.
Max Melmed (42:04)
And from the Assure days, I know you spent some time and energy educating the market. And I learned a ton from reading the Assure articles or the podcasts or webinars and like the ABCs of SBVs or when you gave the whole breakdown. Given the approach you're taking and kind of the white label type solution, would you say Sally's built more for somebody?
Max Melmed (42:32)
who has a little bit of experience and is actively executing on SPVs or like how small is too small. And then is there a fear of the angel list situation where somebody gets so big that they eventually are able to outgrow you or how do you think about that at Sally?
Jeremy Neilson (42:50)
Well, Sally, everybody that I talk to, I'm available to them. I'm giving out my cell phone to clients. And it doesn't scare me because...
Jeremy Neilson (43:01)
They don't need to call me and if they do, it's like, you click this button, this button. So we have a library of videos that people can watch and we have clients from all aspects. We have former Assure clients. We have clients that have done lots of deals. We have clients that this is their very first deal. But what's interesting from watching the clients after they do one or two.
Jeremy Neilson (43:28)
they get it and they understand it. SPVs can feel complex and there is complex nature elements, aspects to it. And so I'm not blind to that. And so I'm available. One of the things that people really disliked at Assure and I hear it that they dislike it at the other current SPV providers is they can't talk to a human, right? It's like email only.
Jeremy Neilson (43:54)
And so I'm sensitive to that. I believe so much in the software that if I'll just take your phone call and just say the system does that.
Jeremy Neilson (44:04)
Here's how it works. Go here. Click this button or let me do a little video for you. And the phone calls slow down and stop. And so I'm not afraid to give out the cell phone, educate and train. so brand new people doing your very first SPV. A lot of people are those are clients, others that have a lot more experience. But it's actually a similar arc. Right. Both have to learn the system. Both have to learn the software and
Jeremy Neilson (44:31)
and it works really well so I'm not afraid to educate, train, and take phone calls.
Max Melmed (44:38)
And that makes a lot of sense. I'm curious from the Assure days, clearly you had a lot of different customers setting up SPVs. And I know I had said this to you personally when I reached out around like, Hey, the experience with Assure.
Max Melmed (44:53)
and how it all played out and totally understand the 95 % drop in volume. I don't, it's very difficult for any business to sustain that, but how do you think about kind of overcoming a potential trust gap or a question that may come up around like, Hey, why is this time different or why will I get set up here? like, what is, what is different about this or how would you approach that conversation with a former client and why it could make sense to look at Sally?
Jeremy Neilson (45:21)
No, obviously we should trust each other and if we can't get over that then probably not, probably shouldn't work together. not blind to that. But a couple things to consider. If you're using a different provider, SPV admin, they are Assure 2.0. They have the Assure model and they have the Assure virus.
Jeremy Neilson (45:44)
anybody that's doing these you know flat fee one-time payments that's a sure and that's what caused a sure to have its have its problem so kind of sticking your head in the sand and saying I'm mad at a sure but I just hired a sure again I don't know right like so that that's one thing that that that I would bring up number two Sally is meant to be somewhat of an anti-assure in that
Jeremy Neilson (46:14)
It's got completely low overhead. has a different financial model of a reoccurring revenue piece and it allows you to control everything about it. You can download all your documents whenever you want. You can download KYCML whenever you want. You can run things however you want. And so you get the chance to make the decision and build the system, the processes, the business that you want using the software.
Jeremy Neilson (46:43)
that gives you all the features, functions, and modules. So I can't take back the past, but definitely want to provide the ecosystem with something that gives them the features and functions that are necessary to run deals the way they want to do it and give them the control that they would like to have.
Max Melmed (47:05)
Makes sense, makes sense. And I think you touch on the ecosystem. Sure, previously a massive player in the ecosystem are almost helping to create this ecosystem.
Max Melmed (47:15)
And a lot of the initial SPV platforms and a lot of the initial, like it starts with getting an allocation, finding a deal and then going and executing on it. How do you think about kind of post deal? And then one of the other things we're very interested in is the ability to leverage the SPV, not just to reduce minimums or provide access, but
Max Melmed (47:38)
to provide that secondary liquidity in the future, specifically pre IPO market, see these companies staying private much longer than ever before. And then somebody who invested or a fund that has a 10 year life cycle, like either.
Max Melmed (47:54)
companies, their shareholders, their investors, their employees, somebody may want liquidity. And then also within this SPV, one of these investors may want liquidity. Did you ever think about or how do you think about actually secondary liquidity within the SPV and the SPV units or membership interest trading hands?
Jeremy Neilson (48:13)
The Sally has great post-clothes.
Jeremy Neilson (48:16)
long-term admin features and those are the features that actually are the most easy to build with software. So we spent all of our time on the front end that's the onboarding and creation and reconciliation and closing. Those are much much harder to build in software and so I'd say that Sally's next 18 to 24 months will be a large addition with these post-close features and functions.
Jeremy Neilson (48:46)
which are much simpler to build in software. Around secondary, so that's something that we saw at Assure, it was people doing these secondary. we would, because at Assure, it was the early days of these SPVs and we were the manager and we were obviously right there at the front.
Jeremy Neilson (49:09)
We were like saying to people like, don't do these secondaries or let us know about it or, you know, we need to approve it or whatever, know, kind of like the lawyer had on. They were happening regardless of what we said and they were happening regardless of what the organizer was saying. So people were just trading them, if you will. Investors were just trading their seats even without asking permission of anybody.
Jeremy Neilson (49:34)
And so the light went on for me, which was, this is going to happen regardless of what regulators, lawyers, portfolio, syndicators, organizers, or us as admins say or want to say. And so we leaned into it. And I know lot of other the administrators have leaned into it as well. But I believe that SPVs
Jeremy Neilson (49:58)
not completely, but could be a very large piece of future liquidity. We know there's lots of groups that have gone after this. CartaX, Forge, EquityZen, many, many, many others. Those have all kind of gone by way, you know, they've been bought or shut down. The next generation have come up, which...
Jeremy Neilson (50:21)
are doing a great job at that. But I believe that SPVs give the liquidity option that nobody else know their kind of structure or vehicle. know, lot of people are like, well, I want to sit on the cap table. I want to have all these legal documents signed and all that stuff. Sounds great. It's just not going to happen. And so you can either go through something like an SPV or you can not.
Jeremy Neilson (50:46)
have liquidity and so I'm just seeing all the time now what SPV stacked, SPV is being used to sell seats or trade positions and you don't run into all these traditional problems of getting permission, sitting on the cap table, all that other stuff that has stopped other systems or groups in the past.
Max Melmed (51:11)
Yeah, and I think we're seeing it firsthand at Augment and I think there's, again, good ways to go about it and bad ways to go about it, whether really bad actors or just egregious fees or fees on top of fees, carried interest, and I think people may or may not know exactly what they're signing up for.
Max Melmed (51:31)
but if done the right way, really sophisticated infrastructure that arguably as an investor, if given the choice of going direct and being on the cap table or going into an SPV, there can be a world where going into the SPV is actually even better for you. And I know we touched on a little bit of the pre IPO market, but you are much broader than that. You have clients using.
Max Melmed (51:55)
your software for all different types of SPVs. What are other use cases that you see that are really interesting that people should be thinking about or you see growing in the next couple of years?
Jeremy Neilson (52:07)
So the number one use case has been and continues to be early stage startup companies. There's multiple reasons for that. One of them is that
Jeremy Neilson (52:16)
SPVs can go dormant. So you you put in the money you pay for the software and You just wait for some future exit if you will The second would be these kind of pre IPO secondary Transactions that augmented others are working on Real estate would be third and then there's anything else oil and gas airplane leases royalties
Jeremy Neilson (52:42)
boats, know, just anything, anything that's a private asset that you want to aggregate investors to invest into this private asset. And SPV is used for that.
Max Melmed (52:53)
And I guess the flip side being, there any spots where you're seeing an SPV used where you'd say, that's, that's not the right structure. That doesn't make sense. So that, doesn't really solve a problem. Is that something that you've seen or come across?
Jeremy Neilson (53:08)
No, because SPVs are perfect. No, just kidding. But no, I haven't seen that. There's definitely times where people are trying to shoehorn an SPV where it's like, just go direct or just do it this way.
Jeremy Neilson (53:23)
And what's cool about that is now SPVs kind of are like, well, let's do that SPV. It's the default. Let's do the SPV where before it was no, no, no, an SPV really would be the best solution here. Now people are thinking SPV when perhaps a more traditional or old school way would be the right approach. But now I haven't seen any sort of kind of repeat individuals or groups or asset or anything like that where you're like, this isn't working or this isn't good.
Jeremy Neilson (53:53)
There tends to be enough people around the table with SPVs meaning investors and the asset and other people that people haven't yet used them for things that don't make sense.
Max Melmed (54:04)
Makes sense, makes sense. I guess I appreciate all the time digging in and I have a couple just close out questions, one, a tremendous amount of respect for the fact that I had reached out saying I had some questions, A, your experience and expertise in the SPV space and what you kind of did laying the foundation for folks like me and Augment and other businesses that are building on top of that. But also the tough questions.
Max Melmed (54:30)
around a shore. And yeah, I'm sure it's not easy what you went through, not easy to relive it as we go through the questions. Why did you ultimately say yes? Why did you want to come on, join and talk through it?
Jeremy Neilson (54:43)
Well, had you asked me a couple years ago, would be no. It was definitely raw. There's also lot of fear around it as well with regards to, you know, we did get legal action. We did need to work through those things and just having, you know, gone through those things and
Jeremy Neilson (55:02)
receiving a lot of counsel and talking to lot of investors. I'm much more comfortable about the situation today than I was before. in having an offering in the marketplace of Sally, I am very comfortable talking about Assure and so on sales calls I talk about all the time. So as of today, I'm talking about it repeatedly. get former Assure customers getting on
Jeremy Neilson (55:30)
on the phone that the interesting is when they don't know who I am, we get on the phone and they bring up a sure be it curiosity in passing or I was a customer and you know that dirty dog and then I reveal well, you know before you continue you are talking to the former co-founder and CEO of a sure and their reactions, right?
Jeremy Neilson (55:56)
humor and laughter and surprise and whatnot. And so it's now much more comfortable for me to talk about than it was.
Max Melmed (56:09)
I respect that. respect that. And I guess the experiences you've had, the, sometimes you learn more from a failure or mistake than you do from the success. Always curious to get other people's perspective. What advice would you give aspiring founders or even aspiring SPD sponsors based off of what you've seen? What advice would you give?
Jeremy Neilson (56:31)
One thing I would say about SPVs is I've been around them a really long time and they're very, very sturdy. I had over thousands of clients, we did over 9,000 SPVs and I can count on one hand how many times the SEC has gotten involved.
Jeremy Neilson (56:51)
And on each one of those times, the organizer was not doing things correctly. the reason I bring that up is just what I've noticed is that the SPVs are stable and a great structure. so there's not, my point being, I didn't have like...
Jeremy Neilson (57:11)
dozens and dozens of clients and the SEC is always calling. was extremely rare and very kind of proud of that. Documentation was solid. Organization and structure was solid. And of course you can get in trouble and of course you should do your due diligence. Of course there are bad actors out there. But I'm very proud of the ecosystem and how SPVs have played a role in that. Advice around...
Jeremy Neilson (57:37)
doing a business or you know, just my experience is you know, I just I would not I would not give up my experience. Actually, I would actually actually I would it was very painful, but the personal growth I wouldn't give up but the the the disappointment that I caused with clients I would not I could easily
Jeremy Neilson (58:01)
live without that experience. But I will say this is that America is amazing, that things go south. For the most part, people are understanding and you shouldn't fear failure more than you should be excited about success. And as somebody who had
Jeremy Neilson (58:24)
a nice big failure. I've been just fine and I'm back at it.
Max Melmed (58:33)
I that. like that. And so final question for you. You've seen the industry grow up over the last 15 years. What is needed for the industry to take the next step in the SPV market to take the next step? And what do you see in terms of like SPV infrastructure and software in the next three to five years?
Jeremy Neilson (58:52)
What I think the industry could use to really benefit it, it would be something in some reform or some benefit in tax filing. In the personal tax filing realm, there's the 1040 easy. That's for young people or people that just not a whole lot of tax complexity in their life.
Jeremy Neilson (59:15)
I believe that SPV should have a 1065 easy because there's not all that complexity, right? It's not a venture fund. It's not all this other running an ongoing business with salaries and rent and expenses and all this stuff, right? And so I think that there should be some...
Jeremy Neilson (59:36)
some changes regulatorily that can really help SPVs be even more streamlined and the price could be even lower. There could be even more stability to SPVs. I think that would be the biggest benefit in change and then also keep the FCC where it is. I don't want to see more and more and more like hands in there and more filings and
Jeremy Neilson (01:00:02)
more reporting than things are today. But other than that, I really think that SPVs and the ecosystem are in really good place. And as SPVs continue to become even more ubiquitous, they'll just be used more and more often.
Max Melmed (01:00:23)
Uh, that's great. I haven't thought about that tax filing almost accepted it for what it is. Uh, what one thing I have thought about is the investor counts and you have the 99 investor count for three C one, or you could use a certain exemption and get two 49 different exemption QPs. can get 2000. What do you think about the investor counts and limits and some of those rules when they were made aren't with the software and technology that we have now to
Max Melmed (01:00:53)
Would you see or you think a change in the investor accounts would be helpful or you see that as problematic?
Jeremy Neilson (01:00:59)
It's a great comment. The reason why it doesn't come up for me very often, or at least in my brain, is it's available, but very few people that I've known that I even come close to those numbers. So yes, some do, but the majority don't. And so I would say it's just not something that's slapping.
Jeremy Neilson (01:01:21)
every you know organizer in the face and so you know for my software it means nothing right like five versus 500 is is pretty pretty similar but current organizers or current administrators where they've got a lot of humans that that would be very painful for them.
Max Melmed (01:01:41)
Yeah, I think maybe projecting there, it's something where we see SPVs as a powerful tool to reduce that minimum investment size and provide access. But there are certain times where a deal that you're looking at is a 5 million or $10 million minimum. So now you need to almost set that minimum investment to stay in line with that investor count. So it's ultimately forcing people out or forcing people to write a check slightly more than their
Max Melmed (01:02:11)
with. Whereas to your point, okay there's 50 people, there's hundred people, there's 500 people. Technology can kind of take care of that. yeah again most SPVs aren't running into those caps. Yeah I think the SPV infrastructure is in a very good spot and very thankful for what you've done.
Max Melmed (01:02:30)
to kind of make that happen and paving the way for a lot of us. So really appreciate you taking the time. Appreciate you digging into all the questions. Yeah. Thank you so much, Jeremy. I appreciate it.
Jeremy Neilson (01:02:40)
Yeah, thank you. I've enjoyed it.
Outro
Thank you for listening. If you enjoyed this conversation, please feel free to share. If you have any feedback or guests you'd like to hear from, please feel free to reach out.
And please note that this conversation is for informational purposes only.
None of the information provided represents investment advice, an offer, or the solicitation of an offer to buy or sell any security. All views are subject to change.
Investing in private securities is speculative, illiquid, and involves substantial risk. including the potential loss of principal. Not all private companies will go public or have a liquidity event.
“Pre-IPO” is used generally to describe a privately held company that may be viewed as a potential candidate for a future public offering. The term does not mean that the company has filed for, scheduled, or committed to an IPO. An IPO or other liquidity event may never occur.
Brokerage services are offered through Augment Capital LLC, member FINRA and SIPC. Investment advisory services are offered through Augment Advisors LLC, an SEC-registered investment adviser. Both are wholly-owned subsidiaries of Augment Markets Inc.
Augment Markets and/or its affiliates, employees, or clients may hold positions in securities or other financial instruments mentioned in this communication. These positions may change at any time without notice. Nothing contained herein should be construed as investment, legal, or tax advice, or as a recommendation to buy, sell, or hold any security. Recipients should conduct their own due diligence and consult their own professional advisors before making any investment decisions.
See full disclosures for additional details.
Thank you. And Have a good day.