Posted by Assure Analytics ● Feb 7, 2022 12:27:22 PM
Evolution of the Private Markets: Assure SPVs Transform Private Fund Administration and Management
This final installment of the "Evolution of Private Investing" series examines how Assure is expanding access and efficiency for private market investors
The private markets have changed dramatically in the last couple of decades as access to and awareness of asset classes, breadth of choice and strategies, and use of technology have expanded at exponential rates.
Historically, structuring and managing transactions or funds required an enormous amount of bespoke financial and legal services, and hundreds of thousands of dollars in fees. These costs served as a market barrier, making it prohibitive for the vast majority of investors to participate in this rapidly growing, high-Alpha asset class. Assure set out to change all that; to enable investors of all types to participate in deals across the capital stack.
This is Section 6 in our evolution of private markets series. This and other segments in our series offer chronology and context on how the private markets got to where they are today. The parts of the series includes:
- Section 1: Evolution of the Private Markets: An Assure Series
- Section 2: Necessity is the Mother of Invention — Rise of Entrepreneurship
- Section 3: Technology Transforms Investing
- Section 4: Investment Landscape Shifts, Regulation Opens Market to More Investors
- Section 5: Staggering Wealth Creation Drives Increased Demand for Private Market Investments
- Spotlight: Assure’s Role in the Innovation of Private Markets (Current Article)
Let’s examine how Assure is expanding access and efficiency for private market investors.
The Private Markets Dark Ages
For decades, the legal and financial industry preserved private markets as an exclusive domain for elite investors with deep pockets and robust legal and accounting teams. The cost of papering and monitoring transactions in alternative assets was prohibitive.
Let’s go back to 2010. An investor interested in private assets had just a couple options when it came to structured vehicles: wrangle together a series of expensive service providers for hundreds of thousands in fees, or do it yourself. Neither of which was easy.
In terms of service providers, whether you were forming a venture capital fund, a special purpose vehicle, or another legal entity for a private asset, the process of building your administration expertise or back office was expensive and complicated. Most service providers specialized in only one of the many areas required to set up and run a fund. This meant you needed to identify and engage a specialized law firm, fund accounting firm, tax and compliance specialists, and more in order to complete your investment. Fund and SPV formation fees were generally well above $200,000, with law firms overcharging for documents based on in-house templates. And ongoing administration costs layered on top. Ultimately, not only did this process take many months, but it was also paid by the investors, which required larger check sizes and fundamentally eroded returns. Fees were so high that deals had to meet a certain size in order to justify the administration costs – this not only limited the range of private market financings that could occur, but also limited which investors could feasibly invest.
Doing it yourself was not any easier, as it required extensive expertise across multiple legal, tax, and financial domains. With investment vehicles, order of operations is a critical matter. Papering a transaction incorrectly or failing to file the right form at the right time could have dire consequences in the long run. Not to mention the opportunity cost of time for the majority of investors who do not have relevant expertise in these fields.
The net result was exclusivity – for years, private investments were the purview of the select few. Even for investors with large portfolios or institutional processes who could afford these high service fees, it didn’t mean they enjoyed it. They still bore the expensive formation and ongoing administration costs that eroded performance. Everyone stood to benefit from a more affordable and complete back office solution.
Bringing the Private Asset Back Office to the 21st Century
In 2012, founders Jeremy and Katie Neilson launched Assure to provide affordable high quality back office services for private transactions, at volume. Through experience in managing a fund of funds for the state of Utah and subsequently providing boutique back office services to the private markets, they understood how difficult this process was for most investors. They appreciated the power and elegance of special purpose vehicles to span asset classes and ultimately democratize access to the private markets. And they had a vision for how SPVs could be enabled by technology and efficient at scale.
In tandem with launching Assure, the online investment platforms AngelList and Seedinvest approached Jeremy and Katie with a request to figure out how to provide back office support for hundreds of deals. Assure soon became the back office provider for both platforms, with many more clients following.
In the first four months of existence, Assure completed 60 private investment transactions. “We knew then that with the initial volume being so large, to succeed, we’d have to engineer new ways of doing things along with technology to scale,” said Assure Cofounder and Chief Revenue Officer Katie Neilson. “In the coming years, we unpacked the SPV formation process with razor precision, built and rebuilt playbooks to thousands of potential investor scenarios, and integrated technology wherever possible to ensure Assure could move as fast as our clients.”
In order to drive efficiency and reduce costs, Assure brought everything in-house – from legal to accounting to compliance to tax to administration – recruiting world-class talent in every domain to make SPVs more affordable and accessible to all investors. As part of laying the foundation for scale, the Assure team codified and streamlined 17 key steps to building an SPV, which underpin the company’s processes and innovations today.
The result was rapid growth. As Assure made SPVs more accessible and affordable, more investors decided to adopt these vehicles as a key component of their back office strategy.
Moving the Private Markets at Internet Speed
Assure made the special purpose vehicle affordable and widely accessible for the first time by decreasing the structuring and administration costs by 90% or more, with corresponding savings in time to market. The company created a way to form and administer SPVs at scale, with the ability to work across asset classes and deal size, from $50K angel rounds to $100M real estate investments and beyond. This has made the private markets increasingly accessible to investors.
A series of continuous innovation and reinvention enabled this growth. Prior articles have discussed key components in the evolution of the back office such as standardized startup funding docs, the rise of DocSend and DocuSign, and more. Continuing the format of past articles in this series, there are several core contributions from Assure that have changed how investors access alternative assets today:
2013 – Assure brings tax in-house. This is rare in the world of private investment administration. But through the power of volume and broad based talent, Assure is able to bring efficiencies to taxes and SPVs. We know taxes are a critical component for investors. For 2021 alone, we’ll issue thousands of 1065 returns and over a hundred thousand K-1s. It’s this alignment and asset-based knowledge that helps us better administer alternative assets.
2014 – Assure invents the ‘multi-asset’ SPV to support certain AngelList deals (the genesis of rolling funds), building a process that enables SPVs to hold multiple deals, and act similarly to a venture fund. The multi-asset SPV offers investors more choice in how they structure their deals; it has also facilitated the growth in smaller, more nimble VCs and syndicate funds who eschew traditional fund structures.
2016 – Assure publishes standardized SPV documents to help the industry improve and streamline their legal formation. Like the SAFE for startups, Assure’s templates helped drive down costs around formation and legal review. Over subsequent years, these Assure documents have been continuously refined and are today approaching an industry standard.
2018 – Glassboard is launched, providing a technology platform to automate aspects of the formation of Special Purpose Vehicles. At its core, Glassboard speeds up the back office experience while centralizing the capital raise for SPV organizers into one place. Assure has had multiple iterations of SPV-focused technologies, and is continuously improving their speed and scope of automation. Today, Glassboard supports tens of thousands of investors.
2019 – Assure Structured Live debuts. The regular program is just one of a series of educational resources Assure has created or co-sponsored, unpacking the intricacies of private investing for all kinds of investors. Assure has continued to partner with other organizations across the alternatives industry to expand investor expertise.
2019 - Assure acquires startup accelerator BoomStartup. Assure continues to operate BoomStartup as both a way to better learn from and support entrepreneurs while testing new SPV services for early stage startup deals and accelerators.
2020 – Assure Syndicates is launched, a pioneering matchmaking, co-investment and training program for the venture ecosystem. Charging zero brokerage, placement, or management fees, Assure Syndicates helps match founders with the right investors to help them grow their ventures, while assisting investors in finding deals that fit their stated investment objectives and theses
2021 – Assure begins its legislative efforts to support the small investor. During the 2021 Utah legislative session, the company collaborated with members of the Utah House of Representatives and Senate to create House Bill 335: Investment Fees Amendments. The legislation, which removes all state Blue Sky filing fees for investment deals of $500,000 and under, passed through both chambers, without a single dissenting vote. This endeavor is a hallmark of yet another avenue through which Assure intends to help expand access, ease, and affordability for private market investors.
2021 – Assure brings on the DifferentFunds team to launch Assure Analytics. The new analytics division will bring new insights and analytics-driven products to market to help private market investors make better and more-informed decisions.
Assure: the Modern Transaction Platform for the Private Markets
At Assure, we’re building the world’s most complete private transaction platform. Since our inception, we have adopted a mantra of “doing the hard stuff” in order to offer our clients the most comprehensive, streamlined deal and fund management in the industry.
When Assure began operations in 2012, private asset back offices were a largely manual, offline experience. Legal formation was a high cost activity that usually moved at a glacial pace. But nearly a decade later, this process is finally digital-first. Special Purpose Vehicles have become viable investment tools for deals of all sizes, with costs declining by over 90% thanks to Assure, its standard docs, streamlined processes, and Glassboard technology.
Today, Assure has the most clients, sees the most deals, and processes the most private transactions of any fund administrator. We’re leapfrogging the competition through our relentless dedication to continuous improvement. We know investors need a robust toolkit, and we’re building it for them. Whether its support on ERAs (Exempt Reporting Advisor), PCAs, taxes, apostolic stamps, asset-based insights and benchmarks, or dozens of other services, Assure offers the full-stack back office.
We handle (and simplify) the structure and management process so that investors can focus on the deals. Our mission is to make the private markets accessible to investors of all types, across the capital stack. We’re transforming the private markets from the purview of the elite, to a savvy strategy nearly anyone can use.
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