How quickly can I get funding?
Short answer: it depends, but 1 month is the minimum on Alvear's platform.
In detail: The timeline for an Alvear issuer to receive their funding can vary based on several factors. Here are the key steps and an estimated timeline:
Filing Form C: This is the first step for any company looking to raise funds through an Alvear offering. The company must work with us to prepare and file a Form C with the SEC, which includes detailed information about the company, its business, and the terms of the securities being offered. This process can take anywhere from a week to a few months, depending on how prepared the company is. SEC Form C: Click Here to View
Launch of Offering: Once your Form C is filed and accepted by the SEC, the company can launch its offering on Alvear's registered FINRA Funding Portal. The offering period can last up to a maximum of one year, but many companies choose a much shorter period (e.g., 90 days or 120 days) based on their funding needs.
Completion of Offering: At the end of the offering period, if the company has met its funding target, it can close the offering and collect funds. The exact timing of fund collection can depend on the terms set by the crowdfunding platform and can range from a few days to a few weeks after the close of the offering.
Funds Transfer: After the close of the offering and completion of any final legal requirements, the crowdfunding platform will transfer funds to the company. This transfer process can take a few days to a week.
In total, the entire process from filing Form C to receiving funds could take several months. However, this timeline can vary significantly based on a variety of factors including the preparedness of the company, the duration of the offering period, and the speed of the crowdfunding platform's processes.
How much can we raise?
Alvear Ventures possesses a FINRA Funding Portal License to list securities offerings under SEC Reg. CF which is capped at $5,000,000.00 (Five Million Dollars). There are partner firms we work with in order to conduct a more significant campaign of up to $75,000,000.00 (Seventy-Five Million Dollars). Obviously, the latter is a significantly higher upfront cost, ranging from 10-20x the cost of a Reg. CF offering with Alvear.
How does Alvear make money?
Alvear collects a "success fee" which consists of a fixed percentage of the amount of funds raised. The industry standard ranges from 1%-15% depending on the complexity and size of the offering. For example, if you successfully raise $100,000.00, the fee might be 5% or $5,000. If the investment offering is not successful, Alvear will collect an application fee to cover our upfront costs. You will receive all of the payment terms in an Offer Letter if your company is a suitable candidate. Depending on the type of business or stage of growth, we can negotiate special forms of compensation.
How do we repay our investors?
On the Alvear platform, your company can offer either Revenue Share, Equity, or Debt securities. These all come with their own benefits and drawbacks, but at the end of the day, investors will want to make their money and returns. Here is a breakdown of how your company might pay back investors you acquired through the Alvear platform:
A revenue-sharing agreement involves distributing a portion of your company's revenues to investors:
Percentage of Revenues: Your company agrees to share a percentage of its revenues with investors until they have received a pre-determined return, often a multiple of their original investment. The actual amount and timing of these payments can vary based on your company's revenue performance and your revenue-sharing agreement with Alvear.
The revenue share rates are determined by the risk profile of the offering as well as the current interest rates. As a rule of thumb, Alvear encourages our issuers to set their overall return rate roughly between 7 -12%. The revenue share rate should be attractive for investors but not too burdensome for businesses.
Alvear works with your business to determine fixed expenses that are paid before revenue is shared, such as wages, rent, insurance, etc.
When investors purchase equity through an Alvear offering, they're buying a small piece of your company. There isn't a fixed repayment plan like with a loan. Instead, investors could make a return in a few potential ways:
Dividends: If your company generates profits and decides to distribute them among shareholders as dividends, investors will receive a portion of these profits proportional to their ownership stake.
Capital Gains: If your company appreciates in value over time, the equity shares that investors hold may also increase in value. This becomes complicated because determining the value of a small business can be a costly and difficult process, and there may be limited ways for Alvear investors to sell their shares, if at all.
Exit Events: If your company goes through a liquidity event like an Initial Public Offering (IPO), acquisition, or merger, investors' shares may be bought out, often at a premium to their current value. These events are typically how equity investors realize significant returns, but it is not very common for a small business to IPO.
Debt on Alvear is like taking out a loan from a pool of investors. Here's how you would repay investors:
Principal and Interest Payments: Your company agrees to repay investors the original amount they invested (the principal) along with interest. The terms of repayment, including the interest rate and repayment schedule, are defined in the initial loan agreement.
Remember, every business is unique, and the exact terms of repayment or return will depend on the specific agreement you set up with your investors. Always be transparent about these terms when communicating with potential investors.